Mortgage company agrees to settle with federal authorities over Birmingham’s alleged ‘redlining’ • Wisconsin Examiner

A mortgage company has agreed to pay nearly $9 million in civil penalties to settle a lawsuit filed by the Consumer Protection Bureau (CFPB) and the US Department of Justice (DOJ) alleging that the company discriminated against people who live in predominantly black neighborhoods. in Birmingham.

Both agencies alleged that Fairway Independent Mortgage Insurance Corporation, based in Madison, Wis., engaged in “redlining” by failing to provide credit services, particularly home loans, to individuals living in communities of color.

“The CFPB and the Department of Justice are holding Fairway accountable for redlining black neighborhoods,” CFPB Director Rohit Chopra said in a statement. “Fairway’s Illegal ‘Red Line’ Stopped Families from Seeking Home Loans in Birmingham’s Black Neighborhoods”.

Fairway said in statement on its website that the case was incorrectly classified in the lawsuit.

“First, the complaint characterizes Fairway’s actions as willful and reckless, a claim that was mutually rejected by the parties pending settlement,” the statement said. “Furthermore, the complaint characterizes Fairway’s actions as willful and intentional, despite the fact that state agencies have been unable to find any evidence to support such a claim.”

The company also said it made more loans in black-majority census tracts than any other non-bank lender with a physical presence in Birmingham, and said it entered into the settlement “to resolve the issue and contain further costs resources”. »

“Fairway is disappointed with this result,” the company said in a statement. “We are a company that serves people and has always strived to help everyone achieve their dream of owning a home. Our numbers, our reputation and customer feedback prove it. We are equally disappointed with the regulatory and judicial systems for these actions. We believe that justice did not prevail in this situation.”

Under the proposed settlement, which requires the approval of a federal judge, Fairway will pay a $1.9 million civil penalty to the CFPB’s victim assistance fund and contribute $7 million to a loan subsidy program that allows people to buy, refinance and improve their homes in mostly black neighborhoods .

The lawsuit alleged that Fairway located all of its brick-and-mortar locations in Birmingham and credit officers in predominantly white neighborhoods without doing the same for predominantly black or colored locations.

“From 2018 to 2022, Fairway primarily targeted its marketing and advertising in predominantly white neighborhoods, but failed to effectively market and advertise in predominantly black neighborhoods in the Birmingham MSA until at least the end of 2022.” the CFPB said in a complaint.

Fairway’s practices prevented minorities from getting loans, and data showed the company generated a disproportionately low number of loan applications from black-majority neighborhoods in the Birmingham metropolitan service area compared to other lenders in a similar location.

The complaint alleges that between 2018 and 2022, the company fielded just over 10,000 applications from the Birmingham area, but only about 4% of the loan applications were for properties in predominantly black neighborhoods. Companies with similar locations were claimed to have received more than 12% of their loan applications from the same black-majority neighborhoods.

“Fairway lenders generated applications for properties in predominantly black neighborhoods that were more than three times more expensive than Fairway’s,” the complaint said.

Fair housing advocates praised the actions of both the Department of Justice and the Consumer Protection Bureau.

“Typically, it’s an argument that says we can make an individual judgment about any borrower based on where they actually live, or based on their race, or based on something unrelated to that individual’s ability individuals to return and assess their collateral is irrational, and banks should not be doing it,” Nestor M. Davidson, faculty director of the Urban Law Center at Fordham Law School.