OneUnited Bank, a minority-owned institution whose mission is community lending, has received a “needs to improve’’ rating in Massachusetts from regulators on its Community Reinvestment Act examination, and “substantial noncompliance’’ in Florida.
It is another blemish on the record of the Boston bank, which has yet to repay $12 million in federal bailout funds from 2008 and which received special help from lawmakers to get those funds.
Regulators at the Massachusetts Division of Banks and the Federal Deposit Insurance Corp. said OneUnited all but stopped lending during the review period, making just five home mortgage loans in Massachusetts from April 2007 through October 2010.
The regulators acknowledged the difficult economy during that time, and noted the bank had its own set of problems, including a cease-and-desist order in 2008 due to investment losses and high executive pay.
Still, they said, “these factors do not fully explain, or justify, the bank’s failure to meet the standards for a ‘satisfactory’ rating, particularly in Massachusetts and Florida.’’
OneUnited’s general counsel, Robert P. Cooper, said the bank’s lending has improved since the reviews, which became public this month.
“A lot has changed,’’ Cooper said, calling the report “based on things that happened during the financial tsunami.’’
He said that the bank was prudent to rein in lending during the financial crisis, and that loan volume that had shrunk to $4 million in 2009 returned to $60 million in 2011.
US Representative Barney Frank, the Newton Democrat who was chairman of the House Financial Services Committee at the time of the bank bailouts, included OneUnited and other minority institutions in the Troubled Asset Relief Program legislation. US Representative Maxine Waters, a California Democrat, helped arrange a meeting for OneUnited executives with Treasury officials to seek a bailout.
Reached yesterday, Frank said he was disappointed by OneUnited’s community lending exam, “but obviously, they have not been doing well’’ financially. He said he hopes the bank recovers, not only so it can repay the government.
“It’s important for society for there to be minority banks,’’ Frank said. “Race continues to be a serious problem. And you want to make sure there’s full economic participation.’’
Cooper said it is not fair to holdcommunity institutions to the same standards as giant banks when it comes to the Community Reinvestment Act. The law is aimed at requiring banks to lend in low- and moderate-income areas where they accept deposits, and the banks are subject to regular examinations of their loan records.
OneUnited, which is one of the largest black-owned banks in the country, historically has focused on minority neighborhoods in Roxbury, Dorchester, and Mattapan, he said.
“We continue to be committed to improving our lending in these communities,’’ Cooper said.
But OneUnited, whose majority owner is its chief executive, Kevin Cohee, has been criticized for several years for failing to make loans in its core markets of Boston, Miami, and Los Angeles. During the lean times, it made some large mortgage loans to wealthy customers and pulled loans on once high-profile clients that were struggling, like the Charles Street African Methodist Episcopal Church.
Kenneth Thomas, a community reinvestment act specialist in Miami and a frequent critic of OneUnited, took particular issue with OneUnited’s recent receipt of a $500,000 grant from the US Treasury’s Community Development Financial Institutions Fund.
“This bank continues to get special favors,’’ Thomas said. “This is a bank that owes Treasury money for TARP and is in very questionable financial condition.’’
OneUnited is among a number of small institutions across the country that not only have not repaid the bailout funds but have not paid interest on the money to taxpayers. The bank did turn a profit last year, reporting net income of $2.5 million for the first nine months of 2011. (It has not yet reported its fourth-quarter results, but Cooper said the bank made money.)
Cooper said the bank, with $561 million in assets, is recovering from its 2008 losses on investments in failed mortgage giants Fannie Mae and Freddie Mac, as well as subsequent loan losses.
“We certainly appreciate the receipt of the TARP assets and we look forward to paying back TARP in earliest course,’’ Cooper said. He declined to say when that would happen.
Beth Healy can be reached at email@example.com.