Mortgage lender Fairway to pay $8.9 million for 'redlining' Black neighborhoods

Fairway, the nation's third-largest mortgage lender in 2023, is entering a proposed settlement to resolve allegations of discrimination. Image (c) ConsumerAffairs

The lender's own data showed it was failing to serve Black neighborhoods

Fairway Independent Mortgage Corporation, the nation's third-largest mortgage lender in 2023, will pay a $1.9 million penalty and $7 million in loan subsidies after it was accused of discriminating against majority-Black neighborhoods, the Consumer Financial Protection Bureau and U.S. Department of Justice said Tuesday.

The proposed settlement, if entered by the court, will resolve allegations that Fairway violated the Equal Credit Opportunity Act, the Consumer Financial Protection Act and the Fair Housing Act by engaging in redlining in Birmingham, Alabama, meaning it denied loans to residents based on the racial demographics of neighborhoods.

The $1.9 million penalty will go to the CFPB's victim relief fund and the $7 million will go to subsidies to offer affordable home purchasing, refinancing and home improvement loans in majority-Black neighborhoods.

"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 DOJ and CPFB allege that Fairway failed to address signs of discrimination when the lender's own data showed it wasn't serving majority-Black neighborhoods in Birmingham: Only 3.7% of Fairway's applications were from the neighborhoods from 2018 to 2022, compared to 12.2% for its peers in lending.

"This case is a reminder that redlining is not a relic of the past, and the Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for the communities harmed by it," Attorney General Merrick Garland said.

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