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 conciliation agreement, First Federal agreed to originate $2.5 million in loans in majority African-American census tracts over a three-year period.  The settlement  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; and
  • $50,000 to the nonprofit complainants to support their fair lending and community reinvestment work.

A statement from HUD said the groups argued that First Federal failed to penetrate markets in Kansas City’s urban core and excluded areas with a concentration of African-American residents from its service area.  The bank denied having discriminated against the groups who complained but agreed to settle the claims.