First judgment against non-bank lender for redlining set at $22 million

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Trident Mortgage ordered to pay for racist lending practices

By Charlene Crowell,
The Washington Informer

The first-ever judgment against a non-bank lender for engaging in the practice of “redlining” was against Trident Mortgage Company (Trident) in the amount of over $22 million.

Trident has been the subject of a four-year investigation by the Pennsylvania attorney general. This investigation attracted the support and resources of the United States Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB).

Trident was ordered to pay for discriminatory lending patterns in majority-minority neighborhoods in the greater Philadelphia metropolitan area, including Camden, NJ and Wilmington, Del. The application now goes to federal court for approval of the second-largest redlining settlement in Justice Department history.

“This settlement is a stark reminder that redlining is not a problem of a bygone era. Trident’s illegal redlining activity has deprived communities of color of equal access to residential mortgages, deprived them of opportunity to create wealth and devalued properties in their neighborhoods,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “Along with our federal and state law enforcement partners laws, we send a powerful message to lenders that they will be held accountable if they violate our fair lending laws.”

According to the Fair Housing Act, “redlining is the practice of denying a creditworthy applicant a loan for housing in a certain neighborhood, even though the applicant may otherwise qualify for the loan”.

Until it stopped accepting mortgage applications in 2021, Trident operated as a noncustodial mortgage company in Delaware, Maryland, New Jersey and Pennsylvania, marketing and selling both first mortgage loans and refinancing home loans. From 2015 to 2017, an estimated 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (Philadelphia MSA) which includes the cities of Philadelphia, Camden, NJ and Wilmington, Del., as well as the county of Cecil, Maryland.

According to the complaint, Trident’s application data revealed that only 12% of its mortgage applications came from majority-minority neighborhoods — even though more than a quarter of Philadelphia’s MSA neighborhoods are majority-minority. Of the mortgage applications Trident received from applicants in majority-minority neighborhoods, most of the applicants were white.

Citing breaches of the Equal Credit Opportunity Act, the Consumer Financial Protection Act and the Fair Housing Act, the government investigation revealed a wide range of problematic behavior by the part of Trident. Here are representative examples of this behavior:

Trident loan officers, assistants and other employees received and distributed emails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent over work emails included pejorative content specifically related to real estate property locations and ratings. Racist content also targeted people living in majority minority neighborhoods;

Of Trident’s 53 different offices in MSA Philadelphia, 51 were in majority-white neighborhoods. The other two offices were in neighborhoods where minority groups made up about half of the population; and

A series of Trident direct mail campaigns between 2015 and 2018 depicted only white models and employees and only in majority white neighborhoods.

“Corporations that use their power to discriminate against and deny people opportunity because of the racial makeup of their neighborhoods are not only wrong, but also illegal,” said Pennsylvania Attorney General Josh Shapiro. “Through our investigation, we allege that hard-working Pennsylvanians have been denied the chance to realize the American dream simply because of where they live, which, unfortunately, in America is inextricably linked to who they are. .”

To address these violations and other lending issues noted in the investigation, Trident, once approved by the Federal Court, would make available several financial resources to assist potential mortgage applicants: a $18.4 million loan that would operate in four majority-minority neighborhood offices, a $4 million fine payable to the CFPB victim relief fund, and a $2 million publicity fund to generate claims mortgage loans in demarcated areas.

While significant punitive measures may deter some financial institutions from violating equity lending laws, an even greater concern underlies these recent developments. For several years, mortgage lending has been diverted from the big banks to non-bank mortgage companies like Trident.

According to the most recent analysis from the Home Mortgage Disclosure Act (HMDA) Annual Report and analyzed by BankRate.com, only three of the largest mortgage lenders of 2021 by volume were banks. Last year, the largest bank lender was Wells Fargo, whose 376,000 loans totaled $141 billion. The other two banks in the top 10 were JP Morgan Chase, at $112 billion, and Bank of America, at $84 billion.

By contrast, the top two mortgage lenders of 2021 by volume were Rocket Mortgage, which topped the list with $340 billion lent to fund 1.2 million issues, and United Wholesale Mortgage, which funded 654,000 loans with $227 billion. of dollars. In addition, these totals represent higher loan increases than the totals recorded the previous year.

“That’s been the general trend since the financial crisis,” said Greg McBride, chief financial analyst at Bankrate. “Banks have backed off – but not eliminated – originations. Non-banks have more than filled the void as the market has rallied, and the big banks are often buying the management rights so they’re in the game with less risk and cyclicality on the upside. origin.

It would be naive to move fair lending and housing law enforcement into a single financial category. Instead, it behooves consumers, regulators and advocates alike to be aware of the many forms and sources of unlawful discrimination. Banks, non-banks and all lenders must be held accountable – whenever and wherever illegal lending occurs.

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