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Mortgage Lender Charged with Racial Bias in Home Loans
WASHINGTON – PrimeLending, a national mortgage lender, has agreed to pay $2 million to resolve allegations that it engaged in a pattern or practice of discrimination against African-American borrowers between 2006 and 2009.
The settlement was filed today in conjunction with a complaint made by the Justice Department in federal court in Dallas, where PrimeLending is headquartered. Brought under the federal Fair Housing Act and Equal Credit Opportunity Act, the complaint alleges African-American borrowers nationwide were charged higher prices on retail loans made through PrimeLending’s branch offices.
“Charging borrowers more to obtain a home loan based on their race is absolutely intolerable, but it is a practice that occurred all too often during the past decade and stripped a vast amount of wealth from communities of color,” said Thomas E. Perez, Assistant Attorney General in charge of the Justice Department’s Civil Rights Division. “We will be vigilant to ensure that this type of discriminatory practice does not continue in the current credit market. Vigorous enforcement of fair lending laws is a top priority, and we will continue aggressively to pursue compensation for the victims of such discrimination.”
Between 2006 and 2009, PrimeLending charged African-American borrowers higher annual percentage rates of interest for prime fixed-rate home loans and for home loans guaranteed by the Federal Housing Administration and Department of Veterans Affairs than it charged to similarly-situated white borrowers. PrimeLending gave its employees wide discretion to increase their commissions by adding “overages” to loans, which increased the interest rates paid by borrowers. This policy had a disparate impact on African-American borrowers.
PrimeLending was rapidly increasing its lending operations, becoming one of the nation’s 20 largest FHA lenders by 2009. However, the lender did not have monitoring in place to ensure that it complied with the fair lending laws, even as it grew to originate more than $5.5 billion in loans per year.
The settlement requires PrimeLending to have in place loan pricing policies, monitoring and employee training that ensure discrimination does not occur in the future. It also incorporates provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations recently enacted by the Federal Reserve that restrict loan officer compensation based on the terms or conditions of a particular transaction.
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Key Facts
- State: Federal
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release ↗
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