DOJ, CFPB Officials Warn More 'Redlining' Cases on Way


The Justice Department is continuing to find cases of lenders steering minority borrowers into higher cost loans three years after the agency forced several large banks into landmark settlements cracking down on the practice, according to a top DOJ official.

“Based on what is on my docket right now, stayed tuned,” said Steven Rosenbaum, chief of housing and civil enforcement at DOJ’s civil rights division, during a fair housing conference on Wednesday. “There are still lenders who seem to think it is okay to steer minority borrowers to certain loan officers or certain brokers who they know will charge more.”

Speaking at the conference, which was hosted by the Department of Housing and Urban Development, he noted that another “old nemesis” is making a comeback — redlining, the practice of lenders charging more for products or excluding altogether minorities within certain geographic areas.

“We are seeing it happen again,” he said.

One attendee at the conference complained that lenders are refusing to make small mortgage loans in African-American neighborhoods in Dayton, Ohio. Lenders claim they don’t make mortgage loans for less than $50,000.

“So cash investors and slumlords are snatching up these houses for $8,000,” the attendee said.

That prompted Patrice Ficklin, the head of the fair lending office at the Consumer Financial Protection Bureau, to encourage the attendee to file a complaint, while noting that the agency is also pursuing redlining cases.

CFPB has a complaint process and “we actually take individual stories from consumers,” Ficklin said. “I would encourage you to tell us the names of those lenders because those stories are factored into our choice of which banks and nonbanks we are going to examine.”

CFPB also has “open investigations with regard to redlining,” she said, and looking at underwriting and credit overlays.

DOJ is working on several redlining cases with the CFPB and “some we are doing on our own,” Rosenbaum said.

Bank of America agreed to a $335 million settlement in 2012 for alleged discriminatory lending practices and steering by Countrywide Home Loans, which B of A acquired in 2008. Rosenbaum said the Justice Department has distributed 91% of the settlement monies to the victims of those lending practices.

That same year, Wells Fargo agreed to a $184 million settlement for its alleged pattern and practice of discrimination against African-American and Hispanic borrowers from 2004 through 2009. Rosenbaum said 98% of those settlement funds have been distributed to victims.

Wells Fargo also paid $50 million to provide down payment assistance to help borrowers return to communities that were harmed by its lending practices. The DOJ official said 2,600 loans have been made with the down payment assistance of $15,000 to $20,000.

At Wednesday’s conference, officials from the CFPB and HUD also announced they had signed a memorandum of understanding to share information and to work together in investigating mortgage lending discrimination.

“This MOU extends an already robust and excellent working relationship between HUD’s office of fair housing and CFPB on a variety of issues,” said Katherine O’Regan, assistant secretary for policy development and research at HUD.

The memorandum of understanding describes the way the agencies will coordinate fair lending matters.

“It will allow information sharing about complaints and coordination of investigations. It also allows the possibility of joint investigations,” O’Regan said.

A separate agreement regarding information sharing will protect confidentiality.

“My office, the office of fair lending, works to ensure fair and equitable and non-discriminatory access to credit for individuals and communities. Our work is driven by the belief in the importance of economic rights as civil rights,” said Ficklin.

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