Dive Brief:
- The New Jersey attorney general’s office accused failed Philadelphia-based Republic First Bank of mortgage discrimination Tuesday, issuing a report from an investigation that found the lender originated 6% of its home loans to residents of majority-Black, -Hispanic or -Asian neighborhoods between 2018 and 2022.
- The state filed a claim with the Federal Deposit Insurance Corp. — Republic First’s receiver since the bank’s collapse in April — seeking remediation on behalf of affected residents. New Jersey’s Division of Civil Rights shared the report with Fulton Bank, which acquired many of Republic First’s assets, and urged the Lancaster, Pennsylvania-based lender to proactively mitigate potential redlining risks it inherited from the loan portfolio.
- “We have a long history of supporting all communities, including majority-minority neighborhoods, and we believe transitioning former Republic assets and team members to our operating model is the best course of action to ensure the American dream is attainable for all customers, in New Jersey and across our five-state footprint,” Fulton Bank said in a statement seen by The Philadelphia Inquirer.
Dive Insight:
The New Jersey AG’s office asserted Tuesday that Republic First knew of its “underperformance in generating mortgage applications from, and originating loans to, people of color, but repeatedly failed to take corrective action to address these severe disparities.”
Those disparities worsened between 2018 and 2022, the state said. Republic First “engaged in almost no lending in majority-Black, Hispanic and Asian neighborhoods in Burlington, Camden, Gloucester, Atlantic and Cape May Counties, even as it engaged in significant lending in predominantly white neighborhoods nearby,” according to a summary of the AG’s report.
Peer lenders, meanwhile, originated loans to residents of majority-nonwhite neighborhoods at more than three times the rate Republic First did, the state said. Overall, Republic First’s peers originated loans to Black borrowers at over 1.5 times the rate Republic did, to Asian borrowers at about 2.5 times the rate Republic did, and to Hispanic borrowers at over 3 times the rate Republic did, according to the report.
Republic First also concentrated its branches and mortgage offices in predominantly white areas, failing to place any in majority-nonwhite neighborhoods, the state said. Further, the bank failed to advertise meaningfully in neighborhoods of color and repeatedly made exceptions to its underwriting policies for white and high-income borrowers who sought home loans, according to the report.
New Jersey Attorney General Matthew Platkin, in a statement, called Republic First’s lending record “shameful.”
“Since I took office, we have proven our commitment to stopping discriminatory practices in the housing industry,” Platkin said. “And we will not stand by when anyone violates our law to create barriers to homeownership.”
New Jersey’s claim says Republic First’s mortgage lending practices violated the state’s Law Against Discrimination.
“Our investigation of Republic’s practices unfortunately shows that redlining is not merely a thing of the past,” Sundeep Iyer, director of the state’s Division on Civil Rights, said Tuesday. “That’s why we will continue our work to hold accountable those who engage in these egregious and discriminatory practices, and why combating housing discrimination will continue to be a priority for our office.”
New Jersey said it would monitor Republic First acquirer Fulton Bank’s mortgage lending performance. Fulton has not identified additional steps it plans to take to address or mitigate redlining risks from former Republic First assets, the state said.
Pennsylvania’s Department of Banking and Securities closed Republic First in April after infighting that divided the bank’s board of directors for more than two years.
The bank’s onetime CEO, Vernon Hill, announced a strategy in 2021 to raise capital and grow Republic First’s footprint. But when the capital raise was delayed indefinitely, the bank’s eight-member board split evenly between Hill’s supporters and a faction that aligned itself with an investor that bemoaned the bank’s lagging earnings per share and stock price.
The board’s deadlock ended only when a Hill ally died. The rival faction ousted the CEO, who sued but ultimately left in 2022.
Investors unveiled a plan in March 2023 to pour $125 million into Republic First. But that deal faltered. A subsequent, scaled-down capital raise failed in November 2023, and the FDIC — which had earlier reportedly sought bids for Republic First’s assets — resumed its auction efforts.
