One month after releasing a highly critical report about KeyBank’s mortgage lending record to Black borrowers, the National Community Reinvestment Coalition is taking its concerns to regulators.
The fair-lending advocacy group says it is planning to send letters this quarter to the Federal Reserve and the Office of the Comptroller of the Currency that focus on KeyBank’s “failure to complete” a five-year, $16.5 billion community benefits plan to which it committed in 2016 while seeking regulatory approval to acquire First Niagara Financial Group in Buffalo, New York.
The coalition says that the letter to the OCC will be submitted as a public comment letter ahead of KeyBank’s next Community Reinvestment Act exam, which is scheduled in April.
While the NCRC is no stranger to submitting letters for bank CRA exams and reaching out to regulators about fair-lending practices, the forthcoming correspondence regarding KeyBank will be “unique” because the letters will detail KeyBank’s “failure to implement” the community benefits plan and the lending issues outlined in the report, one NCRC official said.
“This is not a step that we have had to take in the past,” Kevin Hill, CRA manager at NCRC, said this week in an email to American Banker. “We will be highlighting how regulators should ensure that commitments made during their merger reviews and cited in CRA exams … are implemented in full.”
On Thursday, a KeyBank spokesperson said the bank had no comment on the NCRC’s letter-writing plans.
The NCRC’s latest actions against KeyBank, the banking subsidiary of Cleveland-headquartered KeyCorp, demonstrate to what extent the once amicable relationship between the two parties has frayed as they have tried — and thus far failed — to agree on how the bank can better support low- to moderate-income neighborhoods within its markets.
Among the findings in the NCRC’s research: Of the nation’s 50 largest mortgage lenders, KeyBank in 2021 had the lowest percentage of mortgage originations to Black borrowers (2.2%) and ranked third in percentage of originations to minority borrowers (14%). The report, which was released in December, is based on Home Mortgage Disclosure Act data.
One of the most troubling accusations in the report that NCRC plans to bring up in the letters to regulators is that KeyBank has allegedly engaged in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of the residents are Black.
Maps in the report show how the bank’s mortgage lending in 2021 “effectively wall[ed] out Black neighborhoods in several cities” such as Philadelphia, Cleveland and Buffalo, the NCRC said.
“I think the data speaks for itself,” NCRC President and CEO Jesse Van Tol said this week in an interview. “Demonstrably, they’re getting worse, not better.”
KeyBank and the NCRC worked together seven years ago to craft KeyBank’s first community benefits plan, which was hailed as a “landmark” agreement when it was announced in March 2016. At the time, it was the largest community development commitment by a single bank.
The deal — which pledged more investments in mortgage, small-business and community development lending and philanthropy in low- to moderate-income communities — was also an important tool to help ease antitrust and other concerns over KeyCorp’s bid for First Niagara.
But the bank didn’t live up to some of the commitments it made in the original plan, according to Van Tol, and that has created friction as the two parties tried to work together on the bank’s expanded $40 billion community benefit agreement, which was announced in March 2021 and is scheduled to continue to 2026.
Instead of making more home purchase loans to Black and low- to moderate-income borrowers, which was one of the commitments in the original plan, KeyBank from 2018 to 2021 decreased the share of home purchase lending to Black borrowers in all but three of the major metro areas it serves, according to the NCRC report. Likewise, the bank decreased low- to moderate-income borrowers’ share of such lending in all but one of those markets, according to the report.
Negotiations over KeyBank’s $40 billion plan came to a halt several weeks ago when the two sides couldn’t agree on certain lending goals for people of color, according to Van Tol.
He resigned from KeyBank’s corporate responsibility national advisory council and said the NCRC has “invited KeyBank off” its Bankers/Community Collaborative Council.
KeyBank declined this week to make anyone available for an interview to talk about the report.
Instead, a spokesperson shared a lengthy statement the bank issued last month in response to the report. In the statement, the bank said it “strongly disagrees with the NCRC’s recent characterization” of its lending activities and the performance of the community benefits plan, adding that it “does not discriminate and does not lend based on race” and “any decision to deny an applicant is based solely on the financial information and data associated with the applicant.”
Among its successes, the bank said that it has “delivered more than $29 million in lending, investments and philanthropy to increase access, equity for and inclusion of [low- to moderate-income] clients.” In addition, it said it “committed $25 million to continue to increase mortgage lending in majority-minority neighborhoods and also launched a special-purpose credit program” last fall that, as of this month, provides a $5,000 credit for eligible homebuyers.
“Despite the NCRC’s decision to step away from our partnership, KeyBank is already following through with these commitments as part of our $40 billion extension and expansion,” the bank said in the statement. It also said that it is “now an active participant” in the state of New York Mortgage Agency, or SONYMA, a program that subsidizes mortgage expenses.
According to David Dworkin, president and CEO of the National Housing Conference, KeyBank joined the NHC, expressing “an interest in being more involved in the [agency’s] Black Homeownership Collaborative.”
“I can’t speak to what KeyBank has done in the past, but I do know they are engaged now with a wide range of partners to develop new strategies to better serve [Black] communities,” Dworkin said.
But at least one community development advocate, who’s been involved for years in community development negotiations with KeyBank, wants to see the bank pay a fine for not fulfilling its community benefits commitments on time and get downgraded on its next CRA exam.
“I never give up hope” for a resolution, said Ruhi Maker, senior attorney at the Empire Justice Center in Rochester, New York. “But at this point the regulators have to say to them: Do this.”
