October 2015 Money Matters


Governments Cracking Down on Fraudulent Mortgage Practices


BY GEORGE WHITE


federal agencies have been


City, state stepping


communities color


and up


efforts to stamp out fraudulent practices


mortgage


that target of


discrimination


- pricing and


redlining among them.


Redlining, the practice of


denying credit to qualified applicants who seek loans for homes in specific neighborhoods, is illegal under the 1968 Fair Housing Act. However, a Buffalo-area bank on September 10 agreed to pay nearly $1 million to settle a lawsuit that alleges it redlined a large, predominantly black community in that city.


The suit, filed by New York Attorney General Eric Schneiderman, said


Evans Bancorp created an


investment map that excludes much of Buffalo’s East Side, an area that is predominantly African American. Evans Bank has been denying loans for homes in that area since 2009, according to the lawsuit.


Evans Bank denied the allegations but agreed to create a settlement fund to promote home ownership in the East Side and other areas that were allegedly redlined.


“That systematic we continue to see racial and housing


discrimination in New York in 2015 is shocking,” Schneiderman said. “We will fight for equal justice under law for all New Yorkers and hold lenders to their legal duty to treat all our citizens fairly in the marketplace.”


is part


The lawsuit and settlement of


or reduced lending Schneiderman’s larger,


ongoing investigations into mortgage redlining in New York. He said it was prompted by concerns that banks have halted


activity


in communities of color in the wake of the mortgage crisis and financial collapse of 2008.


The settlement is one of a number of court actions brought by cities and states against banks for alleged fraudulent lending practices. The cities of Baltimore, Chicago, Cleveland, Los Angeles and Memphis have recently filed suits against major banks - with mixed results. On the federal level, the U.S. Department of Housing and Urban Development last May reached an agreement with the Wisconsin-based Associated Bank to


settle redlining


allegations. Associated Bank agreed to invest $200 million in increased home lending in communities


that were


allegedly redlined. HUD said it was the largest redlining settlement in its history.


allegations


HUD is now considering new of discrimination-related


realtor fraud, another kind of illegal activity National


in the housing market. The Fair


Housing Alliance, a


Washington D.C.-based nonprofit, last week filed a complaint with HUD


against a real estate company near


Jackson, Mississippi, alleging that the realtor steered potential homebuyers to neighborhoods based on their race.


The housing alliance said its


allegations are based on reports of those who took part in a “fair housing test,” whites and blacks who posed as potential home buyers. The complaint alleges that the company’s agents steered


white home-seeking posers


away from interracial neighborhoods in Jackson, a city with an African- American majority.


Conversely, never called generally the


black “testers” who inquired about properties in the Jackson area were often


information, the complaint said. A similar


pattern back and were provided very limited of steering


in many other cities was alleged in a report that the housing alliance produced nearly a decade ago. The study, partially funded by HUD, was based on fair housing tests in New York, Washington D.C., Chicago, Philadelphia, San Antonio, Detroit, Atlanta, Austin, Birmingham, Dayton, Mobile and Pittsburgh.


Despite being better qualified


financially, the report said, black and Latino testers were shown fewer homes than their white peers, were often denied information about special incentives that would have made the purchase easier and were required to produce loan pre-approval letters and other documents when whites were not.


Pricing discrimination is another mortgage-market


fraud and federal,


state and city agencies are taking banks to court for allegedly engaging in the illegal practice. For example, a federal court earlier this month revived lawsuits in which the City of Miami accused three of the nation’s largest banks of predatory mortgage lending to


African-American borrowers. By a 3-0 vote, the 11th U.S.


Circuit Court of Appeals in Atlanta said a lower court erred in dismissing the city's claims under the federal Fair Housing Act, over what Miami called a decade of lending discrimination in its residential housing market.


Some of recent successful actions on bank discrimination claims are the result of joint-agency efforts on the federal level. For example, the Federal Trade Commission referred its investigation of Countrywide Financial Corporation to the U.S. Department of Justice and partnered with that agency in a joint probe that began in 2012.


and Latino


www.hamptonroadsmessenger.com


The Hampton Roads Messenger 3 In June, the Justice Department


announced it had obtained the largest residential fair lending settlement in history


to


lawsuit it filed against Countrywide. Under the


resolve a discrimination settlement


agreement,


Countrywide, headquartered near Los Angeles, is to pay $335 million in compensation victims.


The Justice Countrywide Department said discriminated by


charging more than 200,000 Afri- can-American and Latino borrowers higher fees and interest rates than whites. The agency said the borrowers were qualified applicants who were charged higher fees and rates because of their race or national origin.


The Justice alleges that


Countrywide steered


of African- American Latino into


mortgages


2004 to 2007, while


thousands and


borrowers subprime from


providing


prime loans to whites with similar credit.


Subprime


loans generally involve higher-cost terms such as prepayment penalties adjustable rates


and interest that increase


after a few years. In another


joint-agency bank


di sc riminat ion case, the Justice Department and the federal


Financial Protection


Consumer Bureau


announced in May that they reached a settlement with the San Bruno, Ca.-based Provident Funding Associates in a lawsuit that alleges the


charged Latinos and


company African


Americans higher


prices for loans. The


lawsuit alleged that


Provident


over -char ged black and Latino borrowers nationwide levying broker


by higher


For example, Provident its


charges. charged


ican


African-Amer- customers


borrowing $220,000 at


Mortgage Marketplace - Rights and Dispute Options


Protections


The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) - two federal laws - offer protections against discrimination.


The ECOA forbids credit discrimination on the basis of race, color, religion, national origin, gender, marital status and age. Lenders and real estate brokers who arrange financing must comply with the ECOA.


The FHA forbids discrimination in all aspects of residential real-estate related transactions, including:


* making loans to buy, build, repair, or improve a place to live;


* selling, brokering or appraising residential real estate;


* selling or renting a place to live. Loan Application Denials


If your application is denied, the lender must give you specific reasons in writing. You also have the right to know why you were offered less favorable terms than you applied for - but only if you reject these terms. Moreover, you are entitled to obtain a free copy of the credit report that the lender used in making a determination of your application. In addition, you have the right to review the lenders property appraisal because some mortgage applications are rejected because of low valuations.


If You Suspect Discrimination


*Check with your state attorney general to determine if the lender has violated state laws in the past. Many states have their own equal credit opportunity laws.


*Consider suing the lender in federal district court. If you win, you can recover your actual damages and be awarded punitive damages if the court finds that the lender’s conduct was willful. Also, you may recover reasonable lawyers’ fees and court costs. Or you might consider finding other people with the same claim and get together to file a class action suit.


*Report any violations to the appropriate government agency. You can file a complaint regarding a violation of the ECOA with the federal Consumer Financial Protection Bureau. You can file a complaint regarding a violation of the FHA with the U.S. Department of Housing and Urban Development (HUD).


Department also to discrimination


least $858 more in total broker fees, assessments based on the race - not their


said. The Justice


credit worthiness, the lawsuit Department


also


alleged that the bank charged Latino customers borrowing $240,000 at least $615 more in broker fees because of their ethnicity.


Provident agreed to provide $9


million in compensation to Latino and African-American borrowers.


Meanwhile, the Federal Trade Commission (FTC) has been holding public briefings in many cities on scams - fraudulent mortgage practices among them. In May, the FTC and NAACP co-hosted a “Scam Jam” in Atlanta to hear about scams that affect African-American communities.


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