10/15/2024 | Press release | Distributed by Public on 10/15/2024 13:13
WASHINGTON, D.C. - Today, the Consumer Financial Protection Bureau (CFPB) and the Justice Department (DOJ) took action to end Fairway Independent Mortgage Corporation's illegal mortgage lending discrimination against majority-Black neighborhoods in the greater Birmingham, Alabama area. The CFPB and DOJ allege that Fairway illegally redlined Black neighborhoods, including through its marketing and sales actions. Fairway's actions discouraged people from applying for mortgage loans in the Birmingham metropolitan area's Black neighborhoods. If entered by the court, the settlement announced today would require Fairway to pay a $1.9 million civil penalty to the CFPB's victims relief fund. Fairway would also be required to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance, and home improvement loans in majority-Black neighborhoods.
"The CFPB and DOJ are holding Fairway accountable for redlining Black neighborhoods," said CFPB Director Rohit Chopra. "Fairway's unlawful redlining discouraged families from seeking loans for homes in Birmingham's Black neighborhoods."
"This settlement, and the over $150 million in relief the Justice Department has secured for communities across the country through our Combating Redlining Initiative, will help to ensure that future generations of Americans inherit a legacy of home ownership that they too often have been denied," said Attorney General Merrick B. Garland. "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."
"The settlement reached with Fairway Mortgage is a win for communities of color here in Birmingham that have historically been denied access to vital economic resources," said U.S. Attorney Prim Escalona for the Northern District of Alabama. "Our office is committed to ensuring that these communities have equal access to housing and credit resources."
"Birmingham lies at the heart of our nation's civil rights struggle but is also a community that bears the legacy of discriminatory redlining and other exclusionary policies," said Assistant Attorney General Kristen Clarke of the Justice Department's Civil Rights Division. "This settlement will provide Birmingham's Black neighborhoods with the access to credit they have long been denied and increase opportunities for homeownership and generational wealth. This settlement makes clear our intent to uproot modern day redlining in every corner of the country, including in the deep South. With more than $150 million in total relief secured in three short years, our Combating Redlining Initiative is generating real economic opportunity for communities of color while sending a strong message to mortgage lenders, no matter their business model, that discriminatory lending will not be tolerated in America."
Fairway Independent Mortgage Corporation is a non-depository mortgage company headquartered in Madison, Wisconsin. Fairway operates in the Birmingham area under the trade name MortgageBanc. In 2023, Fairway was the nation's third largest mortgage lender, receiving over 100,000 applications and originating over $24 billion in loans. It is a closely held company and Steve Jacobson is the majority owner.
Redlining is the illegal practice of denying the same access to credit to certain neighborhoods based on the racial or ethnic composition of those areas. The complaint describes how Fairway redlined majority-Black neighborhoods in the Birmingham Metropolitan Statistical Area (referred to as the Birmingham MSA). During the period covered by the complaint, the Birmingham MSA included six counties in north central Alabama with a combined population of about 1.1 million. While Fairway claimed to serve the entire metropolitan area, it concentrated all its retail loan offices in majority-white areas, directed less than 3% of its direct mail advertising to consumers in majority-Black areas from 2018-2020, and for years discouraged homeownership in majority-Black areas by generating loan applications at a rate far below its peer institutions.
The CFPB and DOJ allege that Fairway violated the Equal Credit Opportunity Act, the Consumer Financial Protection Act, and the Fair Housing Act. Specifically, the government alleges problematic conduct by Fairway including:
Under the Consumer Financial Protection Act of 2010 (CFPA), the CFPB has the authority to take enforcement action against institutions that violate federal consumer financial protection laws, including violations of the Equal Credit Opportunity Act and its implementing regulation, Regulation B. The Justice Department joined the CFPB's claim that Fairway violated the Equal Credit Opportunity Act and its implementing regulation, and separately alleges that Fairway violated the Fair Housing Act.
The proposed order filed by CFPB and DOJ would require Fairway to:
Consumers can submit complaints about financial products and services by visiting the CFPB's website or by calling (855) 411-CFPB (2372).
Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to [email protected]. To learn more about reporting potential industry misconduct, visit the CFPB's website.