By james art Employees of a company that is paying nearly $10 million in a settlement over “redlining” charges referred to Ensley and Tarrant as “the ghetto” in emails, according to documents filed last week in federal court.
The Department of Justice and the Consumer Financial Protection Bureau (CFPB) announced last week that Fairway Independent Mortgage Corp. has agreed to pay $8 million and a $1.9 million civil monetary penalty to resolve allegations of diversion or discrimination in lending.
An Ensley-based developer said redlining of Birmingham’s black communities like his is nothing new.
“This is not the only bank doing this and everyone knows it,” Brian K. Rice, president of the Ensley Business Alliance, wrote in a Facebook post.
Headquartered in Madison, Wisc., Fairway operates in the Birmingham area under the trade name MortgageBanc.
The Justice Department and the CFPB alleged that Fairway, through its marketing and sales practices, discouraged residents of black neighborhoods from applying for mortgage loans.
Fairway will provide $7 million for a subsidized loan program to offer affordable home purchase, refinance and home improvement loans in Birmingham’s majority-black neighborhoods.
It will also invest $1 million in programs to support this loan subsidy fund and pay a $1.9 million civil penalty to the CFPB’s victim assistance fund.
In a statement, Fairway said it “hopes these efforts will further increase lending opportunities for those looking to purchase property in majority black areas of the Birmingham area.”
According to the Department of Justice, the company’s own data shows it failed to serve black neighborhoods at least in 2017. Before October 2022, it took no meaningful action to address the risk of redlining.
According to the federal complaint, from at least 2018 to 2020, several Fairway employees, all of whom are white, used derogatory language in their company email referring to majority black or highly black areas in the Birmingham metro area.
For example, in a 2018 email chain between two loan officers at the company, one who was a top producer in the Birmingham region referred to the applicant’s friends as “thug friends.”
“(We) don’t need him as a customer. He is a liability waiting to happen,” the email said. “I referred him to a realtor in (Trussville) … he showed up drunk with 4 of his thug friends and showed (his) ass.” The filing states that while the email did not address the subject’s race, the data showed that the person who applied for the loan was black and withdrew his application that year.
An April 2018 email involving a mortgage closing and a loan officer mentioned “Tarrant Ghetto” in the subject line of the email. Tarrant had no mortgage loan applications with Fairway from 2018 to 2021.
In a May 2020 email chain between a “top producing” loan officer and a loan officer, the loan officer wrote, “Ensley is the GHETTO. I promise we don’t have a house there. LOL!” The CPU replied, “ROFLOL”. There were no mortgage loan applications from Ensley for Fairway from 2018 to 2021, according to the filings.
In a statement, Fairway said the complaint filed “significantly mischaracterizes the issue at hand and appears to be intentionally inflammatory in nature.” The company counters that it has accepted more loan applications and made more loans, in terms of the number of loan units, in majority-black areas than any other non-bank lender with a physical presence in the Birmingham metro area.
Fairway also said the government’s analysis focused on “occupancy quotas in white/black census tracts, not the actual volume of applications and origins in majority black census tracts.”
“On the one hand, the complaint characterizes Fairway’s actions as willful and reckless, a claim that was mutually denied by the parties prior to the settlement,” the company said. “Additionally, the complaint characterizes Fairway’s actions as willful and deliberate, despite the failure of government agencies to identify any evidence to support such an allegation.”
In court documents, federal officials said Fairway made 7,913 HMDA-reportable loans from 2018 to 2022 in the Birmingham area, but only 3.3 percent were for properties in majority-black areas. In high-black areas over the same period, the rate was 0.4% of Fairway loans.
And in majority-black areas, an average of just 37.8 percent of Fairway’s loans went to black-identified applicants, meaning most of the applicants were less likely to be black, according to court documents.
Rice said he had read the court documents and was particularly concerned about the email comments. In a Facebook post, he wrote: “We are watching our own death. Our communities are suffering.”
In an interview, Rice said of the settlement’s discovery, “It showed me that it was intentional that there were no loans in places like Ensley, and you can see it all over the city. I wish more people knew how alarming redlining is. It hurts a lot of people and a lot of people are used to it.
He said he was encouraged by the loan subsidy program and that, as part of the agreement, Fairway would have to locate a loan or retail office in a majority-black neighborhood in the Birmingham metro area.
“I think it will be great to see them here because there are mortgage bankers that I’ve talked to locally and they don’t have enough products to reach people,” he said. “I think it’s a start.”
George McCall, president of the Ensley Neighborhood Association, said he’s not sure why anyone would call Ensley a ghetto.
“Living in the area that we live in, I don’t think of it as a ghetto,” he said. “I understand that not everyone lives in a big mansion or if the grounds are not kept clean … We have some very nice homes in this area. If you’ve never been there to see what the areas look like, whatever people tell you, you’ll believe it.”
He is also optimistic that the settlement could change not only Fairway’s attitude but also the outlook of other banks.
“When you see that you can be held accountable, you can do better,” he said.