Federal regulators on Thursday sued a major mortgage lender, alleging that the company discriminated against African-American and Hispanic borrowers by overcharging them hundreds of dollars in broker fees.
The Consumer Financial Protection Bureau and the Justice Department have asked a federal judge to approve a $9 million settlement fund to compensate borrowers. The lender, Provident Funding Associates, says it complied with fair lending laws, but has agreed to settle the case and pay the amount.
“The law is clear: Access to mortgage loans may not be made more difficult because of an applicant’s race or national origin,” U.S. Attorney Melinda Haag said in a statement. “We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation.”
The second-largest private mortgage lender in the U.S., Provident issued 450,000 mortgage loans between 2006 and 2011, according to the complaint. Regulators said the company set interest rates based on an applicant's creditworthiness, but also allowed its brokers to charge customers additional interest and fees that weren't tied to any objective criteria.
As a result, regulators allege, some 14,000 African-American and Hispanics paid more money to access home loans than white borrowers did, for no other reason than their race or national origin.
Between 2006 and 2011, for example, Provident, on average, "charged its African-American customers borrowing $220,000 at least $858 more in total broker fees," the lawsuit says.
Hispanic customers borrowing an average $246,000 between 2006 and 2009 paid "at least $615 more in total broker fees," the suit contends.
The CFPB and the Justice Department have teamed up on discrimination cases over credit card debt-repayment programs and auto lending. In 2013, the agencies also reached a $35 million consent order with PNC Bank over discriminatory practices in mortgage lending.
“We will continue to root out illegal and discriminatory lending practices in the marketplace," CFPB director Richard Cordray said Thursday.
CORRECTION: An earlier version of this story misstated the year that the DOJ and the CFPB reached a consent order with PNC Bank. It was 2013, not 2014. The story has been updated to correct the error.