WASHINGTON – First Federal Bank of Kansas City has agreed to a $2.8 million settlement with the Department of Housing and Urban Development to resolve allegations of redlining in African-American neighborhoods.

As part of the settlement, the Kansas City bank agreed to originate $2.5 million in loans in majority African-American census tracts over a three-year period.

The settlement announced Monday also calls for $275,000 in discounts or subsidies on home purchase loans that can be used to assist with closing costs, down payments and interest rate reductions. The maximum subsidy per borrower is $2,500.

First Federal Bank also agreed to provide:

  • $105,000 to support a loan pool that finances the rehabilitation of vacant, blighted homes in distressed areas of Kansas City.
  • $50,000 for marketing and outreach to African-American communities.
  • $30,000 to support financial education in majority African-American communities.
  • $50,000 to the nonprofit complainants to support their fair lending and community reinvestment work.

"Homeownership should never be affected by the color of a person's skin," HUD's assistant secretary for fair housing and equal opportunity, Gustavo Velasquez, said in a press release. "This agreement helps to ensure that all qualified families in the Kansas City area get a fair shot at owning their own home, regardless of race. HUD will continue to work with banks across the nation to ensure they follow the Fair Housing Act."
Two nonprofit fair housing groups filed complaints on Oct. 5 alleging the bank's designated service area excluded African-American communities on the east side of Kansas City.

It came at a time when First Federal Bank had filed an application with the Office of the Comptroller of the Currency to merge with a Kansas City thrift, Inter-state Federal Savings and Loan Association. Combined, the institutions would have assets of $650 million.

The thrift has two full-service branches in African-American communities and First Federal Bank has one branch. If the merger is approved, the bank has committed to keep the three branches open for at least three years.

In a statement, J.R. Buckner, president and CEO of First Federal, said the institution has "a long history of compliance with fair lending laws. We are committed to expanding our presence into all Kansas City communities, and believe this agreement is a bold step in furtherance of our mission to help all of our customers and communities prosper."

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