Reinventing Redlining: Citi’s Prime Lenders Get Bad Marks for Serving Minorities and the Poor

Many fair-lending advocates say America’s largest bank falls short of living up to the federal Community Reinvestment Act, or CRA, which prods banks to stop “redlining” African-American, Latino, and low-income communities.

Kevin Stein of the California Reinvestment Committee says Citigroup has “one of the worst CRA performances of any major bank. . . . There just doesn’t seem to be much interest.” Citi recently scored a “zero” on the committee’s study of mortgage lending in California. Stein’s organization says Citi also “lags far behind its competitors” in offering checking accounts and other basics that are affordable to consumers with modest incomes.

Citigroup counters that it “has an excellent record of lending to all communities” and notes that regulatory agencies have awarded “outstanding” CRA ratings to nine of Citi’s 12 banking units and satisfactory ratings to the other three. The company says it doesn’t discriminate based on race, ethnicity or income, and it scrupulously follows fair-lending rules. “We live within the letter of these laws and regulations, and also embrace their spirit and intent,” Citi says.

As part of its efforts to reach underserved communities, the company has put on seminars for small-business owners and first-time homebuyers and created “individual development accounts” that help low-income consumers seek financial independence. Last year, the company says, it reached $100 billion in “community reinvestment activity,” placing the company ahead of schedule in its $115 billion, 10-year commitment to community lending and investing.

Critics say banking regulators take a milquetoast stance to policing and rating banks’ CRA performances. And they say Citi’s reinvestment numbers are result of fuzzy math that counts a variety’ of activities that have little to do with serving real people. A number of recent studies have called Citi’s commitment to fair lending into question:

■ Research by Fair Finance Watch found that in 2001 Citi’s prime-rate lenders were much more likely to reject black and Latino mortgage applicants than white applicants. In Washington, D.C., and its Virginia-Maryland suburbs, for example, blacks were turned down 7.1 times more often; Latinos were turned down 6.5 times more often. The mortgage industry’s overall disparity rates in the region were considerably lower (a black-vs.-white disparity of 3.1-to-l and a Latino-vs.-white disparity of 2.3-to-l). Citi says it takes “strong exception” to the group’s characterization of its record.

■ A National Training and Information Center study of mortgage lending in 17 cities established a link between predatory lending and Citi’s weak community reinvestment performance. NTIC said “Citigroup has reinvented redlining by pushing high-interest loans in communities ignored by Citibank and its prime lending operations.”

In 2000, the study found, African Americans were 7.4 times more likely to receive a subprime loan from Citi than a prime one. A spokesperson for Citigroup said NTIC’s information was outdated and failed to reflect new efforts by the company to offer lower interest loans to low-income customers.

■ A report by the National Community Reinvestment Coalition concluded Citigroup does a below-average job of offering affordable loans to minority, female, and low- to moderate-income borrowers. The study looked at 25 metro areas and ranked the 23 most active mortgage lenders in these cities. Citigroup ranked near the bottom in both types of loans measured by NCRC: 14th in home-purchase loans and 17th in refinancings.

NCRC’s senior vice president, David Berenbaum, believes Citigroup officials are committed to community reinvestment: “They have a strong CRA plan.” Still, he adds that Citi’s performance is “nowhere near” the performance of other banks that “are expanding their branches and are very much targeting communities that are usually underserved.”

Peter Skillem of the Community Reinvestment Association of North Carolina says his organization is working with Citi to encourage it to funnel development money into the state through non-profit groups. As it is now, he says, Citi does as much as $1.5 billion a year in business in North Carolina via credit cards, subprime loans, and other transactions, but it has no bank branches in the state. “All of our money seems to be going up to New York,” Skillern says. “And we need it back.”