August 9, 2022

Volume XII, Number 221

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August 08, 2022

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CFPB, DOJ Propose $22 Million Penalty Against Nonbank Mortgage Lender for Illegal Redlining

On July 27, the CFPB and DOJ proposed a settlement with a nonbank mortgage lender for its discriminatory “redlining” lending practices against minority families living in the greater Philadelphia area. If approved by the court, the mortgage lender would be required to pay more than $22 million in civil penalties, and would be the CFPB’s first nonbank mortgage redlining settlement.

According to the complaint, the mortgage lender violated the Equal credit opportunity Act, Consumer Financial Protection Act, and the Fair Housing Act by allegedly:

  • distributing racist or discriminatory messages about certain neighborhoods specifically related to real estate property locations and appraisals;

  • avoiding sending its loan officers to neighborhoods with predominately minority populations; and

  • discouraging and ignoring minority loan applicants in its marketing campaigns and advertising efforts.

The proposed order would require the mortgage lender, among other things, to pay (i) $18.4 million into a loan subsidy program to increase non-discriminatory access to credit; $4 million to the CFPB’s victims’ relief fund, and (ii) $2 million to fund advertising to generate applications in redlined areas. In addition to the CFPB and DOJ’s action against the mortgage lender itself, the states of Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with the mortgage lender’s real estate services affiliate.

Putting It Into Practice: Recently, federal regulators have increased their efforts in combating illegal redlining lending practices. Last fall, the DOJ announced its Combatting Redlining Initiative, which promised to dedicate greater resources and increasing coordination with federal financial regulatory agencies and state Attorneys general to combat modern-day redlining. In light of this recent settlement, mortgage lenders and their affiliates should ensure that their lending practices do not run afoul of federal regulations, especially those focused on discriminatory conduct.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 217
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Associate

Pouneh Almasi is an associate in the Intellectual Property Practice Group in the firm's San Francisco office.  

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Pouneh’s practice focuses on intellectual property litigation with an emphasis on copyright and trademark issues.  She is also a member of the firm’s Blockchain Technology & Digital Currency Team.

During law school, Pouneh worked as a judicial extern to the Honorable Jacqueline Scott Corley at the Northern District of California in San Francisco...

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