- Compliance With This Settlement Agreement
To promote the objectives of ECOA, FHA, RESPA AND HOEPA in connection with its
wholesale lending operations, Delta shall conduct its business with mortgage brokers as follows:
- With respect to fair lending, Delta shall:
- adhere to the FHA and ECOA in all aspects of the credit process
including pricing of mortgage loans;
- reject the broker's proposal or make a counteroffer when it believes
the broker's proposed compensation and costs are not permitted
under the fair lending laws; and
- maintain loan underwriting standards designed to ensure that loan
applicants will be placed at the correct credit risk level on a non-discriminatory basis.
- With respect to real estate settlement procedures, and consistent with HUD's
Statement of Policy 1999-1 Delta shall:
- only fund loans where it reasonably believes the compensation to the
mortgage broker is made in exchange for services actually performed
and goods and facilities actually furnished by the broker and the
broker's total compensation is reasonably related to the services
performed and the goods and facilities provided by the broker;
- operate on the understanding that (i) payments to mortgage brokers
by Delta for referral of business are not permissible and (ii) referral
fees are not payments for goods, facilities or services;
- where necessary to arrive at an overall mortgage broker
compensation that is reasonably related to the services performed or
the goods and facilities provided by the mortgage broker, reduce or
eliminate its yield spread premiums or other back-end fees, propose a
reduction in the mortgage broker's front-end charges or take other
action. Delta shall decline to fund the loan if the overall mortgage
broker compensation is not reasonably related to the services
performed or the goods and facilities provided by the mortgage
- refrain from providing, in exchange for the referral of business, those
settlement services for which the mortgage brokers are receiving
- modify all its existing agreements with mortgage brokers within 60
days of the date of this Settlement Agreement to contain, and ensure
that all future agreements with mortgage brokers contain, a provision
that the mortgage brokers will make timely disclosures to borrowers
concerning the broker's services and compensation, to the extent
required by state law, and, within 60 days of the date of this
Settlement Agreement, Delta shall provide further disclosure, in the
form of Attachment A hereto (the "Broker Information Disclosure") to
each borrower from whom Delta receives a loan application. Delta
shall provide the Broker Information Disclosure no later than three
business days after the loan application is received by Delta.
- With respect to loans covered by HOEPA proposed by brokers, Delta shall:
- reject the broker's proposal when it believes the broker's proffered
documentation of the borrower's income is insufficient to support the
amount of income claimed;
- maintain loan underwriting standards designed to ensure that
extensions of credit are based on the borrower's repayment ability
including the borrower's current and expected income, current
obligations, and employment; and
- maintain loan underwriting procedures designed to ensure that any
borrower's income will be verified and documented to establish a
reasonable basis to believe such income exists.
- Notice to Mortgage Brokers Concerning Compliance With this Settlement Agreement
- Within 60 days of the date of this Settlement Agreement, Delta shall notify each
mortgage broker with which it does business of the compliance requirements set
forth in paragraph IV.A, and shall revise the materials it provides to all brokers to
include the following statements:
- "The Fair Housing Act and the Equal Credit Opportunity Act apply
to all aspects of the credit process including the pricing of mortgage
- "It is unlawful to make differing initial price quotations on the basis of
the loan applicant's race, national origin, sex, or age;"
- "The Real Estate Settlement Procedures Act prohibits compensation
to a mortgage broker unless the compensation is in exchange for
services actually performed and goods and facilities actually furnished
by the broker, and the mortgage broker's total compensation is
reasonably related to the value of the services performed and the
goods and facilities furnished by the broker;" and
- "The Home Ownership and Equity Protection Act of 1994 prohibits
the making of non-purchase money mortgage loans that have total
points and fees that exceed eight percent of the total loan amount
without regard to the borrower's ability to repay. Accordingly, all
loans subject to HOEPA must be supported by credible
documentation that the borrower is able to repay the loan.
- In addition, Delta shall offer all wholesale brokers with whom it does mortgage
loan business the opportunity to undergo training similar to the training described
in Section VII.
