Banks Get Costly Lesson About Mortgage Lending Discrimination

by Barbara Nevins Taylor

If you are African-American, Hispanic or a woman on maternity leave and looking for a mortgage, you can take some comfort from the latest settlements between the U.S. Department of Housing and Urban Development (HUD) and two banking giants. The banks received a costly lesson about mortgage lending discrimination.

In separate cases, MortgageIT, a Deutsche Bank subsidiary, agreed to pay $12.1 million for allegedly discriminating against African-American and Hispanic borrowers and Bank of America agreed to pay $45,000 for allegedly discriminating against women on maternity leave.

In the MortgageIT case, a HUD review alleged that in 2007 and 2008 African-American and Hispanic borrowers paid interest rates that were 8 percentage points higher than white borrowers.

In addition, HUD alleged African-American borrowers were 65 percent more likely to receive higher priced loans than white borrowers with the same financial backgrounds, and Hispanic borrowers were 72 percent more likely. In addition, African-American and Hispanic borrowers allegedly paid higher fees. On average, African-Americans paid $707 more and Hispanics paid $906 more.
 HUD also alleged that African-American applicants were 45 percent more likely to be denied a mortgage loan than white borrowers with the same financial backgrounds.  Hispanic applicants were allegedly 35 percent more likely to be denied.
The settlement requires MortgageIT to set up a $12.1 million fund to compensate borrowers nationwide who were unfairly denied a loan or whose loans may have contained unfair fees.

Bryan Greene, HUD’s Acting Assistant Secretary for Fair Housing and Equal Opportunity said, “It’s creditworthiness and ability to pay that matter when you apply for a loan, not your race or where you come from.”

PREGNANCY DISCRIMINATION

In the maternity leave case, Bank of America will pay $45,000 to settle charges that it refused to refinance the mortgages of two couples in California and Texas because the women were on maternity leave.

One couple, from San Jose, California, said Bank of America delayed the closing on their  mortgage refinancing because the woman was on maternity leave. The other couple, from Humble, Texas, alleged that Bank of America refused to consider the wife’s employment income and denied their application for a mortgage loan because she was on maternity leave. The couple also alleged that after their real estate agent told the loan officer that denying the loan because of the woman’s maternity status violated the Fair Housing Act, the loan officer changed his reasons for denying the loan. The couple ultimately obtained a mortgage from a different lender.

Bank of America will pay $25,000 to the California couple and $15,000 to the Texas couple. According to the agreement it will also revise its policies to allow applicants on parental leave to be approved for mortgage loans without first returning to active work status. Bank of America will also hold fair lending training for its employees.

If you think you’ve been the victim of this type of discrimination by any lender contact HUD  (800) 669-9777 (voice) or (800) 927-9275 (TTY).  Housing discrimination complaints may also be filed at www.hud.gov/fairhousing or by downloading HUD’s free housing discrimination mobile application, which can be accessed through Apple devices, such as the iPhone, iPad, and iPod Touch.

 

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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created ConsumerMojo.com to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.