By james art A mortgage company has agreed to pay nearly $9 million in civil penalties to settle a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) and the US Department of Justice (DOJ) alleging the company discriminated against people living in predominantly black neighborhoods in Birmingham.
The two agencies alleged that Fairway Independent Mortgage Insurance Corporation, based in Madison, Wis., engaged in redlining by failing to provide credit services, particularly home loans, to individuals living in communities of color.
“The CFPB and the DOJ are holding Fairway accountable for redlining black neighborhoods,” CFPB Director Rohit Chopra said in a statement. “Fairway’s illegal red line has discouraged families from seeking home loans in Birmingham’s black neighborhoods.”
GET THE MORNING HEADLINES.
Fairway said in a statement on its website that the lawsuit had mischaracterized the issue.
“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,” according to the statement. “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.”
The company also said it had made more loans in majority black areas than any other non-bank lender with a physical presence in Birmingham, and said it had entered into an agreement “to resolve the matter and limit further expenditure of resources . “
“Fairway is disappointed with this result,” the company said in a statement. “We are a company that serves people and we have always strived to help everyone achieve their dream of home ownership. Our numbers, our reputation and our customer testimonials prove it. We are equally disappointed with the regulatory and judicial system for these actions. We feel that justice has not prevailed in this situation.”
Under the proposed settlement, which requires approval by a federal judge, Fairway will pay a $1.9 million civil penalty to the CFPB’s victim assistance fund and provide $7 million to a loan subsidy program that offers people the chance to buy , refinance and improve their homes in majority black neighborhoods.
The lawsuit alleges that Fairway placed all of its physical Birmingham retail locations and loan officers in predominantly white areas without doing the same for locations that are predominantly black or in communities of color.
“Fairway primarily targeted its marketing and advertising to majority-white areas from 2018 to 2022, while failing to effectively market and advertise to majority-black areas in the Birmingham MSA until at least the end of 2022,” it said. states in the complaint by the CFPB.
Through this practice, Fairway discouraged minorities from obtaining loans, and that data showed the company generated a disproportionately small number of loan applications from majority black areas within the Birmingham metropolitan service area compared to other similarly situated lenders.
The complaint states that from 2018 to 2022 the company generated just over 10,000 applications from the Birmingham area, but that only about 4% of loan applications were from properties in predominantly black areas. Businesses in a similar situation are said to have had more than 12% of their loan applications from the same black-majority areas.
“Fairway’s partner lenders generated applications for properties in predominantly black areas at more than three times the rate of Fairway,” the complaint states.
Fair housing advocates praised the actions of both the DOJ and the Consumer Financial Protection Bureau.
“As a general matter, an argument that says we can make an individual judgment about each borrower based on where they actually live, or based on their race, or based on anything unrelated to that person’s individual ability to pay off and value their collateral is irrational, and banks shouldn’t be doing it,” Nestor M. Davidson, faculty director of the Urban Law Center at Fordham Law School.
YOU MAKE OUR WORK POSSIBLE.