The Department of Justice and the Consumer Financial Protection Bureau on Tuesday hit Fairway Independent Mortgage Corp. with a consent order alleging the company discriminated against applicants in Black neighborhoods in Birmingham, Alabama, by discouraging people from applying for mortgage loans.
The Madison, Wisconsin-based mortgage lender agreed to pay nearly $10 million under
"This case is a reminder that redlining is not a relic of the past, and the Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for the communities harmed by it," Attorney General Merrick B. Garland said
The Justice Department said that Fairway took "no meaningful action," to address redlining risk and failed to train or incentivize its loan officers to serve majority-Black neighborhoods.
Between 2018 and 2022, only 3.7% of Fairway's mortgage applications were for properties in majority-Black areas, compared to 12.2% for the company's peers.
Fairway said it "vigorously defended itself against the government agencies' allegations and continues to deny that the company engages in any discriminatory behavior." Fairway said it "maintains strong disagreement," with the agencies' legal and statistical approach to identifying potential discrimination. The company chose to settle to avoid the cost of further litigation.
Fairway said the complaint "significant mischaracterizes" the company's actions as "willful and reckless, a claim that was mutually rejected by the parties prior to settlement." The company said the agencies comments "suggest bad faith" by the government, which it claimed "did not identify any evidence of redlining or other discrimination by Fairway."
The company also said the government agencies relied on a "quota analysis" to allege that Fairway was not meeting the needs of residents in majority-Black census tracts, which was in contravention of the Supreme Court's 2023 affirmative action decisions.
Under the proposed consent order, Fairway has agreed to pay $8 million for a loan subsidy program in Birmingham's majority-Black neighborhoods that will provide lower interest rates and down payment assistance, among other forms of relief.
The company also agreed to pay $1.9 million to the CFPB's victims relief fund and will invest at least $1 million in redlined neighborhoods in Birmingham by opening a loan production or retail office and by spending at least $500,000 on advertising and outreach plus $250,000 on financial education. The settlement still awaits approval by the Federal District Court for the Northern District of Alabama.
CFPB Director Rohit Chopra said the consent order would hold Fairway accountable for redlining Black neighborhoods.
"Fairway's unlawful redlining discouraged families from seeking loans for homes in Birmingham's Black neighborhoods," Chopra said
From 2015 to 2022, Fairway operated three retail loan offices and three loan production desks within real estate offices — all of which were in majority-white areas of Birmingham. The mortgage company relied on referrals from real estate agents and its loan officers' personal contacts to generate mortgage applications, of which the vast majority were located in white areas, the complaint states.
"By taking these actions, Fairway discriminated against, and unlawfully discouraged, mortgage loan applications for properties in majority-Black neighborhoods," the Justice Department said.
Competing mortgage lenders generated applications at over three times the rates of Fairway in majority-Black neighborhoods, the Justice Department said. The disparity was even higher in areas with 80% or more Black residents, where Fairway originated loans at less than one-eighth the rate of its peers, the DOJ said.
Despite the findings, Fairway failed to adopt any written plan for marketing or growth to address the issue of redlining.
The settlement is the third case that the Justice Department and CFPB have brought jointly, and it brings the amount of relief for the DOJ's Combating Redlining Initiative to more than $150 million, Garland said.
