Housing Section Documents

UNITED STATES OF AMERICA,
Plaintiff

v.

FIRST NATIONAL BANK OF DOÑA
ANA COUNTY,
Defendant.

The United States of America alleges:

1. This action is brought by the United States to enforce the provisions of Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act) as amended by the Fair Housing Act Amendments Act of 1988, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f, as amended.

2. This court has jurisdiction of this action pursuant to 28 U.S.C. § 13-45, 42 U.S.C. § 3614(a), and 15 U.S.C. § 1691e(h); venue is appropriate pursuant to 28 U.S.C. §§ 1391(c) and 1392(a).

3. Defendant First National Bank of Doña Ana County (hereinafter also referred to as "First National Bank" or "the lender") has its principal place of business in Las Cruces, New Mexico. First National Bank has five branches serving greater Las Cruces, and outlying branches in Anthony, Hatch, Santa Teresa and White Sands, New Mexico.

4. The Defendant is subject to federal laws prohibiting certain types of discrimination in lending, including the Fair Housing Act and the Equal Credit Opportunity Act. The Defendant engages in residential real estate-related transactions and is a creditor within the meaning of the Equal Credit Opportunity Act.

5. According to the 1990 Census, over 25% of all housing units in the Las Cruces, Metropolitan Statistical Area (MSA) were mobile home dwellings, the majority of which were occupied by Hispanics. Specifically, in 1990 there were 8,926 owner-occupied mobile homes in the Las Cruces MSA, 5,009 (56%) of which were occupied by Hispanics. As of 1990, 36% of Hispanic homeowners in the Las Cruces, MSA, resided in mobile homes.

6. Since at least 1990, First National Bank has offered loans for the purchase of mobile homes as part of the lender's consumer lending program. The loans are designed for persons desiring to purchase a mobile home as their primary residence. These loans are secured by the mobile home and are commonly referred to as mortgage loans. From January 1992 through March 1995, First National Bank received 795 applications for mobile home mortgage loans, over 60% of which were submitted by Hispanic applicants.

7. Since at least 1990, First National Bank has made loans for the purchase of mobile homes through consumer loan officer employees, stationed in the main office in Las Cruces and in the outlying branches. The loan officer is responsible for receiving from the prospective borrower a loan application and thereafter "processing" the application, that is, attempting to gather the information necessary to determine whether the prospective borrower is qualified to receive the loan, such as information relevant to the applicant's income, debts, and credit history. If the loan amount requested is within the loan officers' authorized limit, the loan officer "underwrites" the loan application, that is, makes a decision, based on the information presented by the applicant and gathered by the loan officer, whether to grant or deny the loan.

8. Since at least 1990, First National Bank has provided its loan officers with vague and non-specific application processing and loan underwriting guidelines and instructions. As a consequence, loan officers were left with de facto authority to establish minimum application processing procedures and loan underwriting standards for determining which applications should be approved and which applications should be denied.

9. Since at least 1990, and continuing through the middle of 1994, no official at First National Bank reviewed decisions by loan officers to deny a mobile home purchase loan to ensure that all persons were treated fairly in the lending process, without regard to any unlawful factor such as national origin. Since the middle of 1994, First National Bank has implemented a second review process, during which certain employees of the lender review summaries of selected denied mortgage loan applications.

10. First National Bank has failed to adequately train its loan officers and other employees, and to establish appropriate procedures to ensure that all mobile home loan applicants are treated fairly, without regard to national origin.

11. First National Bank has made available to the Department of Justice requested loan files relating to applications for mobile home mortgage loans processed by the lender from 1992 through 1995. The loan files reveal that in processing applications, the lender's loan officers made greater efforts to obtain information from Anglo applicants that would demonstrate their eligibility for financing compared to the efforts expended in processing the applications of Hispanics. For example, First National Bank's loan officers have:
    1. failed to make comparable efforts to allow Hispanic applicants to explain adverse items on credit reports;

    2. failed to make comparable efforts to verify credit sources listed on Hispanics' mobile home loan applications; and

    3. failed to make comparable efforts to elicit from Hispanic applicants possible "offsetting" qualifications that may compensate for any deficiencies in the required qualifying information.

12. The mobile home loan files also reveal that First National Bank's loan officers have applied more stringent and less flexible underwriting standards for Hispanic mobile home loan applicants than those applied to similarly situated accepted Anglo applicants applying for the same type of loan. As a result, the lender has failed to approve mobile home loans for Hispanic applicants whose qualifications, as documented in the lender's loan files, met standards that were equal to or greater than those applied to similarly situated Anglo applicants who were approved for financing.

13. The conduct of Defendant as described in paragraphs eight (8) through twelve (12) above, constitutes:
    1. Discrimination on the basis of national origin in making available residential real estate-related transactions in violation of Section 805 of the Fair Housing Act, 42 U.S.C. § 3605(a); and

    2. Discrimination against applicants with respect to credit transactions, on the basis of national origin, in violation of the Equal Credit opportunity Act, 15 U.S.C. § 1691(a)(1).

14. The series of differential and less favorable treatment afforded to Hispanic applicants as described above confirms:
    1. A pattern or practice of resistance to the full enjoyment of rights secured by the Fair Housing Act, as amended, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f; and

    2. A denial of rights granted by the Fair Housing Act, as amended, to a group of persons that raises an issue of general public importance.

15. Persons who have been victims of Defendant's discriminatory policies and practices are aggrieved persons as defined in 42 U.S.C. § 3602(i) and the ECOA, and have suffered damages as a result of the Defendant's conduct.

16. The discriminatory practices of Defendant as described in this Complaint were willful and intentional and were implemented with disregard for the rights of Hispanic persons.

WHEREFORE, the United States prays that the Court enter an ORDER that:

1. declares that the totality of the policies and practices of the Defendant constitutes a violation of the Fair Housing Act and the Equal Credit Opportunity Act;

2. enjoins Defendant, its agents, employees, and successors, and all other persons in active concert or participation with them, from discriminating on account of race or national origin in any aspect of their mortgage lending activities;

3. requires Defendant to develop and submit to the court for its approval a detailed plan that: (a) remedies the vestiges of Defendant's discriminatory policies and practices; and (b) ensures that future Hispanic mortgage loan applicants will be treated in a nondiscriminatory manner that does not differ materially from the treatment afforded to Anglo applicants;

4. awards such damages or redress as would fully compensate each person aggrieved by the Defendant's discriminatory housing practices for the injuries suffered as a result of the Defendant's discriminatory conduct;

5. awards each person aggrieved by Defendant's discriminatory housing practices punitive damages because of the intentional and willful nature of the Defendant's conduct; and

6. assesses civil penalties against Defendant, pursuant to 42 U.S.C. § 3614(d)(1)(c), in order to vindicate the public interest.

The United states further prays for such additional relief as the interests of justice may require.

JANET RENO
Attorney General

ISABELLE KATZ PINZLER
Acting Assistant Attorney General
Civil Rights Division

PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section

ALEXANDER C. ROSS
FREDERICK B. RIVERA
Attorneys
U.S. Department of Justice
Civil Rights Division
Housing and Civil Enforcement Section
Post Office Box 65998
Washington D.C. 20035-5988
(202) 514-6161
FAX: (202) 514-1116

JOHN J. KELLY
United States Attorney