IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW MEXICO
UNITED STATES OF AMERICA,
Plaintiff,
v.
CIVIL ACTION NO: 97-0096 HB
FIRST NATIONAL BANK OF DOÑA
ANA COUNTY,
Defendant.
_____________________________
SETTLEMENT AGREEMENT
The parties, acting by and through their counsel, jointly
enter into and file this Settlement Agreement in order to fully
and finally resolve the lawsuit filed contemporaneously herewith
by the United States against First National Bank of Doña Ana
County (herein after "First National Bank" or "the Bank")
alleging violations of the Fair Housing Act (Title VIII of The
Civil Rights Act of 1968, as amended by the Fair Housing
Amendments Act of 1988), 42 U.S.C. §§ 3601-3619 and the Equal
Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f, as amended.
The Complaint alleges that the Bank has engaged in practices
that discriminated on the basis of national origin in its home
mortgage lending business. More specifically, the United States
alleges that in processing and underwriting mobile home mortgage
loan applications received from January 1992 through March 1995,
the Bank discriminated against Hispanic applicants seeking mobile
home financing(1) by applying more stringent and less flexible
underwriting standards for Hispanic mobile home loan applicants
than those applied to similarly situated accepted Anglo
applicants. As a result, the Bank failed to approve mobile home
loans for Hispanic applicants whose qualifications met standards
that were equal to or greater than those applied to similarly
situated Anglo applicants who were approved for financing.
In addition, the United States alleges that the Bank's loan
officers made greater efforts to obtain information from Anglo
mobile home loan applicants that would demonstrate their
eligibility for financing compared to the efforts expended in
processing the applications of Hispanics. As a result of such
disparate loan processing treatment, the Bank denied Hispanic
mobile home loan applicants who may have had equal or greater
qualifications than accepted Anglos if equal processing efforts
were made by the Bank's loan officers.
First National Bank cooperated voluntarily with the investigation
by the United States. Additionally, during its investigation the
United States determined that the Bank had previously taken
certain steps with regard to the Bank's policies and procedures
which improved the Bank's fair lending record.
First National Bank denies all allegations in the Complaint and
all claims made by the United States of discrimination or
disparate treatment. The Bank believes that its mobile home
lending program has and continues to provide important,
nondiscriminatory service to the Hispanic members the Doña Ana
County community -- who accounted for a majority of the mobile
home loans made by the Bank during the period covered by the
United States' investigation.
The parties have agreed that, in order to avoid protracted and
costly litigation, this controversy should be resolved
voluntarily, without an evidentiary hearing, trial, or other
adjudication on the merits and that the filing of this Settlement
Agreement is not to be construed as an admission by the Bank of
the validity of any claims asserted in this action.
Therefore, on the basis of the foregoing representations and
agreement of the United States and the Bank, it is hereby ORDERED
as follows:
- First National Bank of Doña Ana County, its officials,
employees, and agents, as well as successors, shall not
engage in any act or practice that discriminates on the
basis of race or national origin in the provision of home
mortgages, or in the provision of services or facilities in
connection with any such transactions; and from imposing on
the basis of race or national origin different terms or
conditions for the availability of home mortgage loans, as
prohibited by the Fair Housing Act, 42 U.S.C.§§ 3601, et
seq., and the Equal Credit Opportunity Act, 15 U.S.C. §
1691(a)(1)
- Within sixty (60) days of the date of entry of this
Settlement Agreement, First National Bank will develop and
implement uniform processing and underwriting guidelines to
be applied to applicants seeking mobile home financing from
the Bank which shall remain in effect unless modified during
the term of this Settlement Agreement. The guidelines shall
be distributed to the Bank's employees with responsibility
for receiving, processing, underwriting or otherwise
evaluating mobile home loan applications, and explained to
them so as to facilitate the application of consistent
standards, without regard to the national origin of the
applicant, in processing and underwriting applications for
loans to purchase mobile homes. The guidelines may be
modified by the Bank from time to time. The guidelines and
any modifications will also be provided to the United States
for its review. At a minimum, such mobile home loan
processing and underwriting guidelines shall include:
- Guidelines and instructions for gathering qualifying
information from an applicant prior to consideration
for an underwriting decision, including the
requirement that the loan personnel must obtain and
document information necessary to reach an
underwriting decision, regardless of the national
origin of the applicant, and that they will document
those efforts in writing in the file;
- Guidelines and instructions on how to assist
applicants to qualify for a mobile home loan,
regardless of their national origin, and a requirement
that such assistance be documented in the loan file;
and
- Minimum guidelines as to qualifying factors such as
debt-to-income ratios, loan-to-value ratios, length of
employment and/or length of employment in profession,
and credit history.
