On July 27, the CFPB and DOJ proposed a settlement with a nonbank mortgage lender for its discriminatory “redlining” lending practices against minority families living in the greater Philadelphia area. If approved by the court, the mortgage lender would be required to pay more than $22 million in civil penalties, and would be the CFPB’s first nonbank mortgage redlining settlement.

According to the complaint, the mortgage lender violated the Equal credit opportunity Act, Consumer Financial Protection Act, and the Fair Housing Act by allegedly:

  • distributing racist or discriminatory messages about certain neighborhoods specifically related to real estate property locations and appraisals;
  • avoiding sending its loan officers to neighborhoods with predominately minority populations; and
  • discouraging and ignoring minority loan applicants in its marketing campaigns and advertising efforts.

The proposed order would require the mortgage lender, among other things, to pay (i) $18.4 million into a loan subsidy program to increase non-discriminatory access to credit; $4 million to the CFPB’s victims’ relief fund, and (ii) $2 million to fund advertising to generate applications in redlined areas. In addition to the CFPB and DOJ’s action against the mortgage lender itself, the states of Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with the mortgage lender’s real estate services affiliate.

Putting It Into Practice: Recently, federal regulators have increased their efforts in combating illegal redlining lending practices. Last fall, the DOJ announced its Combatting Redlining Initiative, which promised to dedicate greater resources and increasing coordination with federal financial regulatory agencies and state Attorneys general to combat modern-day redlining. In light of this recent settlement, mortgage lenders and their affiliates should ensure that their lending practices do not run afoul of federal regulations, especially those focused on discriminatory conduct.