MANHATTAN U.S. ATTORNEY SUES MORTGAGE BANKER FOR ENGAGING IN DISCRIMINATORY LENDING PRACTICES AGAINST AFRICAN-AMERICAN AND HISPANIC BORROWERS
FOR IMMEDIATE RELEASE
Monday April 2, 2012
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas E. Perez, the Assistant Attorney General for the Department of Justice’s Civil Rights Division, and John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity in the U.S. Department of Housing and Urban Development (“HUD”), announced today that the United States has filed a civil rights lawsuit against GFI MORTGAGE BANKERS alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act. The Complaint alleges that GFI engaged in a pattern or practice of discrimination on the basis of race and national origin in making hundreds of loans from 2005 through 2009. The Complaint, which was filed today in Manhattan federal court, seeks a declaration that GFI’s practices were illegal, an injunction against further discrimination, compensatory damages to benefit the victims of GFI’s discrimination, and civil penalties.
Manhattan U.S. Attorney Preet Bharara said: “As the lawsuit we filed today alleges, discrimination still exists in certain quarters and it has profound consequences for the victims. At a time when so many American homeowners of all races and nationalities are struggling to make their mortgage payments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers paying higher fees and interest rates for their residential mortgages. As today’s suit demonstrates, this type of discriminatory action will not be tolerated. We will continue to work to ensure that fair lending laws are enforced throughout the district.”
ssistant Attorney General for DOJ’s Civil Rights Division Thomas E. Perez said: “Charging people more for home loans simply because of their race or national origin – as we have alleged in our complaint against GFI – is illegal. The Justice Department will act aggressively to ensure that all people have equal access to credit and a level playing field. For that reason, vigorous enforcement of fair lending laws remains a top priority.”
HUD Assistant Secretary John Trasviña said: “HUD and the Justice Department work together to end lending discrimination in America. This case and others nationwide demonstrate our commitment to pursue lenders if they violate the Fair Housing Act and seek relief for discrimination victims.”
The following allegations are based on the Complaint:
From 2005 through 2009, GFI charged higher loan prices to African-American and Hispanic borrowers than it charged to similarly-situated white borrowers through higher interest rates and fees for home mortgage loans. For example, of borrowers who took out home loans in 2007, African-American and Hispanic borrowers paid on average $7,500 and $5,600 more, respectively, over the first four years of their loans as compared to similarly-situated white borrowers. The disparities in interest rates and fees charged to African-American and Hispanic borrowers are statistically significant and are unrelated to credit risk or loan characteristics.
These disparities are a result of GFI’s home-loan pricing policy. GFI allowed and encouraged its loan officers to use subjective and unguided pricing adjustments that were not based on a borrower’s credit risk when selecting loan products, pricing loans, and charging fees. GFI’s home-loan pricing policy also allowed loan officers to consider factors unrelated to a borrower’s creditworthiness. Moreover, GFI failed to adequately supervise, train, or monitor its loan officers to ensure that they were pricing loans in a non-discriminatory manner.
GFI provided strong financial incentives to loan officers to price their loan products as high as possible by compensating them with a substantial percentage of the profits they generated on each loan. The number of home mortgage loans issued by GFI increased from 974 in 2005 to 2,270 in 2009. At the same time, GFI’s revenue from its home mortgage loan services increased from $305 million in 2005 to $768 million in 2009. Between 2005 and 2009, GFI made approximately 300 home loans to African-American borrowers and 440 home loans to Hispanic borrowers in New York and New Jersey.
The Fair Housing Act and the Equal Credit Opportunity Act prohibit financial institutions from discriminating on the basis of race or national origin, among other factors, in their home mortgage lending practices. Charging higher prices for home mortgage loans on the basis of race or national origin, including charging higher fees and annual percentage rates of interest, is one of the discriminatory lending practices prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.
Mr. Bharara thanked the United States Department of Housing and Urban Development, which referred this matter to the Justice Department.
The case is being handled jointly by the Civil Rights Unit of the U.S. Attorney’s Office and the Civil Rights Division at the Department of Justice. Assistant U.S. Attorneys Jean-David Barnea and David J. Kennedy are handling the case with Department of Justice Civil Rights Division attorneys Jon M. Seward and Sameena Shina Majeed.
African-American and Hispanic borrowers who received GFI loans since 2005, former employees of GFI, or any other individuals with information relevant to this lawsuit are encouraged to contact the U.S. Department of Justice at 1-800-896-7743, mailbox 9992, or to contact the following address:
Chief, Civil Rights Unit
U.S. Attorney’s Office, S.D.N.Y.
86 Chambers Street, 3rd Floor
New York, NY 10007