KeyBank continued its years-long retreat from promoting Black and low-income homeownership in 2022, an analysis of the most recent federal data on mortgage lending reveals.
Black borrowers made up just 2.6% of the Cleveland-based bank’s home purchase mortgage lending in 2022, down from 3% the year prior. KeyBank has been pulling back from supporting Black homeownership each year since 2018, when 6.5% of its home purchase loans went to a Black borrower.
KeyBank made 19.2% of its home purchase loans for the year to low- and moderate-income (LMI) borrowers, down from 19.7% in 2021. This modest but significant one-year decline understates KeyBank’s longer-term performance for non-wealthy families seeking to buy a home to live in: In 2018 more than 38% of such KeyBank loans went to an LMI borrower.
Both data points look even uglier when compared to other top lenders, who made more than 30% of their 2022 purchase mortgages to LMI borrowers and about 7% of them to Black borrowers.
KeyBank’s steady withdrawal from Black and non-wealthy borrowers seeking to buy a home runs counter to the spirit of the agreement it made with community leaders while seeking clearance for a merger in 2016, as a report we published last year documented. In the same period from 2018 to 2022 when the bank was shifting its mortgage business to wealthier, Whiter communities, its executives saw fit to hike shareholder dividends using the new profits from the merger tied to its since-broken promises.
Our 2022 report detailed KeyBank’s severe failure in serving low and moderate-income (LMI) and Black borrowers within the communities it pledged to assist. KeyBank in 2016 signed a Community Benefits Agreement (CBA) with the National Community Reinvestment Coalition (NCRC) and various community groups representing those same borrowers’ interests across the nation. The deal was instrumental in satisfying legal and regulatory requirements in KeyBank’s successful merger with First Niagara Bank.
By 2021, KeyBank had become the worst major mortgage lender for Black borrowers. NCRC cut ties with KeyBank after discovering the bank’s abandonment of Black and LMI borrowers. We notified regulators that the bank should receive a downgraded Community Reinvestment Act rating. And while the bank initially issued misleading and inaccurate responses asserting it had not done what the numbers show, it was later forced to commission a racial equity audit once shareholders applied pressure over our findings.
The 2018-2021 pattern that prompted NCRC’s decision continued in 2022. Despite claiming to have increased lending to LMI borrowers as a share of their lending, KeyBank has failed to make significant strides. The new data also further undermine KeyBank’s public spin in response to NCRC’s findings.
2018-2022 KeyBank Home Purchase Lending
NCRC’s previous report covering 2018-2021 already painted a damning picture of KeyBank’s actions post-merger. The bank systematically and blatantly cut back on loans to the very borrowers it vowed to help – and maps of its lending patterns showed the bank systematically avoided Black communities. We further found that KeyBank failed to offer loans equally to Black and White borrowers, and drastically cut its share of lending to LMI borrowers despite prior promises. It is now clear that the same trends we were able to identify at the bank in last year’s report continued through 2022 as well.
The new numbers for 2022 deserve some context. Last year was a period of extraordinary change in the mortgage market, as interest rates spiked to their highest point in 20 years. Changes in interest rates from 2021 to 2022 impacted all mortgage lenders nationwide. The historically low interest rates of 2020 and 2021, which saw the 30-year fixed rate mortgage dipping to 2.65%, would give way to a peak of over 7% by the end of 2022.
Mortgage Rates 2002 – 2022
This extended period of low rates, followed by a spike to the highest rates in over 20 years, radically reshaped the overall mortgage marketplace. It is therefore no surprise that KeyBank’s total mortgage business shrank substantially in 2021 – a reflection of industry-wide trends. KeyBank made 30,895 total mortgage loans of all types in 2022, down 35% from 2021.
But this drop-off in total mortgage lending is mostly driven by the evaporation of refinance and cash-out refinance loans – credit which is tied to a home, but not to the key inflection point in the financial well being of a household that has previously rented. KeyBank made less than one-third as many such non-purchase mortgage loans last year as it had in 2021, dropping from more than 27,000 to less than 9,000.
Meanwhile, home purchase lending barely dipped. In 2022, KeyBank made 9,900 home purchase loans, a comparatively modest 3.6% drop from the 10,265 such loans it made in 2021.
Home purchase loans are the primary indicator of a lender’s performance toward closing the racial homeownership and wealth divides, as they represent households making the leap from the wealth-eroding reality of renting to the wealth-building promise of owning.
Despite managing to keep its total volume of home purchase lending relatively stable during the interest rate turmoil of 2022, KeyBank continued turning away from Black borrowers. Just 2.6% of its home purchase lending went to a Black borrower last year – down from the prior year’s 3% share. KeyBank has failed to improve its home purchase lending to Black homebuyers. Factoring re-fi loans back in does not reverse that trend.
KeyBank’s response to last year’s report was to tout a “24% increase in lending to African-Americans,” a figure that may sound impressive but is meaningless when considered against the overall share of their loans. The 2022 numbers continue to place KeyBank at the bottom of the top 50 lenders in loans to Black borrowers, with a mere 2.5% of 30,895 loans going to a Black borrower. The bank also ranked poorly in other minority lending categories: second-worst for Hispanic borrowers, third-worst for minority-majority tract lending and for lending in LMI census tracts, and fourth-worst for minority borrower lending overall.
Top 50 Lenders In 2022 by Category
An examination of KeyBank’s activity in their top ten markets corroborates these findings. In many markets, KeyBank ranks at or near the bottom in those metro areas when it comes to lending to Black and LMI homebuyers compared with the top ten banks in terms of 2022 originations in that metro. Their performance ranges from mediocre to downright poor, failing to prioritize investment in these crucial demographics – again, despite pledging to do so in writing seven years ago when regulators were considering whether to approve a merger that made KeyBank’s insiders richer. The new numbers confirm that KeyBank has not prioritized investment in LMI borrowers, despite their explicit commitment to do just that.
KeyBank’s Top Markets
The data from 2022 only sharpens the picture of KeyBank’s unfulfilled commitments. Their failure to effectively serve Black and LMI borrowers is not just a breach of trust but also a significant hindrance to community development. These are not mere statistics; they represent lives and communities that continue to be underserved. And they further discredit the bank’s public spin of its poor conduct.
Jason Richardson is NCRC’s Senior Director of Research.