Joe Buglewicz/Bloomberg
More than 80 community development and fair-lending groups are calling on federal regulators to investigate KeyBank’s mortgage lending practices for alleged redlining.
The National Community Reinvestment Coalition is leading the groups, which are also asking regulators to downgrade the bank’s Community Reinvestment Act rating — a move that would prevent it from merging or opening new branches until it receives a higher rating on a future exam.
The groups also want the regional bank’s regulators to examine how well it complied with commitments it made in a $16.5 billion community benefits agreement that it negotiated as part of its 2016 acquisition of First Niagara Financial Group.
Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, wrote in a blog post Thursday that Key’s CRA rating should be lowered based on “flagrant violations of commitments it made” as it sought approval to buy First Niagara.
“When a bank breaks promises, the law says there are consequences, and it’s our government’s job to enforce that accountability,” Van Tol wrote.
The groups’ demands were outlined in a March 31 letter to the Federal Reserve and the Office of the Comptroller of the Currency. The letter was made public on Thursday.
In a November 2022 report, the National Community Reinvestment Coalition was highly critical of Key’s mortgage lending record to Black borrowers. Two months later, the community reinvestment group warned that it would take its concerns to regulators ahead of Key’s next scheduled CRA exam period, which was set to begin on April 1.
The 2022 report, which is based on Home Mortgage Disclosure Act data, included several troubling findings. Of the nation’s 50 largest mortgage lenders, Key had the lowest percentage of mortgage originations to Black borrowers in 2021, and it ranked near the bottom in terms of the percentage of originations to minority borrowers, according to the report.
The report accused KeyBank, which is the banking subsidiary of Cleveland-based KeyCorp, of engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of the residents are Black.
Key currently has a CRA rating of “outstanding,” the highest possible score in a four-tiered ratings system. It has received 10 consecutive “outstanding” ratings from the OCC since 1977, when the Community Reinvestment Act was enacted, a Key spokesperson said Thursday.
KeyBank’s most recent “outstanding” rating was “the wrong call,” Van Tol wrote in the blog post.
His group wants regulators to conduct a review of the integrity of the community development data submitted during Key’s previous CRA exam period.
“They promised to use their merger with First Niagara to buoy the economic interests of under-resourced communities, then turned around and did the opposite in most of the cities they serve — all while passing the new profits from the merger on to shareholders and insiders,” Van Tol wrote. “Regulators have an obvious duty to act, not only for the communities KeyBank hoodwinked but also to show the industry as a whole that this kind of conduct is not okay.”
In response, the KeyBank spokesperson pointed to a lengthy statement the bank issued back in December after the NCRC’s report was published. That statement says that KeyBank does not discriminate or make lending decisions based on customers’ race.
“Lending decisions are applied consistently to all potential borrowers and are based on predetermined criteria in accordance with fair lending laws,” the bank said. “Any decision to deny an applicant is based solely on the financial information and data associated with the applicant.”
The Key spokesperson also pointed Thursday to new details added to the bank’s original statement, which discussed a special purpose credit program. The new statement notes that the bank has since launched a second special purpose credit program that provides affordable terms to eligible homeowners who want to refinance their mortgages. Those loans feature fixed rates, zero origination fees and first- or second-lien options of up to $100,000.
Since 2017, when the five-year community benefits plan commenced, Key has provided $29 billion in lending and investments in affordable housing, home lending and small business lending in low- and moderate-income communities and philanthropic endeavors, according to the bank.
The relationship between Key and the National Community Reinvestment Coalition hasn’t always been so tense. They worked together amid Key’s acquisition of Buffalo, New York-based First Niagara to draft a community benefits agreement, and the National Community Reinvestment Coalition hailed it as a “landmark” agreement in March 2016.
But the once-cordial relationship turned sour after the community reinvestment group began to question whether Key had fulfilled the various lending promises it made in the agreement.
The National Reinvestment Coalition and Key had been trying to work together on an expanded $40 billion community benefits plan. But the relationship came to a halt in December when the two sides couldn’t agree on certain lending goals for people of color, Van Tol said in January.
Van Tol wound up resigning from KeyBank’s corporate responsibility national advisory council, and KeyBank is no longer part of the NCRC’s Bankers/Community Collaborative Council.
KeyBank has said that it fulfilled all of the commitments it made in the original agreement.
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