Recently, the DOJ released information regarding three fair lending actions, all three of which included allegations related to wholesale lending programs. On September 27, the DOJ announced separate actions—one against a Wisconsin bank and the other against a nationwide wholesale lender—in which the DOJ alleged that the lenders engaged in a pattern or practice of discrimination on the basis of race and national origin in their wholesale mortgage businesses. The DOJ charged that, during 2007 and 2008, the bank violated the Fair Housing Act and ECOA by granting its mortgage brokers discretion to vary their fees and thus alter the loan price based on factors other than a borrower’s objective credit-related factors, which allegedly resulted in African-American and Hispanic borrowers paying more than non-Hispanic white borrowers for home mortgage loans. The bank denies the allegations but entered a consent order pursuant to which it will pay $687,000 to wholesale mortgage borrowers who were subject to the alleged discrimination. The allegations originated from an FDIC referral to the DOJ.
The DOJ charged the California-based wholesale lender with violations of the Fair Housing Act and ECOA, alleging that over a four-year period, the lender’s practice of granting its mortgage brokers discretion to set the amount of broker fees charged to individual borrowers, unrelated to an applicant’s credit risk characteristics, resulted in African-American and Hispanic borrowers paying more than non-Hispanic white borrowers for home mortgage loans. The lender did not admit the allegations, but agreed to enter a consent order to avoid litigation. Pursuant to that order the lender will pay $3 million to allegedly harmed borrowers. The order also requires the lender to take other actions including establishing race- and national origin-neutral standards for the assessment of broker fees and monitoring its wholesale mortgage loans for potential disparities based on race and national origin.
Finally, on September 30, the DOJ announced that a national bank agreed to resolve certain legacy fair lending claims against a thrift it acquired several years ago, which the bank and the OCC identified as part of the acquisition review. Based on its own investigation following the OCC referral, the DOJ alleged that, between 2006 and 2009, the thrift allowed employees in its retail lending operation to vary interest rates and fees, and allowed third-party brokers as part of its wholesale lending program to do the same, allegedly resulting in disparities between the rates, fees, and costs paid by non-white borrowers compared to similarly-situated white borrowers. The bank, which was not itself subject to the DOJ’s allegations, agreed to pay $2.85 million to approximately 3,100 allegedly harmed borrowers to resolve the legacy claims and avoid litigation.