The U.S. Department of Justice (DOJ) recently announced legal actions aimed at addressing discriminatory lending practices, documenting systemic racism in the financial services industry. The cases highlight DOJ’s efforts: a $6.5 million settlement with Citadel Federal Credit Union for redlining Black and Hispanic communities, and a lawsuit against Rocket Mortgage, an appraisal management company, and an appraiser for racial discrimination in a mortgage refinance application.
These cases underline a painful truth: redlining and racial discrimination in housing and mortgage lending persist, reinforcing racial wealth disparities and undermining the economic potential of minority communities.
The Citadel Federal Credit Union Case
In the first case, the settlement with Citadel Federal Credit Union reveals a stark reality. Despite decades of laws intended to prevent it, redlining—a practice in which lenders systematically deny or limit financial services to communities of color—remains entrenched in certain parts of the U.S. Citadel was found to have avoided providing mortgage lending services to Black and Hispanic neighborhoods, focusing instead on predominantly white areas.
The settlement requires Citadel to invest over $6.5 million in impacted communities and is a significant victory in the fight against redlining. It is the first ever redlining lawsuit targeting a credit union and includes funds for subsidizing loan products, outreach to affected neighborhoods, and community development.
The monetary fine is minimal. It is important to recognize that financial settlements alone cannot erase decades of damage. Discriminatory practices like redlining stifle generational wealth-building opportunities in Black and Hispanic communities, leading to lower rates of homeownership and widening the racial wealth gap.
The effects of redlining are profound. When financial institutions neglect certain neighborhoods, property values stagnate, businesses struggle to thrive, and residents face obstacles in accessing credit. This perpetuates a cycle of poverty and underinvestment that weakens the entire economy. While Citadel’s settlement may provide some relief, it cannot compensate for the decades of exclusion that have left minority communities economically disadvantaged.
The Rocket Mortgage Discrimination Lawsuit
DOJ’s lawsuit against Rocket Mortgage, an appraisal management company, and an appraiser for race discrimination in a mortgage refinance application paints a similarly troubling picture of bias. The complaint alleges that when a Black couple applied to refinance their mortgage, their home was appraised significantly lower than comparable homes owned by white families. This type of discrimination, known as appraisal bias, is a common but often overlooked form of racism in the housing industry.
Appraisal discrimination has severe consequences for minority homeowners. A low appraisal can result in higher mortgage rates, denial of loan applications, or reduced access to home equity—the very means through which families build wealth. In this case, the DOJ’s lawsuit seeks to hold not only the appraiser but also Rocket Mortgage and the appraisal management company accountable, signaling that the government will not tolerate racial bias at any stage of the mortgage process.
The Broader Impact
These cases are part of a broader push by the Biden administration and the DOJ to confront racial inequities in housing and lending. Under the Fair Housing Act and the Equal Credit Opportunity Act, discriminatory practices based on race are illegal, yet enforcement has been inconsistent over the years. The recent actions demonstrate a renewed commitment to using the full power of the federal government to hold financial institutions accountable for racial discrimination.
Enforcement, however, is only one part of the solution. Systemic racism in housing and finance cannot be eradicated through lawsuits alone. Structural reforms, including greater oversight of appraisers, mortgage lenders, and financial institutions, are critical. Additionally, expanding access to credit in historically marginalized communities and supporting minority-owned banks and credit unions may help address the racial wealth gap.
Looking Forward
Both the Citadel settlement and the Rocket Mortgage lawsuit underscore the need for continued vigilance in the fight against racial discrimination in housing. For Black and Hispanic families, homeownership represents one of the most reliable paths to building generational wealth. When discriminatory practices deny them access to that opportunity, the entire economy suffers. Addressing these injustices is not just a matter of fairness—it is an economic imperative.
Both cases should serve as a reminder to all financial institutions that discriminatory practices, whether through redlining or appraisal bias, will not go unnoticed or unpunished. It is up to regulators, lawmakers, and financial leaders to ensure that the American Dream of homeownership is accessible to all, regardless of race. The fight for fair housing continues, and we must all play a role in dismantling the systems that perpetuate inequality.