A Rochester-based mortgage lender has pledged to invest $500,000 in loan incentives to homebuyers in historically-disadvantaged communities across upstate New York after coming under scrutiny for its lending patterns by state regulators.
The move by Premium Mortgage follows a state Department of Financial Services report on mortgage lending practices in the Buffalo area that cited Premium, and other lenders, for “a distinct lack of lending” to people of color and in neighborhoods mostly populated by them.
The report, which was released in February, found that while about 20 percent of the area’s population is comprised of people of color, mortgage loans to minorities made up less than 10 percent of total mortgage loans in the area between 2016 and 2019.
When homing in on census tracts that the department deemed “majority-minority,” regulators found that about 4.5 percent of loans originated in those tracts. Of the 4,841 mortgages provided by Premium, roughly 3.9 percent originated in majority-minority tracts. By contrast, Evans Bank and Five Star Bank originated over 12 percent of their loans in those tracts.
The investigation did not find signs that Premium or any other institution discriminated against borrowers. Loan applications were not denied at excessive rates and, in fact, approval rates were high for minority applicants, according to the report.
But, the department pointed out, “these companies had little or no engagement with minorities, and generally made scant effort to do so.”
The inquiry focused in part on the performance of several “non-depository lenders” operating in the Buffalo metro, one of which was Premium. Non-depository lenders generally focus on mortgages and do not offer other financial products, such as savings and checking accounts, like banks.
The Department of Financial Services report said these institutions account for an increasing share of mortgage loans nationwide. In 2013, banks originated 70 percent of new mortgages, while “nonbanks” now lend the majority of mortgages, which they often sell on the secondary market, according to the report.
The report noted that the department’s investigation into one non-bank lender, Hunt Mortgage Corp., had concluded and that the department found no intentional discrimination or violation of fair lending laws.
But in a “good-faith attempt to increase lending in majority-minority neighborhoods and to minority borrowers,” Hunt entered into an agreement with the Department of Financial Services to improve its services, the report read.
Under that agreement, Hunt will increase marketing to minorities and majority-minority neighborhoods, commit to the creation of a financing program that will provide at least $150,000 in discounted or subsidized loans for homes in majority-minority neighborhoods, and annually train its employees and agents on fair lending.
That agreement appears to have been a model for one that Premium struck with the Department of Financial Services.
In a June 28 statement announcing the deal, executives from Premium noted that the department had wrapped up its investigation into the company and found no evidence of intentional discrimination, misconduct, or other violations.
But, executives said, Premium chose to enter into an agreement with the department to launch the new $500,000 Neighborhood Vitality homebuyer incentive program.
“We did not just want to throw money at the problem — that is easy, anyone can do that,” Premium Mortgage President Mike Donoghue said in the statement. “We wanted to find a way to get the money into the hands of those who need it and can use it to revitalize their neighborhoods.”
National Mortgage News, a trade publication, reported that Premium will advertise the Neighborhood Vitality program and disperse the funding using proprietary software that identifies underserved communities in Upstate New York.
In its news release, Premium stated it started the Neighborhood Vitality program at the beginning of the year, while it was still under investigation, and it has already distributed $100,000 worth of incentives.
Jeremy Moule is CITY’s news editor. He can be reached at [email protected].