$200 million federal settlement over bank's mortgage practices includes Twin Cities

A Wisconsin bank with branches in Minnesota has agreed to a $200 million, three-year settlement prompted by one of the largest discriminatory housing lending complaints ever brought by the federal government.

Associated Bank agreed to the settlement after the U.S. Department of Housing and Urban Development (HUD) alleged that between 2008 and 2010 the bank discriminated against blacks and Hispanics seeking mortgages in predominantly minority neighborhoods.

HUD's analysis of Associated Bank's mortgage lending indicated that, compared to other mortgage lenders, it made few loans in minority neighborhoods while approving mortgages in nearby, predominantly white neighborhoods.

In a statement, officials called it "the largest settlement of this kind HUD has ever reached."

Keenan Raverty, a vice president at Bell Mortgage and two-time president of the Minnesota Mortgage Association (MMA), called the settlement "staggering," and certainly the largest he's seen in his 23-year career.

"HUD doesn't reach settlements like this often," he said. "The sheer dollars involved will bring attention to this issue."

Raverty said Associated has a rather small share of the residential mortgage lending market in the Twin Cities and recently became involved with the Homeownership Opportunity Alliance, a group trying to determine why Minnesota has such a large gap between white and nonwhite homeownership rates.

"It seems that they have recently hired some good people and are making some strides to do the right thing," Raverty said.

Under the agreement, Associated will generate nearly $200 million in new housing loans in minority-dominated neighborhoods in Wisconsin, Minnesota and Illinois.

It also will pay nearly $10 million to lower interest rates and provide down-payment and closing-cost assistance to qualified borrowers in targeted areas in the Twin Cities; Chicago and Lake County, Ill.; and Milwaukee, Racine and Kenosha, Wis.

Nearly $3 million will be available to help homeowners repair their properties in those areas.

The bank expects to originate $3.6 million in new mortgages to boost sustainable homeownership in predominantly minority neighborhoods in Anoka, Chisago, Dakota, Hennepin, Ramsey, Washington and Scott counties and Wisconsin's Pierce and St. Croix counties. At least $180,000 will be available to help reduce interest rates and down payment and closing costs.

Also, about $65,000 will be committed to a nonprofit organization to make affordable home repair grants to residents who have experienced "financial distress." Additional money would go to outreach in the Twin Cities and provide fair lending education and training among public and nonprofit community organizations.

"The point is that we make sure every borrower, especially borrowers of color, are given every opportunity to have loans at reasonable rates that allow them to participate in the economy and purchase homes and build the assets they need to move ahead like everybody else," said Ron Elwood, supervising attorney for the Legal Services Advocacy Project in Minnesota.

"This settlement sends a strong message that HUD does not tolerate practices that unfairly restrict an equal and open housing market," said HUD Secretary Julián Castro. "This agreement will ensure that more Americans can fulfill their hopes and aspirations."

Philip Flynn, Associated Bank's president and CEO, said: "We agree with HUD that we can improve our performance in some of the communities and neighborhoods we serve. We remain committed to the promotion of homeownership and lending in those areas."

The company already has made a number of enhancements to its lending practices and will implement others as designated and scheduled in the agreement.

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jim.buchta@startribune.com • 612-673-7376