- Within ninety (90) days after entry of this Settlement
Agreement, First National Bank shall develop a written
Customer Assistance Program designed to provide information
to customers and prospective customers relating to the
Bank's residential mortgage loans which shall remain in
effect during the term of this Settlement Agreement. Such
program shall be described in both English and Spanish, and
designed to provide, at a minimum, the following
information to potential customers regarding First National
Bank's residential mortgage loans:
- The principal terms of each type of mortgage loan
currently offered by First National Bank;
- A general summary Of the elements that the Bank evaluates to qualify applicants for each type of mortgage loan offered by First National Bank; and
- Instructions on how to prepare a complete First National Bank mortgage loan application.
The Customer Assistance Program shall be made available at
all of the Bank's branches and loan offices.
- Second Review Committee: Since 1994, First National Bank
has utilized a Second Review Committee to review lending
decisions to evaluate compliance with the Bank's policies
and various laws and regulations. First National Bank shall
continue the Second Review Committee efforts, which
includes the review of mobile home loan decisions, during
the term of this Settlement Agreement. The Second Review
Committee minutes shall reflect the voting of the committee
and indicate each member's concurrence with or vote to
change the initial decision.
- First National Bank's written advertising for residential
mortgage loan products shall contain an Equal Housing
Opportunity logo, statement, or slogan. In all television
and radio advertisements and promotions for home mortgage
loans, the statement "Equal Housing Lender" will be audibly
stated. In the alternative, if a television advertisement
or promotion for mortgage loans includes a written
statement appearing on the screen, the nondiscrimination
statement may so appear; the nondiscrimination statement
must appear on the screen as long as any other written
statement appears.
- Within one hundred and twenty (120) days after entry of
this Settlement Agreement, officers, directors, and First
National Bank employees involved in the mortgage lending
business shall complete a training course appropriate for
the duties and responsibilities of each such individual.
The training courses shall include the following elements:
- a discussion of the Bank's responsibilities under this Settlement Agreement;
- a discussion of the purpose of, and prohibitions
contained in, the Fair Housing Act and the Equal
Credit Opportunity Act;
- a discussion of individual and principal liability for
violations of the Fair Housing Act and the Equal
Credit Opportunity Act;
- a discussion of First National Bank's policies
regarding nondiscrimination in lending;
- a discussion regarding the Bank's disciplinary policy
regarding violations of the Fair Housing Act and the
Equal Credit Opportunity Act by employees;
- a discussion, with the appropriate employees,
regarding the Bank's guidelines for processing and
underwriting mobile home loan applications, as
implemented pursuant to Paragraph 2 above.
Commencing ninety (90) days after the completion of the
above employee training, and thereafter for the term of this
Settlement Agreement, new First National Bank employees involved
in the mortgage lending process shall complete this training
course within thirty (30) days of commencing employment.
The Bank will retain outside consultants to conduct the
specified training.
- Each person required to complete a training course under
the preceding paragraph shall execute a form, which shall
he maintained by First National Bank, acknowledging:
- completion of the training course;
- that they have received, read and understand First National
Bank's policies regarding nondiscrimination, including
the institution's disciplinary policy regarding
violations of the Fair Housing Act and the Equal
Credit Opportunity Act; and
- that they understand that violations of the Fair
Housing Act and the Equal Credit Opportunity Act may
subject them or First National Bank to individual
liability, judicial sanctions, and/or administrative
sanctions.
- Outreach efforts to Hispanic community: First National Bank
shall undertake specific actions to notify the Las Cruces
Hispanic community that the Bank's lending policies and
practices are applied without regard to national origin.
Specifically, First National Bank shall take the following
steps:
- Home Buyers' Education Seminars: During the term of
this Settlement Agreement, the Bank will conduct home
buyers' programs, with particular emphasis placed on
the Las Cruces Hispanic communities. These programs
will instruct participants about such topics as
managing credit, controlling the household budget, and
preparing and applying for a mortgage loan. During the
term of this Settlement Agreement, the Bank will
conduct at least six such programs per year which
specifically target the Hispanic community, in
coordination with local Hispanic organizations or
educational institutions in Doña Ana County. At each
educational seminar, the Bank shall make available
information regarding the loan products it offers,
including the Customer Assistance Program detailed at
paragraph Three (3), supra.