- MONETARY COMPENSATION
On September 17, 1999, the Superintendent of Banks of New York State ("NYSBD") and
Delta entered into a Remediation Agreement resolving NYSBD's allegations that its examination
of Delta's lending practices revealed violations of the FHA, ECOA, RESPA and HOEPA and
Section 296-a of the New York Executive Law. The settlement includes a $7,250,000.00
"Remediation Fund" by Delta and an "Amelioration Fund" consisting of 525,000 unregistered
shares of common stock ("Stock") of Delta Financial Corporation. The "Remediation Fund" and
the proceeds from the sale of the Stock in the "Amelioration Fund" shall be used to compensate
borrowers identified by the NYSBD and the federal agencies.
One of the purposes of the Remediation Fund is to compensate New York State
borrowers, including residents of minority areas and African American females identified by the
Department of Justice and the NYSBD, who obtained home mortgage loans from Delta between
October 1, 1995 and September 17, 1999 and who allegedly paid more for their loans than the
average borrower who was a resident of non-minority areas or the average non-minority
borrower, and New York State borrowers with respect to whom the NYSBD alleges Delta
violated HOEPA or RESPA. Compensation will be in the form of reductions to monthly
mortgage payments on a going forward basis as set forth in the September 17, 1999 Remediation
Agreement executed by the NYSBD and Delta.
The "Amelioration Fund" will be used to provide monetary restitution to borrowers who
were allegedly harmed by Delta's alleged fair lending, RESPA, and/or HOEPA violations, as
identified by the Department of Justice and the NYSBD. Restitution must be paid to all eligible
New York State borrowers before restitution is made to borrowers outside New York State. Any
borrower to whom compensation is awarded from the Remediation Fund or Amelioration Fund
shall be required, prior to receiving any such compensation, to sign a general release.
- MONITORING AND COMPLIANCE SYSTEM
- Within forty-five days of the date of this Settlement Agreement, Delta shall submit to the
federal agencies for review and approval a new monitoring and compliance system
designed to ensure uniform application of underwriting criteria and appropriate payment
of mortgage broker fees. If the federal agencies do not otherwise notify Delta in writing
within forty-five days after their receipt of the new monitoring and compliance system, it
shall be deemed approved.
- The monitoring and compliance system shall include:
- Development and implementation of policies and guidelines designed to ensure
that the underwriting of mortgage loans is made in compliance with law. Such
guidelines shall be incorporated into Delta's lending policy;
- Development and implementation of a system designed to accurately record data
related to the charging of broker fees on mortgage loans underwritten, closed and
funded by Delta, including the dollar and percentage amount of the broker fee
charged, the amount and type of loan, documentation of any pricing exceptions,
information about the borrower as required by the Home Mortgage Disclosure Act
("HMDA"), the name of the loan officer, and the name of the mortgage broker;
- Development and implementation of a comprehensive system designed to permit
detailed periodic monitoring of mortgage origination pricing practices to ensure
that flexible pricing does not result in discrimination and that mortgage broker
compensation is in exchange for and is reasonably related to the services, goods,
and facilities provided by the broker.
- The development and implementation of a system designed to identify all
borrowers whose loans are subject to the requirements of HOEPA and permit
detailed and ongoing monitoring of file documentation that such borrowers are
able to repay their loans.
- The designation of managers, including senior-level managers, to serve as
compliance officers and to monitor compliance with the foregoing compliance
- The development and implementation of a disciplinary policy for employees who
violate the required policies and practices described in this Settlement Agreement.
- EDUCATION OF DELTA EMPLOYEES
- Within forty-five days from the effective date of this Settlement Agreement, Delta shall
amend its existing Fair Lending Training Program to include the elements set forth
below, and shall submit the amended training program ("Amended Training Program") to
the federal agencies for review and approval. If the federal agencies do not otherwise
notify Delta in writing within forty-five days after their receipt of the Amended Training
Program, it shall be deemed approved. Such Amended Training Program shall include:
- A detailed discussion of the purpose of, and the prohibitions contained in
HOEPA, ECOA, FHA, and RESPA;
- A detailed discussion of liability for violations of HOEPA, ECOA, FHA, and
- A certification form to be completed by each officer and employee attending the
training program; and
- A schedule pursuant to which the training program and supplemental training
programs will be offered.
