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#2114824 - 01/20/17 12:02 AM Redlining - Klein Bank vs. DOJ
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,265
This scares me......can the DOJ decide a bank's assessment area??

https://www.justice.gov/opa/pr/justice-d...hoods-minnesota
Last edited by John Burnett; 01/20/17 06:55 PM. Reason: spelling in subject
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Fair Lending
#2114827 - 01/20/17 12:59 AM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Rocky P Offline
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Joined: Jun 2003
Posts: 7,650
Florida
So can a regulator. Reasonably Expected Market Area has been around at least since the 2009 FFIEC Fair Lending Exam Procedures for redlining. How about being targeted for redlining in an area that is not even in your assessment area??

From the manual (emphasis added)

Comparative analysis for redlining
Step 1: Identify and delineate any areas within the institution’s CRA assessment area and reasonably expected market area for residential products that are of a racial or national origin minority character.

NOTE: The CRA assessment area can be a convenient unit for redlining analysis because information about it typically already is in hand. However, the CRA assessment area may be too limited. The redlining analysis focuses on the institution’s decisions about how much access to credit to provide to different geographical areas. The areas for which those decisions can best be compared are areas where the institution actually marketed and provided credit and where it could reasonably be expected to have marketed and provided credit. Some of those areas might be beyond or otherwise different from the CRA assessment area.
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#2114911 - 01/20/17 03:48 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Inspector Offline
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Joined: Apr 2016
Posts: 283
The REMA used for redlining often goes beyond the AA; however, Illegal discrimination is also one of the factors when determining whether a delineated AA is appropriate. So it seems like an AA could be adjusted based upon the findings of illegal discrimination.

a. Consists of one or more MSAs/MDs or contiguous political subdivisions (i.e.,counties, cities, or towns) where the institution has its main office, branches, and deposit-taking ATMs;

b. Consists only of whole census tracts;

c. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is located in a multistate MSA/MD;

d. Does not reflect illegal discrimination; and

e. Does not arbitrarily exclude any low- or moderate-income area(s) taking into account
the institution's size and financial condition.
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#2114920 - 01/20/17 03:59 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Regulators often point out deficiencies in assessment areas and if the bank won't make the change, the regulators can proceed with the examination using what they feel is the appropriate AA. This comes up most often when potential red lining is on the table.

The marketing issue is one I see frequently when assessing bank's CRA and fair lending programs. It is why marketing needs to be planned for CRA and fair lending purposes. It is risky to just review marketing efforts retroactively. I have seen banks who ran marketing programs when a regional manager requested one. Well, what if the managers in the non-white areas did not request. This is so risky.

Never just hope that things work out. It can be hard to attract customers even when the bank is actively marketing, but at least you can show that you are trying.

Placement of offices is also extremely important.
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#2115228 - 01/23/17 11:46 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,265
The reason this is so concerning to me is our AA consists of whole, mostly rural counties and certain census tracts within a metropolitan county where we only have 3 branches. It would be impossible to serve the entire metropolitan county given our small market footprint there. I would argue that our REMA is the specific counties we have selected and I monitor the inside/outside ratio of applications in that county very closely. At one time, we had the entire metropolitan county in our AA, but were criticized for not serving huge sections, so we delineated. Seems like a no-win situation!

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#2115257 - 01/24/17 02:16 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Dog Lady Offline
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Joined: Dec 2015
Posts: 74
Klein Bank did not have branches in the tracts added to the AA. The MBA noted that the DOJ added an entire county they do not have branches in. So it's not that marketing was only requested by a certain manager... there are no managers in the other areas because there are no branches.

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#2123522 - 03/24/17 05:06 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
InFairness, CRCM Offline
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InFairness, CRCM
Joined: Nov 2010
Posts: 919
USA
Any time you break a county in your AA, you are asking for additional scrutiny. Why just those tracts? Why did you locate branches there instead of other LMI or majority minority tracts? Why aren't you conducting outreach to the remainder of the county? And so on.
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#2123570 - 03/24/17 06:45 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:
Any time you break a county in your AA, you are asking for additional scrutiny.

This is a pretty broad statement. I work with hundreds of small banks and know of numerous ones that have part of a county, but not all of it in their AA. Why? There's are dozen's of reasons. Such as, the county:
Is divided by a geographical limitation (mountain, river without quick bridge access, etc.)
Has a city on one side and is rural on the other. The bank sits on the far rural side and doesn't try to meet the needs of the urban area. (very common in my area).
The city is large and the bank has one location on one side of the city. They don't serve the whole city - nor want to.

I could go on and on, but I think you get the idea. Mel mentioned some legitimate reasons and has rights to be concerned about the criticism.
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#2134425 - 06/15/17 01:46 AM Re: Redlining - Klein Bank vs. DOJ Rocky P
Reads Regs Offline
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Joined: Nov 2004
Posts: 2,307
Originally Posted By Rocky P
So can a regulator. Reasonably Expected Market Area has been around at least since the 2009 FFIEC Fair Lending Exam Procedures for redlining. How about being targeted for redlining in an area that is not even in your assessment area??

From the manual (emphasis added)

Comparative analysis for redlining
Step 1: Identify and delineate any areas within the institution’s CRA assessment area and reasonably expected market area for residential products that are of a racial or national origin minority character.

NOTE: The CRA assessment area can be a convenient unit for redlining analysis because information about it typically already is in hand. However, the CRA assessment area may be too limited. The redlining analysis focuses on the institution’s decisions about how much access to credit to provide to different geographical areas. The areas for which those decisions can best be compared are areas where the institution actually marketed and provided credit and where it could reasonably be expected to have marketed and provided credit. Some of those areas might be beyond or otherwise different from the CRA assessment area.


The FDIC NY Region did a presentation on this topic back in March. https://www.fdic.gov/news/conferences/other_events/2017-03-30-new-york.html

I was at the NJBankers Compliance University today and the FDIC did a case study exercise on redlining that involved a REMA. They advised us to review the 3/30/17 teleconference materials for more details.
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Opinions expressed are my own and not necessarily those of my employer. They are not legal advice.

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#2134452 - 06/15/17 01:44 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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The FDIC is very hot on REMAs and FDIC regulated banks need to pay attention. That presentation is a good representation of their process.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2134454 - 06/15/17 01:46 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
Re the statement above "Any time you break a county in your AA, you are asking for additional scrutiny" I would say that anytime you break a county, you need to be able to explain and support your reasons when asked.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2144908 - 09/05/17 11:38 PM Re: Redlining - Klein Bank vs. DOJ Mel in WA
InFairness, CRCM Offline
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InFairness, CRCM
Joined: Nov 2010
Posts: 919
USA
Kaybee, that was my point regarding "asking for additional scrutiny." And even if the bank has prepared response supporting their decision to break a county, even if it includes what they think are good reasons (such as physical barriers, inability to serve given their small presence, etc.), they still may face scrutiny from their regulator or the DOJ.
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Opinions are strictly my own, and have nothing to do with my employer.

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