CFPB and DOJ Enter Into Redlining Consent Order With Large Independent Mortgage Banker

The CFPB and DOJ entered into their second-ever redlining consent order against a non-depository mortgage lender as part of their ongoing focus on “modern redlining.”

The agencies alleged that the mortgage lender discouraged prospective mortgage applicants in majority-Black areas in and around Birmingham, Alabama from applying for mortgage loans, and also failed to provide them with services in connection with the sale of housing on account of race or color.  About 33% of the census tracts in the Birmingham area are majority-Black, and all of these majority-Black tracts are concentrated within one of the six counties which made up the Birmingham area.  The agencies asserted that the lender received mortgage applications and originated loans in majority-Black neighborhoods in Birmingham at a rate more than 3 times lower than other mortgage lenders in the area.  Further, the DOJ asserted that the lender:

• Operated three full-service loan offices and three loan production desks based in majority-White areas, while having none in majority-Black areas (and none even in the county which contained all of the area’s majority-Black neighborhoods);
• Loan officers obtained business through referral relationships, and 97% of these referral sources were based in majority-White areas;
• All of the company’s loan officers were White, and the vast majority of the company’s marketing materials showed images of White people but not of Black people;
• Direct mail pieces and other marketing expenditures were directed to people or locations in majority-White areas, while almost none were specifically directed to majority-Black areas;
• The lender was allegedly aware of the purported disparities in applications and originations from majority-Black versus majority-White areas, and allegedly failed to take action to address this issue; and
• Employees of the lender sent and received emails using derogatory language about majority-Black neighborhoods within the Birmingham area.

The lender denied the allegations in the complaint.

As part of the consent order, the lender agreed to: create a $7 million loan subsidy fund to support borrowers in majority-Black areas; open a branch or production desk in a majority-Black neighborhood in the Birmingham area; spend at least $1 million on outreach, marketing, financial education, and community development activities in majority-Black areas; and pay a $1.9 million civil money penalty.