UNITED STATES OF AMERICA,
Plaintiff,

v.

FIRST NATIONAL BANK OF DOÑA
ANA COUNTY,
Defendant.

_____________________________

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:

1. 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)

2. 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:
   1. 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;

   2. 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

   3. 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.

3. 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:
   1. The principal terms of each type of mortgage loan currently offered by First National Bank;

   2. 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

   3. 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.

4. 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.

5. 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.

6. 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:
   1. a discussion of the Bank's responsibilities under this Settlement Agreement;

   2. a discussion of the purpose of, and prohibitions contained in, the Fair Housing Act and the Equal Credit Opportunity Act;

   3. a discussion of individual and principal liability for violations of the Fair Housing Act and the Equal Credit Opportunity Act;

   4. a discussion of First National Bank's policies regarding nondiscrimination in lending;

   5. a discussion regarding the Bank's disciplinary policy regarding violations of the Fair Housing Act and the Equal Credit Opportunity Act by employees;

   6. 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.

7. 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:
   1. completion of the training course;

   2. 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

   3. 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.

8. 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:
   1. 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.

   2. 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.

9. 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.

10. 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.

11. 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.

12. 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

13. 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.

14. The $485,000 Compensation Fund will be administered as follows:
    1. 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⁾

    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"):

       1. 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;

       2. 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;

       3. for all other applicants not identified as being eligible for compensation, the Bank will state their reasons for affirming the loan denial;

       4. 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

       5. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. This Settlement Agreement may be modified by written agreement of the Bank and the United States Department of Justice.

21. 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.

22. 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.