Banking can seem like a complicated business. But the way banks make money is quite simple: They count on people to keep their promises.
Promises to repay loans. Promises to maintain balances.
When everyday people struggle to keep the promises they made to a bank, the bank takes stern action. Break a mortgage contract for long enough, and they’ll send the sheriffs to kick you to the curb. Forget to shuffle money around before someone cashes a check, and they’ll smack you with overdraft fees for your mistake.
But what about when a bank breaks its promises? What happens if a bank pledges to help promote homeownership for underserved communities and then turns around and walls them out of the mortgage market in a half-dozen major cities?
That is exactly what KeyBank did for the past half-decade. And that’s why I’m taking the National Community Reinvestment Coalition out of negotiations with KeyBank – talks that I now know have been a charade.
Here’s the deal: Six years ago, we approached KeyBank executives to discuss how they could help underserved communities build wealth. They wanted to buy another bank called First Niagara, which would allow them to make more money. They also knew that bank mergers go more smoothly when the banks demonstrate how real people in communities where the banks do business – and not just far away investors and bank executives – will benefit if they are allowed to make that extra money. And they knew that NCRC and our membership of 700+ community development organizations work with banks to identify the most effective ways to help underserved Americans gain access to homeownership, small business support and other key wealth-building opportunities.
We put KeyBank executives in rooms with people who do community development work at ground level every day. We facilitated those listening sessions and pushed KeyBank to make bold commitments for how they would spend some of that new money they’d make if they were allowed to buy First Niagara. And they did. They promised us and our members that they would make mortgage markets more inclusive in the cities where they operate. Federal bank regulators cited those promises when they approved the merger.
Then KeyBank did the opposite. Merger approved, new business opportunities consolidated, KeyBank executives abandoned the very people they’d pledged to help. From 2018 onward, the share of KeyBank’s mortgage lending going to Black people and low- and moderate-income (LMI) borrowers shrank. Every year, they grew their home mortgage business but left people of color behind.
In many of the major cities where KeyBank operates, it is at the back of the pack in lending to non-White, non-wealthy homebuyers. The bank has halved the share of its mortgage loans going to LMI borrowers, from 35% in 2018 to just 18% last year. Map their mortgage lending and you’ll see something that looks an awful lot like the discrimination against entire neighborhoods, known as redlining, that prevented minorities from buying homes or accumulating family wealth in the 20th Century. If you want to buy a house with KeyBank’s money, you better make sure it’s not in one of your city’s Black neighborhoods.
NCRC uncovered these ugly truths about KeyBank after our negotiating team began to suspect bank leaders were stringing us along earlier this year. I asked our research team to run the numbers, which banks are required to report to federal regulators under the Home Mortgage Disclosure Act – and the analysis we just published with their findings is damning.
The difference between what KeyBank promised to communities in 2016 and what it actually did could not be more stark. And at the same time KeyBank’s leaders were breaking faith with neglected communities, they were rewarding themselves with a big dividend payment that mainly served to increase their own compensation. It’s all right there in their annual reports.
I can’t call in the sheriffs on these bank executives who broke their promises. I can’t ding them with fees or garnish their wages. All I can do is tell the world what I now know: Of the nation’s 50 largest mortgage lenders, KeyBank had the lowest percentage of home purchase loans to Black borrowers from 2018-2021. Across the bank’s 10 largest markets, just 2.7% of its home purchase loans last year went to Black people, down from nearly 6% in 2018. Similarly, LMI borrowers accounted for just 17% of such KeyBank loans, down from 35% four years ago.
This contrast between what the bank said and what it actually did leads me to a painful conclusion: KeyBank’s leadership team are not sincere in their public claims about their bank’s commitment to economic equity.
So I’m walking away. I’ve resigned from KeyBank’s National Advisory Committee, and I’m making sure everyone else knows the truth about KeyBank: The more power they get in the mortgage market, the less of it they’ll use to help less-privileged people stop being tenants and start becoming homeowners. KeyBank’s practices will have to shift dramatically to make good on its unfulfilled promises to better serve long-neglected communities and families.
If I believed KeyBank’s executives were ready to fix this – if I believed they simply screwed up, had a sincere desire to change course, and would do what they promised this time – then I’d still be in those meetings, pushing them hard to be as ambitious as possible to close this country’s racial and socioeconomic wealth divides.
But I don’t believe them anymore. Their record since making commitments to NCRC and its members makes that impossible. We took them at their word six years ago when they committed to a community benefits agreement and told us that if they were allowed to complete a merger that would make them a lot more money, they would use that new market power to build a more inclusive homeownership market in the cities where they lend. And instead, they got worse and worse. Every year. All while spending a lot of their merger profits to increase the value of their own compensation through dividends.
I am appalled by KeyBank’s broken promises. And I can no longer in good conscience tell our members that what’s good for KeyBank will be good for them too.
Jesse Van Tol is President and CEO of NCRC.
Photo via Can Pac Swire on Flickr.