DOJ Files Lawsuit Against National Bank Alleging Mortgage Discrimination

On January 18, 2017, the U.S. Attorney’s Office for the Southern District of New York (USAO) filed a lawsuit against a national bank, alleging that the bank had engaged in a years-long practice of racial discrimination in providing mortgage services.  The parties reportedly have agreed to terms of a settlement to resolve the action.

The USAO’s lawsuit alleged that, from 2006 to 2009, the bank had charged minority borrowers higher rates and fees on home loans in violation of the Fair Housing Act and the Equal Credit Opportunity Act.  According to the complaint, the bank gave independent mortgage brokers discretion to adjust interest rates on mortgage loans from the rates initially set (which were based on objective criteria).  The USAO alleged that the bank failed to require its mortgage brokers to document the reasons for any modifications, and also failed to address issues of racial discrimination resulting from discretionary pricing.  As a result, the USAO claimed that the rights of at least 53,000 minority borrowers had been violated because they were charged higher interest rates than similarly situated non-minority borrowers.

In its complaint, the USAO seeks a declaratory judgment, injunctive relief, monetary damages for victims of the alleged discrimination, and civil penalties. Within the same day as the complaint was filed, however, it was reported that the bank agreed to pay $55 million to settle the USAO’s claims.