- Mobile Home Loan Fund: As more fully described at
Paragraph Seventeen (17) below, First National Bank,
as part of satisfying the United States, claims for
damages, will establish a Seven Hundred and Fifty
Thousand Dollar ($750,000.00) Mobile Home Loan Fund
("Loan Fund") through which it will offer mobile home
loans at interest rates that are more favorable to the
borrower than normally would be offered. Specifically,
First National Bank will offer mobile home loans to
qualified applicants at the then current Chase
Manhattan prime interest rate (approximately 2.5%
below the interest rate typically charged by the Bank
on mobile home loans) as published in The The Wall Street Journal.
- RECORD-KEEPING AND REPORTING REQUIREMENTS
- For a three-year period following entry of this Settlement
Agreement, the Bank shall retain all mobile home loan
applications submitted to it and all documents and notices
relevant to any underwriting decisions regarding such
applications, including Second Review Committee decisions.
During the same period, the Bank will also retain all
records relating to its fair lending compliance program,
including documents concerning employee training on fair
lending and lending guidelines, the home buyers'
educational programs, and the Loan Fund.
- To monitor the Bank's processing and evaluation of mobile
home loan applicants under this Settlement Agreement, the
United States may, from time to time during the term of the
Settlement Agreement, seek and be provided access to
individual mobile home loan application files and related
records such as the minutes of the Bank's Second Review
Committee, provided such requests are reasonable and are
made upon reasonable notice and in writing to the Bank and
comply with applicable laws concerning the applicant's
right to financial privacy. The United States will keep all
information and materials received from the Bank
confidential except as may be necessary to enforce this
Settlement Agreement. If the United States identifies any
concerns with respect to the Bank's compliance with this
Settlement Agreement in its treatment of mobile home loan
applicants, it will promptly notify the Bank of the
concerns and seek a negotiated resolution, or, if the
parties reach an impasse, will bring the issue to the Court
for resolution.
- The Bank will report on its progress under this Settlement
Agreement to the Civil Rights Division of the United States
Department of Justice on a semi-annual basis for the first
year, and annually thereafter for the following two (2)
years. Each report will include a status report on the
Bank's processing and underwriting of Hispanic mobile home
loan applications. This report should also discuss, among
other things, the Bank's mobile home loan production (as it
relates to Hispanic borrowers and potential borrowers),
underwriting guidelines, the Second Review Committee
activities, the Loan Fund, and the home buyers' education
seminars. The first report under this paragraph shall be due
six (6) months after entry of this Settlement Agreement,
the second report twelve (12) months after entry, and the
remaining reports in twelve (12) month intervals thereafter
for two (2) additional years.
- Copies of all notices, correspondence, reports, or
documents required to be provided by one party to the other
under this Settlement Agreement will be mailed to the
following addresses:
For the United States:
Chief, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
P.O. Box 65998
Washington, D.C. 20035-5998
For the Bank:
Robert: H. Ledig, Esq.
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W., Suite 800
Washington, D.C. 20004-2505
Ben Haines
President
First National Bank of Doña Ana County
P.O. Box Drawer FNB
Las Cruces, N.M. 88004
- The Bank will pay a total of approximately Five Hundred and
Eighty-Five Thousand Dollars ($585,000.00) to satisfy the
United States' claim for monetary damages in the manner set
forth below. First, the Bank shall place the sum of Four
Hundred and Eighty-Five Thousand Dollars ($485,000.00) into
a First National Bank of Doña County "Settlement
Agreement Compensation Fund" ("Compensation Fund") to be
established at the Bank and administered at the direction
of the United States. The purpose of this fund is to
compensate those persons whom the United States maintains
were injured by the Bank's discriminatory lending practices
during the period January 1992 through March 1995.
Furthermore, the Bank will establish the Seven Hundred and
Fifty Thousand Dollar ($750,000.00) Loan Fund described
further in Paragraph Seventeen (17) below, that will offer
below market rate mobile home mortgage loans to qualified
applicants and will be designed to redress the past
discriminatory practices in which the United States alleges
the Bank engaged. By establishing this Loan Fund, the
parties estimate that the Bank will expend approximately
One Hundred Thousand Dollars ($100,000.00) in costs
associated with the subsidized financing.
