- Source: Consumerfinance.gov
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In the Summer 2021 issue of Supervisory Highlights, the Consumer Financial Protection Bureau (CFPB) identified several redlining risks related to discouragement of applicants or potential applicants residing in minority neighborhoods from applying for credit. Specifically, a lender received a targeted redlining examination because a substantially smaller proportion of their applications came from majority-minority census tracts (MMCT) and high-minority census tracts (HMCT) relative to peers. During the course of the examination, the CFPB noted several communications directed to applicants and prospective applicants that might “discourage a reasonable person, on a prohibited basis, from applying for credit”:
- Human models used in direct mail campaigns appeared to be exclusively non-Hispanic Whites;
- Headshots of mortgage lenders included in open house materials were almost exclusively of non-Hispanic White mortgage professionals;
- Mortgage loan officers were mostly non-Hispanic Whites;
- The lender’s office locations were concentrated predominantly in neighborhoods that were majority non-Hispanic White; and
- The lender’s direct marketing activities and Multiple Listing Service (MLS) advertisements were focused on majority-white areas of the metropolitan area.
The CFPB determined that these issues were communications between the lender and potential applicants and application referral sources (such as real estate agents). The CFPB exam team also found emails among mortgage loan officers containing derogatory and racist content.
When taken together with recent enforcement activity based on discouragement of applicants and potential applicants, the CFPB is placing lenders on notice that discouragement is a critical component of analyzing redlining and other fair lending risks.
 Official Staff Interpretation of 12 CFR §1002.4(b)