KeyBank, which was ranked the worst lender for Black borrowers among the nation’s 50 largest mortgage lenders by a national nonprofit, will conduct a racial equity audit, the bank announced.
The regional bank, headquartered in Cleveland, Ohio, said it had commissioned a law firm “with deep experience leading civil rights and racial equity audits” to continue advancing its diversity, equity and inclusion priorities.
The results of the audit, conducted by Covington & Burling LLP, will be published at the end of the second quarter in 2024 and will include input from a variety of stakeholders, including representatives from the Service Employees International Union Master Trust (SEIU) and other community groups.
The announcement comes on the heels of a December report by the Washington D.C.-based National Community Reinvestment Coalition which found that between 2018 to 2021, KeyBank’s share of mortgage originations to Black borrowers was the lowest among the nation’s 50 largest home purchase lenders. The report also found indications that KeyBank engaged in “redlining in several major cities and a dramatic drop in the bank’s overall lending to low- and moderate-income (LMI) borrowers.”
Out of a total of 46,971 KeyBank loans, just 2.2% of total originations were made to Black borrowers tying for second-worst at lending to majority-minority neighborhoods, with just 7% of its total loan originations, according to the report.
KeyBank said it strongly disagreed with the NCRC’s characterization of their lending activities.
“KeyBank does not discriminate and does not lend based on race. KeyBank’s lending decisions are applied consistently to all potential borrowers and are based on predetermined criteria in accordance with fair lending laws,” a statement from KeyBank said. “Any decision to deny an applicant is based solely on the financial information and data associated with the applicant.”
The bank said between 2018 – 2021, KeyBank increased loans to African-American borrowers by 24%, and has more than doubled its lending to all minority groups during the same time period.
After the audit announcement was made, NCRC released a statement saying the bank agreed to the audit as a result of pressure from shareholders and staff from the Service Employees International Union Master Trust, who were planning to force the issue via a resolution during the upcoming KeyBank annual shareholders’ meeting.
“It’s a shame that it took pressure from shareholders for KeyBank to acknowledge they have a problem,” Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition, said.
The NCRC report found that KeyBank had decreased the share of its home purchase lending made to Black borrowers in all but three of the major metropolitan areas it serves. The nonprofit alleged that amounts to breaking its promise to serve underserved communities as set out in the community benefits agreement signed in 2016 ahead of its purchase of First Niagara. The nonprofit terminated its relationship with the bank late last year over the same alleged conduct.
When asked if shareholder pressure was behind the audit, a spokesperson for the company sent the following response: “Many companies, including financial institutions, have received shareholder proposals regarding the further advancement of racial equity and inclusion priorities. We have discussed the possibility of a racial equity audit with a number of stakeholders and have decided to move forward with it at this time.”
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