- The $485,000 Compensation Fund will be administered as follows:
- Applicants whose files were reviewed by the United States during the course of its investigation
This group of applicants ("Group I Payees") will be
compensated in the amounts specified by the United States,
provided that no Group I Payee shall receive more than
$40,000, and not less than $5,000, and the total sum for
Group I Payees shall not exceed $300,000.(2)
- Other applicants denied between January 1992 and March
1995
For those denied Hispanic mobile home loan applications not
reviewed by the Department of Justice during its investigation,
the following procedure will be used to identify and compensate
additional persons ("Group II Payees"):
- within sixty (60) days after entry of this
Settlement Agreement, the Bank's personnel will
review all loan files of rejected Hispanic mobile
home loan applicants submitted between January 1,
1992 and March 30, 1995 not previously reviewed
by the Department. The Bank will review these
loan files under the mobile home processing and
underwriting standards that have been agreed
upon;
- the Bank will then compile a list of those
applicants reviewed who would have been accepted,
or may have been accepted with additional
qualifying information, if they had been
considered under the underwriting standards
applied. These applicants will be eligible for
compensation as Group II Payees;
- for all other applicants not identified as being
eligible for compensation, the Bank will state
their reasons for affirming the loan denial;
- thereafter, the United States will review the
reasons for the continued denial of those
applicants the Bank identified as ineligible for
compensation and will have the right to add any
who it believes should be included as Group II
Payees. The United States may include as Group II
Payees those applicants who it determines had
equal to or greater qualifications than similar
situated accepted Anglo applicants reviewed
during the Department's investigation; and
- the Bank will compensate the Group II Payees that
the Bank or the United States identify pursuant
to this procedure. The exact amount of
compensation for each Group II Payee shall be
determined by the United States, provided that no
individual Group II Payee shall receive more than
$40,000 and the total for all Group II Payees
shall not exceed $185,000.
- Within thirty (30) days after the United States identifies
those payees and their compensation amounts pursuant to
Paragraph 14a, and within thirty (30) days after the
provisions of Paragraphs 14b have been completed, including
the determination of compensation amounts, the Bank shall
notify all payees by registered mail, return receipt
requested, of the nature of the settlement and of their
right to receive compensation. The form of the
correspondence shall be substantially in the form set forth
at Exhibit A attached hereto. The Bank will notify the
United States of the names, last known addresses and social
security numbers of all payees from whom no return receipt
has been received within thirty (30) days of the mailing of
the notice, and the United States will have an additional
sixty (60) days to locate these payees and provide them
with a copy of the notice. The notice will include a
requirement that each payee respond within thirty (30) days
of receipt of the notice and execute a release,
substantially in the form set forth at Exhibit B, of any
additional rights to proceed against the Bank on claims
arising from the same facts.(3) Each payee will receive an
amount designated by the United States consistent with the
guidelines outlined above. The Bank will issue checks from
the Compensation Fund to each payee for the designated
amount and provide copies of the checks and applicable
correspondence to counsel for the United States.
- Any amount remaining in the Compensation Fund after all
payees have been identified and compensated will be used to
supplement the below market rate loan program outlined in
Paragraph Seventeen (17) below. For each One Thousand
Dollars ($1,000.00) remaining in the Compensation Fund,
First National Bank will add an additional Five Thousand
Dollars ($5,000.00) to the total amount of financing
offered through the Loan Fund.
- As indicated in Paragraph Eight (8) above, First National
Bank shall establish a Seven Hundred and Fifty Thousand
Dollar ($750,000.00) Loan Fund which will offer below
market rate mobile home loans. The Loan Fund will be
designed with the goal of redressing the past pattern of
discrimination against Hispanics in which the United States
alleges the Bank engaged. Specifically, the Bank will offer
to all qualified mobile home loan applicants loans at the
then current Chase Manhattan prime interest rate as
published in The Wall Street Journal -- (which is generally
approximately 2.5% below the interest rate typically
charged by the Bank on mobile home loans). The loans may be
for the purchase of mobile homes or mobile home and land
packages. By establishing this Loan Fund, the parties
estimate that the Bank will expend approximately One
Hundred Thousand Dollars ($100,000.00) in costs associated
with the subsidized financing, which shall be included as
part of the satisfaction of the United States' claim for
monetary damages.
The Loan Fund will be available for a period of three (3)
years following the entry of the Settlement Agreement -- unless
the Loan Fund is fully disbursed before the end of such period.
After the three year period (or earlier if the Loan Fund has been
fully disbursed), new loans will be made at the Bank's then
current market rates regardless of whether (in the case of the
three year period) the entire amount in the Loan Fund has been
disbursed.
The Loan Fund shall be made available on a first come first
served basis beginning on the first business day occurring on or
after the ninetieth (90th) day following the entry of this
Settlement Agreement to all applicants for mobile home loans and
mobile home land packages who meet the following criteria:
First, an applicant or applicants must have income that is
equal to or less than 120% of the annual HUD median family income
for the Las Cruces MSA rounded to the nearest thousand.
