On July 27, 2022, the United States and the Consumer Financial Protection Bureau filed a joint complaint and a proposed consent order in Trident Mortgage Company, Inc. (E.D. Pa.). The complaint alleges that Trident Mortgage Company (Trident), which Berkshire Hathaway, Inc. owns, violated the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Consumer Financial Protection Act (CFPA), by engaging in unlawful redlining in the Philadelphia metropolitan area by avoiding providing credit services to neighborhoods of color because of the race, color, and national origin of the people living in those neighborhoods. The complaint also alleges that Trident’s loan officers and other employees sent and received work e-mails containing racial slurs and referring to communities of color as “ghetto.” The proposed consent order, which still must be approved by the court, requires the defendant to invest at least $18.4 million in a loan subsidy fund for residents of neighborhoods predominantly of color in the Philadelphia metropolitan area; invest $750,000 for the development of community partnerships to provide services that increase access to residential mortgage credit in those neighborhoods; invest $875,000 for advertising and outreach in those neighborhoods; invest $375,000 for consumer financial education. Trident will also pay a civil money penalty of $4 million.
Press Release (7-27-2022)
Case Open Date: Wednesday, July 27, 2022
Case Name: Consumer Financial Protection Bureau, and United States v. Trident Mortgage Company (E.D. Pa.)
Topic: Civil Rights
Tags: Fair Housing Act; FHA; Equal Credit Opportunity Act; ECOA; mortgage companies; race; color; other characteristics; Regulation B; redlining; pattern or practice; Black; Hispanic; Asian; Native American; Native Hawaiian; Pacific Islander; US Census
Industry Code: None
Component: Civil Rights Division
Civil Rights – Housing and Civil Enforcement Section
Case Documents: Complaint – Consumer Financial Protection Bureau, and United States v. Trident Mortgage Company (E.D. Pa.)
Consent Order – Consumer Financial Protection Bureau, and United States v. Trident Mortgage Company (E.D. Pa.)
Under the FHA, it is unlawful to discriminate against any person in making available residential real-estate related credit transactions, such as a mortgage. This includes the practice of redlining, which occurs when lenders deny or discourage applications by refusing or avoiding loan services in certain neighborhoods based on the race, color, or national origin of the residents of those neighborhoods. The government alleged that lending discrimination was occurring here because: a) virtually all of the Defendant’s offices were located in majority-white areas; b) 94% of the loan officers were white; c) the Defendant’s marketing efforts were targeted at majority-white neighborhoods; d) marketing materials featured only white models and loan officers; e) emails including racist content were found in several loan officers’ records; and f) the Defendant generated a disproportionately low number of applications from minority neighborhoods.
From the government’s standpoint, there did not seem to be any attempt to reach outside of the company’s “bubble” in order to provide a more equal opportunity to utilize its services. It is a reality that there are many neighborhoods in every state where the majority of the population is comprised of one or more minority groups. The FHA was enacted in large part to correct the causes and effects of racial segregation, but after more than 50 years, there is still a long way to go. Even if a business office is located in a majority-white area, which certainly isn’t a violation by itself, the expectation under the law is that efforts will be made to reach out to areas that serve minority residents, whether it is to offer housing opportunities or lending services. The Complaint in this case alleged multiple times that while the numbers clearly indicated a racial and ethnic disparity between the individuals being served by Defendant versus the overall population, Defendant failed to take any actions to change these statistics.
Takeaways from this case:
- Employee emails are always subject to discovery. Emails containing racial slurs or other offensive content should NOT be sent or shared. Ever.
- While a lender or housing provider may not maintain records of the race/national origin of its clients/applicants (and in most cases shouldn’t!), there should be someone at the company that is generally aware of who is being targeted and who is receiving the marketing content. If a company is only attracting white applicants, it is probably a good idea to rethink its marketing strategies or seek the counsel of a fair housing lawyer to review its marketing practices.