- Within sixty days following the approval of the Amended Training Program by the
federal agencies, all Delta officers and employees whose job responsibilities include
contact with consumers or mortgage brokers concerning mortgage loan applications, the
pricing of mortgage loans or the monitoring of mortgage pricing shall attend the
Amended Training Program.
- All new Delta officers and employees whose job responsibilities include contact with
consumers or mortgage brokers concerning mortgage loan applications, the pricing of
mortgage loans or the monitoring of mortgage pricing shall attend the Amended Training
Program within forty-five days of their employment with Delta.
- All Delta officers and employees attending the Amended Training Program shall execute
a certification form stating that the individual has attended the Amended Training
Program, that the individual understands Delta's policies regarding non-discrimination in
the origination and underwriting of mortgage loans, that the individual understands
Delta's disciplinary policies with respect to originating and underwriting mortgage loans
and compliance with HOEPA, ECOA, FHA, and RESPA, and that the individual
understands that failure to comply with such laws may subject the individual and/or Delta
- Delta shall comply with the training provisions described above in all states in
which it does business; provided, however, that in states other than New York, Delta shall not be
required to provide training in connection with laws that apply only in New York.
- RECORDKEEPING AND REPORTING REQUIREMENTS
- For a period of three years from the date of this Settlement Agreement, Delta agrees to
retain all loan application files submitted for mortgage loans, all loan-related documents
and notices relevant to any pricing decisions, and all documents related to compliance
and monitoring as set forth in Section VI, above. During this period, upon reasonable
notice from the Civil Rights Division of the United States Department of Justice ("DOJ"),
Delta shall make individual mortgage loan application files and related records available
for inspection or copying by the DOJ.
- Delta agrees that it will periodically review its lending operations for compliance with the
RESPA, FHA and ECOA.
- For a period of three years from the date of this Settlement Agreement, Delta shall report
its compliance with this Settlement Agreement to the DOJ semi-annually, beginning with
the period ending September 30, 2000, within forty-five days after the end of each half-year period.(1) Each such report shall include:
- A report on Delta's fair lending pricing requirements; and
- A description of corrective actions taken by Delta to comply with this Settlement
- ADMINISTRATION OF SETTLEMENT AGREEMENT; MISCELLANEOUS
- The Court shall retain jurisdiction for the purpose of enforcing the terms of this
Settlement Agreement for a period of three years from the date it is entered by the Court,
at which time this Settlement Agreement shall terminate. The Settlement Agreement shall
be binding on Delta and any of its employees, representatives, officers, heirs, assigns,
subsidiaries, or successors in interest.
- The parties to this Settlement Agreement shall endeavor in good faith to resolve
informally any differences regarding interpretation of and compliance with this
Settlement Agreement prior to bringing such matters to the Court for resolution.
Furthermore, the United States shall not bring any matter involving compliance with this
Agreement to the Court for resolution unless it reasonably believes that Delta has
materially violated the provisions of this Settlement Agreement. This Settlement
Agreement may be modified by written consent of Delta and the federal agencies. Any
such modification may be submitted to the Court for approval, and shall be deemed
effective immediately upon execution by the parties until such time, if any, that the Court
indicates a lack of such approval.
- For purposes of measuring time periods, the "date of" this Settlement Agreement shall be
deemed to be the date of its entry by the Court.
- Each party to this Settlement Agreement will bear its own costs.
- This Settlement Agreement, when fully executed and performed by Delta to the
reasonable satisfaction of the federal agencies, will resolve all the issues between Delta
and its affiliates (including, without limitation, Delta Financial Corporation), and the
United States respecting the subject matter of the United States' Complaint.
