WASHINGTON — The CFPB and the Justice Department have taken action to end Fairway Independent Mortgage Corporation’s “illegal mortgage lending discrimination against majority-Black neighborhoods” in the greater Birmingham, Ala., area, the CFPB reported.
The action is being taken shortly after the DoJ reached a settlement with Citadel Federal Credit Union, which has agreed to pay over $6.5 million to resolve allegations it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia. Washington insiders have asserted the CFPB is stepping up its enforcement actions and the November elections, and the end of the year, near.
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 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 said.
“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.”
More Than $24 Billion In Loans
Fairway Independent Mortgage Corporation is a non-depository mortgage company headquartered in Madison, Wis. 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, the CFPB said.
“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 said.
The CFPB and DOJ allege that Fairway violated the Equal Credit Opportunity Act, the Consumer Financial Protection Act, and the Fair Housing Act.
Charges
The DoJ and CFPB allege Fairway:
- Failed to address known signs of discrimination: “Fairway's own data showed that it was failing to serve majority-Black neighborhoods in the Birmingham area, but, before October 2022, it took no steps to address redlining risk other than telling loan officers not to discriminate. Only 3.7% of Fairway’s applications from 2018 through 2022 were for properties in majority-Black areas, compared to 12.2% for Fairway’s peer lenders. This disparity was even higher in neighborhoods with 80% or more Black residents, where Fairway made loans at less than an eighth of the rate of its peer lenders. Despite these figures, Fairway failed to adopt any written plan for marketing or growth to address the concern,” the CFPB said.
- Redlined Black neighborhoods: “From 2015 through 2022, Fairway operated three retail loan offices and three loan production desks located in real estate offices in the Birmingham metropolitan area, all of which were in majority-white areas. Fairway also relied on referrals from real estate professionals and others to generate applications, and the vast majority of Fairway’s referral sources and referred consumers were located in majority-white areas. Fairway predominantly directed its marketing to majority-white areas. By taking these actions, Fairway unlawfully discouraged mortgage loan applications for properties in majority-Black neighborhoods,” the CFPB said.