On November 30, the DOJ announced the filing of a complaint and proposed consent order against a Massachusetts-based bank alleged to have violated the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) by charging African-American and Hispanic borrowers higher prices for home loans than similarly situated white borrowers. From 2011 until at least 2014, the bank allegedly used a “target pricing” mortgage origination policy, assigning loan officers with a Minimum Base Price (MBP) they were expected to achieve on each home loan without regard the borrower’s creditworthiness. According to the DOJ’s complaint, “African-American and Hispanic borrowers were served disproportionately by loan officers with higher MBPs than the loan officers serving white borrowers.” The complaint further alleges that, from April 2011 through December 2013, the bank authorized loan officers to price a loan higher than their assigned MBP, without documenting the reasons for doing so. Pending court approval, the DOJ’s proposed consent order will require the bank to (i) pay $1,175,000 as compensation to borrowers affected by its practices; (ii) establish a new loan pricing policy and a new loan officer compensation policy; (iii) provide fair lending and fair housing training to loan officers and bank employees; and (iv) establish a monitoring program designed to, at a minimum, assess loan pricing disparities.
In May 2013, the FDIC conducted a consumer compliance examination of the bank and found reason to believe that its lending practices violated the FHA and ECOA, prompting the agency to refer the matter to the DOJ on February 7, 2014.