GFI Mortgage Bankers has agreed to pay more than $3.5 million to settle allegations by federal prosecutors that it charged higher interest rates and fees on mortgages to nonwhite borrowers than to whites with similar financial backgrounds. Nearly all of the settlement money to be paid by the company will go to 600 black and Hispanic borrowers who federal authorities said paid unfairly high rates from 2005 through 2009. The settlement also included a fine of $55,000, the maximum under the federal Fair Housing Act.
The mortgage company, which concentrates on the New York, New Jersey and Florida markets, agreed to develop new policies to reduce the discretion of its loan officers in deciding fees and rates. Preet Bharara, the United States Attorney in Manhattan, said that with this settlement “the hundreds of victims of lending discrimination committed by GFI will be made whole.” GFI says on its Web site that it originates more than $1 billion a year in mortgages. The company admitted that an analysis by the federal government showed that it charged higher rates and fees to black and Hispanic borrowers than to white borrowers.
According to federal prosecutors, GFI’s mortgage business increased rapidly, from 974 mortgages originated in 2005 to 2,270 in 2009, mostly in New York and New Jersey. The average interest rates the company charged to black borrowers each year in the review period were 0.19 to 0.41 percentage points higher than what it charged white borrowers with similar financial backgrounds, prosecutors said. Hispanic borrowers on average paid as much as 0.23 points more than whites.
Fees on the mortgages followed the pattern, with black borrowers paying as much as 1.05 points more than similarly-situated white borrowers. GFI’s loan officers could base rates and fees on their analyses of the borrowers’ ability to repay, and their compensation structure created an incentive to charge higher rates wherever possible, the government said. The company agreed to remove that incentive and train its officers in objective rate-setting criteria. It should be noted that the loans in question were not subprime loans, which are more expensive loans created for people whose credit histories make obtaining a traditional loan unlikely, and that makes the conduct even more horrendous.
GFI, which sells the loans it originates, was one of the first mortgage lenders in New York to venture into subprime loans, long before that category of mortgage lending came to be blamed for the financial collapse of 2008. The GFI settlement comes after several larger lenders settled with the Justice Department over similar claims, including a $175 million agreement by Wells Fargo that was announced in July. Josh Zinner, who monitors lending bias in the city for the Neighborhood Economic Development Advocacy Project, pointed out that “(a)ll of this discriminatory lending did not happen in a vacuum.” He added that there was “a huge pattern of this across a whole bunch of mortgage companies and banks.”
Source: New York Times
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.