Second, the mobile home for which financing is sought must
remain located in Doña Ana County.
Third, the applicant or applicants must intend to reside in
the mobile home.
Fourth, the applicant or applicants must otherwise meet the
Bank's underwriting and other applicable requirements for a
mobile home loan or mobile home land package.
The Bank may require an applicant or applicants to provide
a certification with respect to their qualification with regards
to the first three conditions specified above.
- In order to apprise the Hispanic community of the Loan
Fund, the Bank shall, beginning not more than ninety (90)
days after entry of this Settlement Agreement, coordinate
with at least one Hispanic community organization active in
Doña Ana County to assist in notifying the Hispanic
community of the availability of the Loan Fund and shall
make available to the community organization a written
notice concerning the availability, terms and requirements
of the Loan Fund. Such coordination may be done in
conjunction with the home buyers' program specified at
Paragraph Eight (8) above.
The Bank shall report on the progress of the disbursement
of the Loan Fund pursuant to Paragraph Eleven (11) above to determine if the goal of the Fund is being achieved. If it is
determined that additional outreach efforts to the Hispanic
community are necessary to achieve the goals of the Loan Fund,
the parties shall agree an appropriate modifications.
- The terms of this Settlement Agreement will bind any
successor in interest to the Bank as to employees,
branches, and offices now under its control, branches
subsequently acquired by them, and any branches into which
its branches are consolidated. In is assumed by the parties
that any successor in interest will voluntarily implement
the provisions of this Settlement Agreement in all new
successor in interest branches located in the Bank's
current service area, but if any such successor in interest
declines to implement voluntarily the provisions of the
Settlement Agreement in all such branches and offices, it
shall present to the United States its proposed plan of
operation. If the United States concludes that the proposed
plan of operation will hinder the attainment of the goals
of this Settlement Agreement, it shall present such
concerns to the successor in interest and attempt to
resolve the differences voluntarily. Any differences that
cannot be resolved by the parties may be presented to the
Court for resolution.
- This Settlement Agreement may be modified by written
agreement of the Bank and the United States Department of
Justice.
- RETENTION OF JURISDICTION
- Upon entry of this Settlement Agreement, the complaint in
this case shall be dismissed. However, for a three-year
period following the entry of this settlement Agreement,
this Court will retain jurisdiction for purposes of
enforcing all provisions of this Settlement Agreement (as
may hereafter be modified by the parties in writing). The
parties to this Settlement Agreement will endeavor in good
faith to resolve informally any differences regarding
interpretation and compliance with this Settlement
Agreement prior to bringing such matters to the Court for
resolution.
- Each party to this litigation will bear its own costs.
It is so ORDERED, this ______ day of________________, 1997.
UNITED STATES DISTRICT COURT JUDGE
The Undersigned apply for and consent to the entry of this
Settlement Agreement:
FOR THE UNITED STATES:
JANET RENO
Attorney General
ISABELLE KATZ PINZLER
Acting Assistant Attorney General, Civil Rights Division
PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section
ALEXANDER C. ROSS
FREDERICK B. RIVERA
Attorneys
U.S. Department of Justice
P.O. Box 65998
Washington, D.C. 20035-5998
(202) 514-6161
FAX: (202) 514-6161
JOHN J. KELLY
United States Attorney
RAYMOND HAMILTON
Assistant United States Attorney
Chief, Civil Section
Post Office Box 607
Albuguerque, New Mexico 87103
(505) 766-2868
FOR THE BANK:
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
THOMAS P. VARTANIAN, Esq.
JACK B. GORDON, Esq.
ROBERT H. LEDIG, Esq.
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004-2505
(202) 639-7000
FAX: (202) 639-7008
1. Mobil home loans or financing, as used in this Settlement
Agreement, refers to loans financing the purchase of new or used
mobile homes or mobile homes and land packages.
2. There will be one compensation payment per application for
Group I and II Payees, even if there were two or more co-applicants. Accordingly, co-applicants shall be deemed a single
Payee for purposes of determining the minimum and maximum
compensation payment. However, if directed by the United States,
the Bank will distribute the applicable compensation payment
among the co-applicants in such proportion as the United States
may direct provided that releases, substantially in the form of
Exhibit 3 attached hereto, shall be obtained from all co-applicants
3. If the applicant or co-applicant was married at the time
the subject application was submitted or denied, the Bank may
also require that the spouse execute a release, unless
circumstances are such that obtaining a spouse's release is not
practical.