The Department of Justice and a Florida-based lender are moving to settle claims that the mortgage shop engaged in discriminatory lending practices from 2016 to 2021.
During that stretch of time, The Mortgage Firm allegedly avoided offering mortgage services in predominantly Black and Hispanic neighborhoods in the Miami metropolitan area, according to a complaint filed by the Justice Department in Florida on Jan. 7.
By doing so, the mortgage lender violated the Fair Housing Act and the Equal Credit Opportunity Act, the department argued. The case was referred to it by the Consumer Financial Protection Bureau in 2022, the enforcement agency said.
Under the proposed settlement, which is
It will also need to implement a number of internal operating changes including expanding its outreach and marketing efforts to minority communities and conducting a credit needs assessment.
"Non-depository institutions, including mortgage companies, are now originating a higher share of loans to homebuyers than banks and credit unions," said Kristen Clarke, assistant attorney general of the Justice Department's Civil Rights Division, in a press release.
"With this trend comes the obligation to ensure full compliance with our federal laws that prohibit redlining," she added. "By denying predominantly Black and Hispanic neighborhoods in the greater Miami area access to credit, The Mortgage Firm violated the law, denied communities equal access to credit and exacerbated the racial wealth gap."
The Mortgage Firm, a mid-sized lender, disagrees with the DOJ's claims that its South Florida lending practices violated any laws or regulations. It also pointed out that the company is not required to pay a civil money penalty under the settlement.
"The Mortgage Firm has made significant investments in recent years to reach, educate, and serve the residents of the South Florida communities at issue," a company spokesperson said. "The Mortgage Firm's decision to settle this matter out of court is based on its desire to avoid the cost of litigation and to move on from this disagreement relating to business activities that occurred approximately five to ten years ago."
The retail mortgage lender's "conduct and practices," such as not being based in minority communities and doing minimal outreach to residents, denied equal access to home loans and discouraged prospective applicants from applying for mortgages on the basis "of the race, color, and national origin of the residents of those neighborhoods," DOJ's complaint said.
Between 2016 and 2021, only 30.4% of The Mortgage Firm's loan applications were for properties in majority-Black and Hispanic areas, compared to 59% for the company's peers, litigation claims.
The Mortgage Firm, a retail lender based in Orlando, Florida, sponsors over 200 loan officers and is licensed to operate in over 20 states, per the Nationwide Multistate Licensing System.
This is the DOJ's 16th redlining settlement under the Combating Redlining Initiative launched in 2021, it said. The department has secured over $153 million in relief for communities of color that have been victims of lending discrimination.
"This historic amount of relief is expected to generate over $1 billion in investment to address unequal access to credit in communities of color across the country," the DOJ wrote in its press release.
Financial institutions such as
Meanwhile, lenders, such as Bank of America, JPMorgan Chase and Wells Fargo, and non-bank lenders Rocket Mortgage and Guaranteed Rate, have taken steps to address the racial homeownership gap by
