Sunday, December 13, 2015

Bay State Bank Agrees To Cough Up $1.1+ Million To Settle Suit Accusing It Of Clipping Black, Hispanic Borrowers Higher Prices For Home Loans Than It Did For Similarly Qualified White Counterparts

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department filed a complaint and proposed consent order [] to resolve allegations that Sage Bank, headquartered in Lowell, Massachusetts, violated the Fair Housing Act and the Equal Credit Opportunity Act (ECOA) by engaging in a pattern or practice of discrimination on the basis of race and national origin in the pricing of its residential mortgage loans.

    The United States’ complaint alleges that Sage Bank charged African-American and Hispanic borrowers higher prices for home loans than Sage Bank charged to similarly situated white borrowers for reasons unrelated to their creditworthiness.

    Specifically, under Sage Bank’s pricing policy, each of its loan officers was assigned a “target price,” which was the price a loan officer was required to achieve on each home loan, regardless of a borrower’s creditworthiness. The complaint alleges that those loan officers whom Sage Bank assigned higher target prices disproportionately served African-American and Hispanic borrowers. The complaint also alleges that loan officers had discretion to price loans above their target prices and did so to a greater extent for African-American and Hispanic borrowers than for white borrowers. The result, the complaint alleges, was that the average African-American borrower paid approximately $2,500 more for his/her loan than did a similarly qualified white borrower; the average Hispanic borrower paid approximately $1,400 more.

    The consent order, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the District of Massachusetts. Under the consent order, Sage Bank will pay $1,175,000 into a settlement fund to compensate borrowers and applicants who were harmed by Sage Bank’s policies. The consent order also requires Sage Bank to establish a new loan pricing policy and a new loan officer compensation policy, have loan officers and bank employees undergo fair housing and fair lending training, and establish a monitoring program to detect future unlawful disparities in mortgage loan pricing.

    “Sage Bank’s loan pricing policies created the risk that borrowers would be treated differently based on impermissible characteristics like race and national origin, and that was in fact the result,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “This settlement ensures that all potential borrowers will be treated equally, regardless of race and national origin, and Sage Bank has agreed to restructure and monitor its lending practices to ensure that it is meeting those obligations.”

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