Recent Fair Lending Cases
On December 28, 2011,
the court entered a consent order
in United States v. Countrywide Financial Corporation, Countrywide Home Loans and Countrywide Bank
(C.D. Cal.), resolving the United States' claims of race, national origin and marital status discrimination in residential mortgage lending and providing $335 million in monetary relief for victims of discrimination. The claims in the United States' complaint
, which was filed on December 21, 2011, are the largest pattern or practice lending discrimination violations of the Fair Housing Act and the Equal Credit Opportunity Act ever alleged by the Division. The United States' complaint alleges that from 2004 to 2008, Countrywide discriminated against more than 10,000 Hispanic and African-American borrowers across the country by systematically giving those borrowers subprime loans while similarly-situated white borrowers received prime loans. The complaint also alleges that Countrywide discriminated against more than 200,000 Hispanic and African-American borrowers by systematically charging higher discretionary fees and markups to those borrowers than to white borrowers. The complaint further alleges that the defendants discriminated on the basis of marital status by encouraging non-applicant spouses to forfeit their property rights as part of their spouse obtaining a Countrywide loan. The consent order provides that the $335 million settlement fund will be distributed to victims by an independent administrator, and that if Countrywide re-enters the business of home mortgage lending, it must adopt fair lending policies and procedures that will be subject to review by the Division.
On September 30, 2011,
the United States filed a complaint
and consent order
in United States v. C&F Mortgage Corporation
(E.D. Va.), a pattern or practice case under the Fair Housing Act and the Equal Credit Opportunity Act that was referred by the Federal Deposit Insurance Corporation. The complaint alleges that C&F charged greater interest rate markups (overages) and gave lesser discounts (underages) on home mortgage loans made to African-American and Hispanic borrowers by giving its employees wide discretion in overages and underages without having in place objective criteria for setting the overages and underages. The complaint alleges that this policy had a disparate impact on African-American and Hispanic borrowers. The consent order resolves the case by requiring C&F to develop uniform policies for all aspects of its loan pricing and to phase out the practice of charging overages to home mortgage borrowers. The settlement also requires the bank to pay $140,000 to black and Hispanic victims of discrimination, monitor its loans for potential disparities based on race or national origin, and provide equal credit opportunity training to its employees. The court entered the consent order October 4, 2011.
On July 5, 2011,
the United States filed a Fair Housing Act complaint
against the nation's largest mortgage insurance company and two of its underwriters in United States v. Mortgage Guaranty Insurance Corp., et al.
(W.D. Pa.). The complaint alleges that the defendants discriminated on the basis of sex and familial status by requiring women on paid maternity leave to return to work before the company would insure their mortgages. The case was referred to the Division after the Department of Housing and Urban Development (HUD) received a complaint from a homeowner in Wexford, Penn. who was required to return to work from paid maternity leave to obtain mortgage insurance.
On June 28, 2011,
the court entered an agreed order
in United States v. Midwest BankCentre
(E.D. Mo.), a Fair Housing Act and Equal Credit Opportunity Act pattern or practice case. The matter was referred to the Department of Justice by the Metropolitan St. Louis Equal Housing Opportunities Council in 2009 and was the subject of a referral from the Federal Reserve Board in 2010. The complaint
, filed on June 16, 2011, alleges that Midwest BankCentre (Midwest) failed to provide its home mortgage lending services to residents of majority African American neighborhoods on an equal basis as it provided those services to residents of predominantly white neighborhoods in the Missouri portion of the St. Louis metropolitan area, a practice commonly known as "redlining." Under the agreed order Midwest will open a full-service branch in an African-American neighborhood and invest in the formerly redlined majority African-American areas in the Missouri portion of the St. Louis metropolitan area by providing $900,000 in a special financing program to increase the amount of credit the bank extends in those areas; spending $300,000 for consumer education and credit repair programs; and spending $250,000 for outreach to potential customers and promotion of their products and services.
On June 23, 2011,
the parties entered into a settlement agreement
in United States v. Citizens Republic Bancorp, Inc.
