Federal courts in recent weeks have terminated five consent orders with mortgage lenders, which stemmed from redlining probes by the prior administration. The Department of Justice claimed those companies satisfied the terms of their settlements months and years before their expiration, freeing them of fair lending stipulations. 

Among 15 redlining settlements secured by the Biden administration, 10 remain active, with a few having uncertain statuses. The government's unprecedented attempt to reverse a previously-agreed settlement with Chicago brokerage Townstone Financial was also defeated by a federal judge this past week.

Fair housing advocates are battling the DOJ's attempts to close two consent orders, including a 2023 agreement with ESSA Bank and Trust which was accused of redlining around the Philadelphia area. While feds say ESSA has distributed its required $3 million loan subsidy fund and is in compliance with the settlement's other terms, opponents say the bank's remedial work should continue for the required three additional years. 

Daniel Urevick-Ackelsberg, an attorney with the Public Interest Law Center opposing the feds' moves, said fighting the scourge of redlining has been a bipartisan priority for numerous administrations.

"The attempt to take down these agreements to remedy the effects of alleged redlining is really an attack on the fundamental ideals that I think have guided America for decades now," he said.

The Department of Justice didn't respond to a request for comment.

What is the DOJ doing?

The DOJ in late May began asking federal courts to extinguish consent orders with lenders targeted by former U.S. attorney general Merrick Garland's Combatting Redlining Initiative. Biden-era prosecutors accused those firms of making fewer loans to Black and Hispanic consumers compared to their peers; failing to employ branches and loan officers in those communities; and in a few cases, of internally spouting racially prejudiced messages.

In nearly identical filings, prosecutors last month argued banks had fulfilled, or were on track to fulfill, required multi-million loan subsidy funds for underserved borrowers. In short comments, feds wrote that banks satisfied other requirements which typically include employing LOs and branches in affected areas and promoting advertising and financial education to affected communities. 

Although President Trump condemned "disparate impact" earlier last month, feds' filings have lacked legal theory and other explanations. Still, most of their calls to end consent orders before their five-year terms have met little resistance, including no opposition from the banks. 

Which lenders have been affected?

Federal judges have granted DOJ requests to terminate consent orders with five lenders: Ameris Bank, Patriot Bank, Cadence Bank, Trustmark National Bank and Trident Mortgage. The largest settlement was the $22.4 million deal prosecutors reached with Trident, which has been out of business since 2022. 

Ten redlining settlements remain active. That includes deals with First National Bank of Pennsylvania; Fairway Independent Mortgage Corp.; Draper & Kramer Mortgage; Citadel Federal Credit Union; American Bank of Oklahoma; and a $31 million consent order with City National Bank. 

A consent order with New Jersey-based OceanFirst Bank remains active, although an attorney last month recently applied to defend the bank in the long-dormant case docket. That attorney, nor a representative for OceanFirst, returned requests for comment Friday. 

Attorneys who spoke with National Mortgage News were hesitant to speculate on that movement but agreed an action could be imminent. 

"That to me signals something substantive is coming, otherwise there wouldn't be a need to substitute lawyers in and out," said Zachary Best, counsel at Washington, D.C.-based civil rights law firm Relman Colfax. "I think there are a couple (of cases) that there's probably something coming on the horizon." 

What could happen next in active consent orders?

The Public Interest Law Center and National Fair Housing Alliance are among groups which have asked courts to reject the DOJ's efforts to rescind consent orders against ESSA and New Jersey-based Lakeland Bank. Prosecutors in the Lakeland case acknowledged the bank had not yet completed distributing a mandated $12 million loan subsidy fund. 

The Public Interest Law Center in a proposed filing argues Lakeland, should the consent order be terminated, could close the loan subsidy fund; shutter a required branch location; terminate LOs designated for the Newark community in question; and cease required community partnerships. 

"I don't believe simply paying out those [loan subsidy] funds is grounds to terminate all the other things," said Urevick-Ackelsberg.

An attorney for Lakeland in a filing earlier this month said the lender would be ready to reply to the opposing brief should it have the opportunity to do so. 

The Public Interest Law Center on Friday also filed a notice of supplemental authority, notifying the court of the Townstone ruling. A federal judge last week issued a 15-page ruling rejecting feds' attempts to reverse a $105,000 agreement reached with the lender in November, suggesting a reversal would set a poor precedent. 

Ackelsberg said the Townstone decision was encouraging, but cautioned that the industry shouldn't draw too many conclusions on how other district judges would rule. 

Best, whose firm isn't involved in any of the above cases but is watching them closely, said he anticipated the Trump administration to scale back redlining enforcement, but thought the consent order terminations were extraordinary. He said the defendants in the redlining probes "stuck out like sore thumbs" in failing to serve minority communities. 

"There's no reason for the DOJ to take this affirmative step, other than, I think, to carry out an upside-down vision of civil rights enforcement," he said.