Bank ‘Redlined’ NJ Home Buyers In Newark Metro Area, Feds Allege

NEWARK, NJ — Federal authorities have reached an agreement with Lakeland Bank involving one of the largest “redlining” settlements in the history of the U.S. Department of Justice, prosecutors said.

The racial discrimination allegedly took place in the Newark metropolitan area of New Jersey, including neighborhoods in Essex, Somerset and Union counties, federal prosecutors announced last week.

What is redlining? According to the U.S. Department of Justice:

“Redlining is an illegal practice in which lenders avoid providing services to individuals living in communities of color because of the race or national origin of the people who live in those communities.”

Here are the allegations against Lakeland Bank, federal prosecutors said:

“The complaint filed in federal court alleges that from at least 2015 to 2021, Lakeland failed to provide mortgage lending services to Black and Hispanic neighborhoods in the Newark, New Jersey metropolitan area … that all its branches were located in majority-white neighborhoods … and that its loan officers did not serve the credit needs of Black and Hispanic neighborhoods in and around Newark.”

According to prosecutors, under the proposed consent order – which is subject to court approval and was filed in the U.S. District Court for the District of New Jersey along with a complaint – Lakeland has agreed to do the following:

• Invest at least $12 million in a loan subsidy fund for residents of Black and Hispanic neighborhoods in the Newark area; $750,000 for advertising, outreach and consumer education; and $400,000 for development of community partnerships to provide services that increase access to residential mortgage credit
• Open two new branches in neighborhoods of color, including at least one in the city of Newark; ensure at least four mortgage loan officers are dedicated to serving all neighborhoods in and around Newark; and employ a full-time “community development officer” who will oversee the continued development of lending in neighborhoods of color in the Newark area
• Maintain an expanded Community Reinvestment Act Assessment Area that includes Essex, Somerset and Union counties

The resolution, which is part of the Justice Department’s nationwide Combating Redlining Initiative, represents the third-largest redlining settlement in its history, authorities said.

Thomas Shara, the president and CEO of Lakeland Bank, said the company “strongly disagrees” with any suggestion that it acted improperly. Shara said the bank “fully cooperated” with authorities as they conducted their investigation, and that the company “remains confident that we have been fully compliant with all fair lending laws.”

“This resolution avoids the distraction of protracted litigation and allows us to focus our time, expertise, and resources towards achieving a shared goal of meeting the credit needs of all residents within our communities, including those who historically have been underserved,” Shara said.

Lakeland Bank is the wholly-owned subsidiary of Lakeland Bancorp Inc., which has over $10 billion in total assets. It maintains an “extensive” branch network and commercial lending centers throughout New Jersey and Highland Mills, New York, the company stated.

NEWARK MAYOR: ‘A POWERFUL MESSAGE’

Newark Mayor Ras Baraka had high praise for the settlement, saying that it sends a “powerful message” to financial institutions that withhold loans in minority neighborhoods.

Baraka pointed out that most of the settlement funds will be used to create a loan subsidy fund to help home buyers make down payments, and offset insurance and closing costs.

The mayor said that $12 million is more than just an abstract number – it will potentially power “hundreds of mortgages.” That will be a welcome boost at a time when living costs have gone up so dramatically, putting homeownership out of reach for many Newark residents.

“Although, redlining was banned nationwide more than 50 years ago, we know it still exists,” Baraka said. “To deny people, specifically in Black and Latino neighborhoods in Newark, mortgage-lending services, based strictly on their race, robs and erodes their American dream of homeownership. It impedes families from building generational wealth, and widens the racial wealth gap.”

Baraka said the funds will help supplant the city’s own campaign to build and preserve affordable housing. The mayor previously said that those efforts have included:

• "Doubling the Live Newark Program to help residents become first-time homebuyers." Read More: Newark Trying To Boost Housing Market With No-Interest Loans
• "Implemented the Neighborhood Development Program, which turns city-owned land into residential and affordable housing." Read More: Newark Vs. Gentrification: We Can't Become Brooklyn, Mayor Says
• "Allocated a $20 million investment to create housing affordable to residents at a $34,000 income level." Read More: Newark Trying To Add Housing For Low-Income Families
• "Using Land Bank properties to create Section 8 homeownership opportunities." Read More: Newark Families Get Keys To Their 1st Homes: 'My Dream Came True'
• "Created the NJ Forty Acres and a Mule Fund (NJ FAM Fund) that will invest $100 million into real estate development and small business development for Black and Latinx partners." Read More: Newark Makes Bold, $100M Pledge To Black, Latinx Business Owners

Nearly half of Newark’s residential property is owned by corporations – the highest rate in the nation, according to a recent report from the Rutgers Center on Law, Inequality and Metropolitan Equity.

• See related article: Who Owns Newark? City Fights Back Against Corporate Buying Spree

Send local news tips and correction requests to eric.kiefer@patch.com. Learn more about advertising on Patch here. Find out how to post announcements or events to your local Patch site. Don’t forget to visit the Patch Newark Facebook page.