Justice Department Reaches Settlement with C&F Mortgage Corporation to Resolve Allegations of Lending Discrimination

WASHINGTON – The Justice Department announced today that C&F Mortgage Corporation of Midlothian, Va., will revise its pricing policies, conduct employee training and pay $140,000 as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin.

The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in U.S. District Court for the Eastern District of Virginia. 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, in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).

“Fair and equal access to credit is critical and lenders have a responsibility to have protocols in place that ensure all of their lending programs comply with the law and don’t discriminate,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Civil Rights Division is committed to fair lending enforcement that stops abuses across the entire spectrum of credit markets and to compensating the victims of discriminatory lending. We commend C&F for working cooperatively with the Justice Department in reaching an appropriate resolution of this case.”

“Racial and ethnic bias have no place in the lending market,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. “We are pleased that C&F is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”

“The FDIC is committed to ensuring its supervised banks and their subsidiaries comply with fair lending laws,” said Mark Pearce, Director of the Federal Deposit Insurance Corporation’s (FDIC) Division of Depositor and Consumer Protection. “Banks must effectively monitor their subsidiaries to avoid allowing impermissible discrimination to occur. We appreciate the Department of Justice’s efforts to investigate and resolve this matter.” 

According to court documents, in 2007, C&F used rate sheets to calculate a “par” or standard interest rate for each borrower based on objective factors related to the borrower’s credit risk and the loan terms; however, C&F then gave its employees wide discretion to charge borrowers more (overages) or less (underages) than the par rate without having in place objective criteria for setting the overages and underages. Prior to 2010, C&F also did not require employees to document the reasons for charging overages or providing underages to borrowers, did not monitor whether these overages and underages resulted in discrimination based on race or national origin, and did not offer detailed fair lending training to its employees. The Justice Department’s complaint alleges that this policy had a disparate impact on African-American and Hispanic borrowers.

The department alleged that in 2010, C&F began to develop uniform policies for all aspects of its loan pricing and to phase out the practice of charging overages to home mortgage borrowers. As part of this settlement, C&F revised these and other pricing policies further to ensure that the interest rates charged for its home mortgage loans are set in a non-discriminatory manner consistent with the requirements of the FHA and the ECOA. The settlement also requires the lender to pay $140,000 to African-American and Hispanic victims of discrimination, monitor its loans for potential disparities based on race and national origin, and provide equal credit opportunity training to its employees. The agreement also prohibits the lender from discriminating on the basis of race or national origin in any aspect of a credit transaction.

The lawsuit originated from a referral by the FDIC to the Justice Department’s Civil Rights Division.

The Civil Rights Division, the U.S. Attorney’s Office for the Eastern District of Virginia, and the FDIC are members of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at www.justice.gov/fairhousing.