WASHINGTON – The U.S. Department of Justice has handed down a fine in excess of $28 million to a Pennsylvania mortgage company owned by billionaire Warren Buffet, which it says engaged in discriminatory lending practices to prospective homeowners who are Black and Latino.
The Department of Justice, in coordination with the Consumer Financial Protection Bureau (CFPB) and the Attorneys General of Pennsylvania, New Jersey and Delaware announced the financial penalty on July 27, to resolve allegations that Trident Mortgage Company, a Berkshire Hathaway Inc. subsidiary, participated in the practice of “redlining” in the Philadelphia metropolitan area, including within neighborhoods in Philadelphia, Camden, N.J. and Wilmington, Del between 2015 and 2019.
Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in minority communities because of the race, color or national origin of residents of those communities.
The Justice Department and the CFPB conducted a joint investigation into the matter, with support from the U.S. Attorney’s Office in the Eastern District of Pennsylvania and working in conjunction with the state attorneys general.
The Justice Department referred to the agreement as “the first redlining settlement that the Justice Department has reached with a non-bank lender and the second largest redlining settlement in the department’s history.”
Though Trident no longer accepts mortgage loan applications, the complaint, filed in the U.S. District Court for the Eastern District of Pennsylvania, detailed how Trident redlined majority-minority neighborhoods in the Philadelphia Metropolitan Statistical Area and “actively discouraged applications from the people living in those neighborhoods.” Trident’s self-defined market areas included majority-minority neighborhoods, but the company’s loan application data show it did not serve neighborhoods within its market areas equally.
“Only 12 percent of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80 percent minority, more than half of the applications Trident generated were from white applicants,” according to the DOJ’s press release.
In order to resolve the allegations, Trident has agreed to invest over $20 million to increase credit opportunities in neighborhoods of color in the Philadelphia metropolitan area. Trident will invest at least:
• $18.4 million in a loan subsidy fund for residents of neighborhoods of color in the Philadelphia metropolitan area;
• $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit;
• $875,000 for advertising and outreach; and
• $375,000 for consumer financial education.
Though Trident no longer operates a lending business, it will contract with another lender to provide loan subsidies and services to the “redlined” communities.
Trident will further ensure that:
• The lender employs at least four mortgage loan officers dedicated to serving neighborhoods of color in and around Philadelphia, Camden and Wilmington;
• Maintains at least four office locations in those neighborhoods; and
• Employs a full-time manager of community lending who will oversee the continued development of lending in neighborhoods of color in the Philadelphia metropolitan area.
• Trident will also pay a civil money penalty of $4 million.
“Last fall, I announced the Department’s Combating Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country. As demonstrated by [this] historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color,” U.S. Attorney General Merrick B. Garland said.
“This settlement is a stark reminder that redlining is not a problem from a bygone era. Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods. This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division, added.
“For far too many years Philadelphia’s Black, Latino and other communities of color have lacked equal access to lending and legal deed ownership. These historically redlined areas of Philadelphia continue to experience disproportionate amounts of poverty, poor health outcomes, limited educational attainment, unemployment and violent crime. I am pleased that my office could support the Attorney General’s Combatting Redlining Initiative through this resolution, and I look forward to our continued partnership with the Civil Rights Division,” U.S. Attorney Jacqueline Romero for the Eastern District of Pennsylvania, stated.
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com