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Wednesday, November 6, 2024

Justice Department settles with mortgage firm over redlining allegations

Attorneys & Judges
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Merrick B. Garland, Attorney General | https://www.justice.gov/

The Justice Department and the Consumer Financial Protection Bureau (CFPB) have announced that Fairway Independent Mortgage Corporation has agreed to a settlement of $8 million, alongside a $1.9 million civil penalty. This resolves allegations of lending discrimination through redlining in predominantly Black neighborhoods in Birmingham, Alabama.

Redlining is an illegal practice where lenders avoid providing credit services based on the race, color, or national origin of residents in certain communities. This settlement contributes to the Justice Department’s Combating Redlining Initiative, which has surpassed $150 million in relief for communities of color nationwide affected by lending discrimination.

Attorney General Merrick B. Garland stated, “This settlement... will help to ensure that future generations of Americans inherit a legacy of home ownership that they too often have been denied.” The initiative aims to combat lending discrimination and secure relief for affected communities.

Fairway was accused of discouraging mortgage applications from Black neighborhoods through its marketing and sales actions. As part of the settlement, Fairway is required to provide $7 million for affordable loans in majority-Black neighborhoods in Birmingham and invest an additional $1 million into programs supporting this loan subsidy fund. Additionally, Fairway must pay a $1.9 million civil penalty to the CFPB’s victims' relief fund.

Assistant Attorney General Kristen Clarke emphasized the importance of this action: “This settlement will provide Birmingham’s Black neighborhoods with access to credit they have long been denied and increase opportunities for homeownership.”

U.S. Attorney Prim Escalona also commented on the significance for local communities: “Our office is committed to ensuring that these communities have equal access to housing and credit resources.”

According to CFPB Director Rohit Chopra, “The CFPB and Justice Department are holding Fairway accountable for redlining Black neighborhoods.”

Fairway operates under the trade name MortgageBanc in Birmingham but headquartered in Madison, Wisconsin. It was among the top lenders by origination volume nationally in 2022.

The complaint highlighted Fairway's failure to address known signs of discrimination since at least 2017. The company concentrated its retail loan offices in majority-white areas while directing minimal advertising towards majority-Black areas.

A proposed consent order awaits approval by the Federal District Court for Northern Alabama. If approved, it would mandate Fairway's compliance with specific financial commitments aimed at rectifying past discriminatory practices.

Information about fair lending enforcement can be accessed via www.justice.gov/fairhousing or reported through designated channels provided by both the Justice Department and CFPB websites.

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