Fairway Mortgage reaches $8 million Redlining settlement after mocking Black Neighborhoods

In May 2020, a top loan officer at Fairway Independent Mortgage Company sent an email to a loan processor regarding a possible property purchase in Ensley, a majority Black neighborhood in Birmingham, that stated: “Ensley is a GHETTO. I assure you we do not have a house there. A LOT OF LAUGHTER!”

The Fairway mortgage processor replied, “ROFLOL,” which likely meant “rolling on the floor laughing out loud,” in accordance with a court document that noted the lender didn’t accept any loan applications within the Ensley area between 2018 and 2021 .

No one at Fairway Mortgage is laughing now, after a four-year investigation this week by the Consumer Financial Protection Bureau and the U.S. Department of Justice forced the mortgage lender to succeed in an $8 million settlement to deal with its alleged discriminatory lending practices, including redlining black neighborhoods in and around Birmingham.

Redlining is an illegal, discriminatory practice wherein lenders and other firms make credit and other financial services out of reach for people in certain areas based on race or national origin.

According to a criticism filed by each federal agencies on Oct. 15, Madison, Wisconsin-based Fairway, doing business in Birmingham as MortgageBanc, operated retail lending offices in predominantly white areas of metro Birmingham from 2015 to 2022. The company also solicited lending referrals from individuals and organizations in majority-white areas and targeted its marketing efforts at them, while ignoring majority-black neighborhoods.

As a result, just 3.7 per cent of the ten,247 Fairway mortgage applications reported to the federal government between 2018 and 2022 were for properties in predominantly black areas, compared with 12.2 per cent for other lenders in Birmingham, in accordance with complaints. Only 3.3 percent of the 7,913 mortgages Fairway actually originated within the metro area were for properties in predominantly black neighborhoods, compared with 10.1 percent from other mortgage lenders.

At that point, the Birmingham Metropolitan Statistical Area (MSA) comprised six counties in north-central Alabama with a complete population of 1.1 million made up of residents that were 62% white, 30% black, 5% Latino, and three% other races.

Such Fairway policies and practices constitute an override because they “were intended to disclaim and, in effect, resulted within the denial of equal access to home loans to majority Black (a minimum of 50 percent Black) and high Black (a minimum of 80 percent of the Black population) residents black) percentage of black people) residential areas and applicants for loans for properties situated in those areas,” argued the 2 federal agencies, which found that Fairway violated the federal Fair Housing Act, the Equal Credit Opportunity Act and the U.S. financial consumers.

The agencies argued that Fairway must have been well aware that it was not adequately serving majority Black areas because the corporate had been using third-party vendors since 2017 to review credit data to evaluate the danger of redlining in majority Black areas. and minorities. Those annual risk-mitigation reports “should have brought attention to Fairway,” the feds argued, but the corporate “failed to take any significant action to increase (loan) applications and originations in majority-black areas” in metro Birmingham .

The criticism also noted that piece of email between several white Fairway employees between 2018 and 2020 used offensive language in reference to majority-Black areas of Birmingham, “indicating a culture consistent with discrimination, including by discouraging applications.” for real estate loans in these areas.”

In addition to calling Ensley and one other majority-Black neighborhood, Tarrant, a “ghetto,” Fairway loan officers in a 2018 email chain referred to an African-American male loan applicant as having “thug friends” and wrote that “(w)e ​​don’t need him as a client. He is a burden waiting to occur. The black applicant withdrew his application.

The settlement announced Tuesday requires Fairway to offer $8 million for a loan subsidy program to supply reasonably priced loans for home purchases, refinances and residential renovations in predominantly black neighborhoods in Birmingham, in addition to pay a civil penalty of 1.9 million dollars to the CFPB Victim Assistance Fund. It has not yet been certified by the U.S. District Court for the Northern District of Alabama.

The Birmingham settlement is the fifteenth settlement the Justice Department has reapproved in three years as a part of its settlement Anti-redlining initiativewhich has now raised greater than $150 million in settlements “to benefit communities of color across the country who have experienced lending discrimination,” including Houston, Memphis, Los Angeles and Philadelphia.

“This settlement…will help ensure that future generations of Americans inherit the legacy of home ownership that has been too often denied,” said Attorney General Merrick Garland. “This case is a reminder that redlining is not a relic of the past.”

“This is good news for those looking to buy or renovate a home in this area,” George McCall, 81, president of the Ensley Neighborhood Association, told Atlanta Black Star in regards to the settlement.

“This is not a ghetto as they said. Our homes are not neglected or neglected, but many of the homeowners are seniors who have had a hard time getting loans to make needed improvements,” McCall said, adding, “I hope this will help more young people be able to buy a home.” It’s really hard for them to get financing for anything.

Eric Guster, an attorney and developer who grew up in Ensley and who recently built a $2.5 million shopping mall in nearby Five Points West, told Atlanta Black Star he hopes the settlement and loan assistance program will result in more homeowners in mostly Birmingham -Black neighborhoods.

“When people start owning homes, they take more pride in their homes, they become attached to their neighborhood, and that promotes social responsibility,” he said. “When there is no inflow of cash and investment, when people are disenfranchised, it is a faster path to collapse and decay. And that was what the mortgage company was doing, helping the decomposition process.”

Fairway released statement on Tuesday, denying that he participated in redlining and noting that the federal lawsuit was filed a day after the settlement was reached. He called the criticism “inflammatory” and said it incorrectly characterizes Fairway’s actions as “willful and reckless, a claim that was mutually denied by the parties prior to the settlement.”

In the primary half of 2024, the corporate ranked twelfth amongst the most important U.S. mortgage lenders, with $11.8 billion in home loan production. HousingWire reported. The criticism says Fairway is among the many top five lenders within the Birmingham area for application volume.

“Fairway has vigorously defended itself against the government agencies’ allegations and continues to deny that the Company engaged in any discriminatory conduct,” Fairway said in an announcement. “Fairway also maintains its strong opposition to government agencies’ legal and statistical approaches to identifying potential discrimination. However, to resolve this issue and reduce further expenditure of resources, Fairway concluded that a settlement with the Bureau and the Department of Justice can be probably the most appropriate solution.

The company said the settlement “gives Fairway the opportunity to redirect financial resources to majority-Black neighborhoods through loan subsidies, consumer financial education and community development.” Fairway hopes these efforts will further expand lending options for people seeking to purchase properties within the majority-Black census tracts of the Birmingham MSA.