United States Reaches Lending Discrimination Settlement With GFI Mortgage Bankers Inc.

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas E. Perez, the Assistant Attorney General for the Department of Justice’s Civil Rights Division, and John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity at the U.S. Department of Housing and Urban Development (“HUD”), announced today that GFI Mortgage Bankers Inc., a large independent home mortgage firm that concentrates on the New York, New Jersey, and Florida markets, will pay $3.555 million to resolve a lending discrimination lawsuit filed by the Department of Justice and the U.S. Attorney’s Office for the Southern District of New York. The lawsuit alleges that GFI engaged in a pattern or practice of discrimination by pricing residential mortgage loans for qualified African-American and Hispanic borrowers higher than for similarly qualified non-Hispanic white borrowers between 2005 and 2009. The consent order, which was filed in federal court in Manhattan – where GFI is headquartered – was approved yesterday by U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara stated: “With the settlement we announce today, the hundreds of victims of lending discrimination committed by GFI will be made whole, and the company has admitted the conduct that led to this lawsuit, and agreed to reform its residential lending practices. The swift resolution of this case demonstrates the commitment of this Office and of the entire Department of Justice to aggressively enforcing the laws against discriminatory lending, and to holding accountable those who engage in this illegal conduct.”

Assistant Attorney General for DOJ’s Civil Rights Division Thomas E. Perez said: “The Justice Department will not hesitate to litigate against lenders to enforce federal fair lending laws where the evidence warrants and to obtain compensation for borrowers who were victims of unlawful lending practices. This department is determined to address discriminatory lending practices and to ensure equal credit opportunity for all borrowers in the years to come. We also greatly appreciate our strong partnership with the U.S. Attorney’s Office for the Southern District of New York, which worked jointly with the department to prosecute this case.”

HUD Assistant Secretary John Trasviña said: “No prospective home buyer should be saddled with a higher cost mortgage because of their race or national origin. This type of practice has no place in the mortgage market. HUD and the Justice Department have made a vigorous commitment to ending unlawful lending discrimination.”

The settlement provides $3.5 million – full compensation – to approximately 600 African-American and Hispanic GFI borrowers identified by the United States as having paid more for a loan based on their race or national origin than similarly situated non-Hispanic white borrowers, and it requires GFI to pay the maximum $55,000 civil penalty allowed by the Fair Housing Act. The settlement also requires GFI to develop and implement new policies that limit the pricing discretion of its loan officers, to document its loan pricing decisions, and to monitor loan prices for race and national origin disparities not justified by objective borrower credit characteristics or loan features.

As part of the settlement, GFI admits that an analysis of the interest rates for notes, and fees that it charged, on mortgage loans to qualified borrowers showed statistically significant disparities between non-Hispanic white borrowers and both African-American and Hispanic borrowers that could not be explained by objective borrower characteristics or loan product features. The company also admitted that it provided financial incentives to its loan officers to charge higher interest rates and fees to borrowers, and that it did not have fair lending training and monitoring programs in place to prevent those interest rate and fee disparities from occurring.
Mr. Bharara thanked the United States Department of Housing and Urban Development, which referred the GFI matter to the Justice Department in June 2010 for a potential pattern or practice of discrimination.