(E.D. Mich.), a Fair Housing Act and Equal Credit Opportunity Act pattern or practice case that was referred to the Department of Justice by the Board of Governors of the Federal Reserve System. Upon entry of the settlement agreement, the parties filed a joint stipulation to dismiss the Unites States' complaint. The complaint
, filed on May 5, 2011, alleges that Citizens Republic Bancorp, Inc. (CRBC), as the successor to Republic Bank, and Citizens Bank have failed to provide their home mortgage lending services to the residents of majority African-American neighborhoods on an equal basis as those services are provided to residents of predominantly white neighborhoods in the Detroit metropolitan area, a practice commonly known as "redlining." The settlement agreement requires CRBC and Citizens Bank to open a loan production office in an African-American neighborhood in the City of Detroit and hire two community lenders; and to invest in the formerly redlined majority African-American areas of Wayne County by providing $1.5 million in a special financing program to increase the amount of credit the bank extends in those areas, by partnering with the City of Detroit to provide $1.625 million in matching grants of up to $5,000 to existing homeowners for exterior improvements and by spending $500,000 for advertising, marketing, and consumer financial education targeted to those areas.
On June 21, 2011,
the court entered a consent order
in United States v. Nixon State Bank
(W.D. Tex.), an Equal Credit Opportunity Act pattern or practice case that was referred to the Department of Justice by the Federal Deposit Insurance Corporation. The complaint
, filed on June 17, 2011, alleges that Nixon charged higher prices on unsecured consumer loans made to Hispanic borrowers through the bank's branch offices. The consent order requires Nixon to revise its new uniform rate matrices for pricing unsecured consumer and other loans offered by the bank to ensure that the price charged for its loans is set in a non-discriminatory manner. The settlement also requires the bank to pay nearly $100,000 to Hispanic victims of discrimination, monitor its loans for potential disparities based on national origin, and provide equal credit opportunity training to its employees.
On April 28, 2011,
the Division filed a statement of interest
in USAA Federal Savings Bank v. Pennsylvania Human Rights Commission
(E.D. Pa.). USAA seeks to enjoin PHRC's investigation of an individual's Fair Housing Act national origin discrimination complaint by arguing that federal banking law preempts state agencies enforcing state laws from investigating a federally chartered bank. The statement of interest supports PHRC's motion for summary judgment, arguing that preemption does not apply because the Fair Housing Act specifically provides for substantially equivalent state agencies to investigate fair housing complaints. The motions for summary judgment are pending decision by the court.
On January 11, 2011,
the court entered a consent order
in United States v. PrimeLending
(N.D. Tex.). The complaint
alleged that the defendant violated the Fair Housing Act and the Equal Credit Opportunity Act when it charged African-American borrowers higher annual percentage rates of interest between 2006 and 2009 for prime fixed-rate home loans and for home loans guaranteed by the Federal Housing Administration and Department of Veterans Affairs than it charged to similarly-situated white borrowers. The defendant, a national mortgage lender with 168 offices in 32 states, became one of the nation's 20 largest FHA lenders by 2009. PrimeLending did not have monitoring in place to ensure that it complied with the fair lending laws, even as it grew to originate more than $5.5 billion in loans per year. The complaint alleges that PrimeLending's policy of giving its employees wide discretion to increase their commissions by adding "overages" to loans resulted in the alleged discrimination. The consent order requires the defendants to pay up to $2 million to the alleged victims of discrimination and to have in place loan pricing policies, monitoring and employee training that ensure discrimination does not occur in the future. This case resulted from a referral by the Board of Governors of the Federal Reserve.
On March 4, 2010,
the United States filed a fair lending complaint
and consent order
resolving United States v. AIG Federal Savings Bank and Wilmington Finance, Inc.
(D. Del.). AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), two subsidiaries of American International Group, Inc., have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers. The complaint alleges that the two violated the Fair Housing Act and the Equal Credit Opportunity Act when they charged higher fees on wholesale loans to African American borrowers nationwide on thousands of loans from July 2003 until May 2006, a period of time before the federal government obtained an ownership interest in American International Group Inc.
The complaint further alleges that AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants and failed to supervise or monitor brokers in setting broker fees. Under the settlement, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than non-Hispanic white customers and will invest at least $1 million in consumer financial education efforts and shall also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending. This case resulted from a referral by the Treasury Departmentís Office of Thrift Supervision to the Justice Departmentís Civil Rights Division. The court entered the consent order on March 25, 2010.