The Consumer Financial Protection Bureau and the Department of Justice yesterday announced a settlement with Fairway Independent Mortgage Corp. over allegations that the company engaged in redlining by discriminating against minority borrowers in Birmingham, Ala. The settlement, which could total over $9 million, includes both penalties and funds aimed at increasing access to mortgage loans for these historically underserved communities. The company vigorously denied the allegations and had some interesting comments about the investigation itself in issuing its own statement about the settlement.
The big picture: According to the CFPB and DOJ, Fairway’s actions included limiting mortgage lending in majority-Black neighborhoods through both its office locations and marketing strategies. From 2018 to 2022, Fairway allegedly concentrated its efforts in majority-white areas of Birmingham, directing less than 3% of its marketing to majority-Black areas. This lack of outreach led to a much lower rate of loan applications from Black residents compared to similar lenders.
By the numbers:
- $1.9 million civil penalty to be paid to CFPB’s victims relief fund
- $7 million for a loan subsidy program in majority-Black neighborhoods
- $1 million for outreach, education, and community partnerships
The response: In a statement, Fairway denied any intentional wrongdoing, emphasizing that they settled the case to avoid protracted litigation and further resource expenditures. The company contested many of the allegations, particularly the characterization of its actions as “willful.” Fairway highlighted that their lending volume in Birmingham’s Black neighborhoods was higher than other non-bank lenders, pointing to their efforts to serve all residents.
- Fairway also noted that the investigation into its actions began on the day after President Biden took office and that the enforcement action and settlement were announced just “days before the impending Presidential election.”
What’s next: As part of the settlement, Fairway will be required to open or acquire a new loan production office in a majority-Black neighborhood in Birmingham, invest $250,000 in consumer financial education, and allocate another $250,000 to partnerships with community-based organizations. These efforts are aimed at addressing the credit access gaps that have persisted due to the company’s alleged past practices.