- The entry into this Settlement Agreement shall not be deemed or construed to be an
admission of, or evidence of, any violation of any statute, law or regulation or of any
liability or wrongdoing or of the truth of any of the claims or allegations of the United
States, and may not be used against Delta in any other action or proceeding. The United
States acknowledges and agrees that Delta's good faith compliance with the terms and
conditions of this Settlement Agreement shall not be considered by the Unites States as a
violation of any federal or state law prohibiting discrimination.
- Any requirement, responsibility, or obligation imposed on Delta by this Agreement which
is based upon statute, regulation, or Statement of Policy shall bind Delta only to the
extent that the applicable portion of that authority remains in force and effect.
- This Agreement may be executed in multiple counterparts, each of which shall be deemed
a duplicate original.
- Nothing in this Agreement is intended to confer or limit any right, remedy, obligation or
liability upon any person or entity other than the parties hereto and their respective
It is so ORDERED this ___ day of _________, 2000.
United States District Judge
The undersigned apply for and consent to the entry of this Order:
For the United States:
BILL LANN LEE
ACTING ASSISTANT ATTORNEY GENERAL
JOAN A MAGAGNA
ALEXANDER C. ROSS
Housing and Civil Enforcement Section
Civil Rights Division U.S. Department of Justice
P.O. Box 65998
Washington, DC 20035
LORETTA E. LYNCH
UNITED STATES ATTORNEY
MARLA TEPPER (MT7529)
Assistant U.S. Attorney
1 PIERREPONT PLAZA, 16th Floor
Brooklyn, NY 11201
GAIL W. LASTER
PETER S. RACE
Assistant General Counsel
Assistant General Counsel
U.S. Department of Housing and Urban Development
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
For Delta Funding Corporation and Delta Financial Corporation:
THOMAS J. NOTO (TN-9279)
Associate Director for Financial Practices
MELANIE L. HIBBS (MH-0154)
EUGENE R. LICKER (EL-0334)
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800
DELTA FUNDING CORPORATION
1000 WOODBURY ROAD
WOODBURY, NY 11797
BROKER INFORMATION DISCLOSURE
The purpose of this disclosure is to provide you with an estimate of the fee you will be paying to
your Mortgage Broker in connection with your loan. This disclosure does not include all fees
you will pay for this loan. For that information please refer to the Good Faith Estimate of
settlement costs that you already have or soon will receive, and the HUD-1 form that will be
given to you at closing. The HUD-1 will show the final charges for broker and other fees.
Please read this information carefully so that you make an informed choice. You are entitled to a
copy of this disclosure. Signing this disclosure does not obligate you to obtain the mortgage loan
described below, nor does it constitute a mortgage loan approval.
We have received your application for a mortgage loan from (Name of Mortgage Broker).
1) The Mortgage Broker is expected to charge a total of $_________ for arranging a
mortgage loan of $_______ at a proposed interest rate of ___%.
This amount is made of:
a) $__________ paid by you to the Broker as a percentage of the loan; and $__________ in additional amounts paid by you to the Broker as noted on the
Good Faith Estimate. These amounts will be paid from the proceeds of your loan
and/or directly out of your pocket; and
b) $__________ paid to the Broker by Delta Funding Corp. which increases your
interest rate on the loan;
IF ANY PORTION OF THE BROKER FEE DESCRIBED ABOVE IS PAID FROM THE
PROCEEDS OF THE LOAN, YOU WILL BE OBLIGATED TO REPAY THIS AMOUNT
WITH INTEREST OVER THE TERM OF THE LOAN.
If you would rather pay a lower interest rate on your loan, you may be able to pay higher upfront
fees. If you pay less upfront, you may pay a higher interest rate. If you have any questions about
the different options available to you, your mortgage broker and/or Delta will be glad to discuss
them with you.
2) The Broker's Fee described above is payable only if the loan is approved and accepted by
Please sign and return one copy in the enclosed envelope. Keep the other copy for your files.
1. 1 All notices, correspondence, reports, or documents required to be provided to the United States shall be mailed
to the following address:
Chief, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
P.O. Box 65998
Washington, D.C. 20035