The Federal Trade Commission has charged a home mortgage lender and its owner with violating federal law by charging Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers — price disparities that cannot be explained by the applicants credit characteristics or underwriting risk.
The FTC seeks to bar future violations by Golden Empire Mortgage, Inc., of Bakersfield, Calif., and obtain redress for consumers.
Mortgage lenders must ensure that pricing discretion does not lead to illegal pricing discrimination, FTC Chairman Jon Leibowitz said. The FTC will continue to enforce the fair lending laws so that American borrowers are treated equally based on their credit — not their race, national origin, or gender.
According to the FTCs complaint, Golden Empire violated the Equal Credit Opportunity Act (ECOA) in pricing mortgage loans. They allegedly gave loan officers and branch managers wide discretion to charge, in addition to the risk-based price, overages through higher interest rates and higher up-front charges. The defendants allegedly paid loan officers a percentage of the overages as a commission and failed to monitor whether Hispanic consumers were paying higher overages than non-Hispanic white borrowers.
The complaint alleged that the companys policy and practice of allowing loan officers to charge discretionary overages resulted in Hispanics being charged higher prices because of their national origin price disparities that are substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.
The ECOA and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicants income is derived from public assistance.
More information about consumers rights under the ECOA is available online.