Mortgage giant to pay $9.9 million for alleged discrimination in Black neighborhoods of Birmingham

Fairway Independent Mortgage Corp. has agreed to pay nearly $10 million to settle allegations from the U.S. Department of Justice and the Consumer Financial Protection Bureau, accusations based on its alleged discriminatory practices, including lending discrimination in predominantly Black neighborhoods in the city of Birmingham.

Following the agreement between the parties, the Department of Justice and the CFPB announced that Fairway Independent Mortgage Corp. will pay $8 million for a credit subsidy program and an additional $1.9 million as a civil penalty to resolve the lending discrimination complaints.

These allegations suggest that Fairway’s marketing and sales strategies, as a large firm operating in the Birmingham area under the trade name MortgageBanc, discouraged residents of Black neighborhoods from applying for mortgage loans, thus limiting their access to homeownership and increasing their vulnerability to foreclosure.

Some parts of the agreement specifically state that Fairway will allocate $7 million to a subsidy program aimed at providing affordable loans for home purchases, refinancing, and home improvements in Birmingham’s majority-Black neighborhoods. Additionally, $1 million will be invested in programs to support the subsidy fund, while the $1.9 million fine will go to the CFPB’s victim relief fund.

Kristen Clarke, Assistant Attorney General for the Justice Department’s Civil Rights Division, said in a statement: “Birmingham has long been a symbol of the civil rights movement, but it continues to face the consequences of discriminatory practices like residential segregation. And this agreement will help address the systemic denial of credit in Black neighborhoods, creating more opportunities for homeownership.”

The Department of Justice’s investigation revealed that Fairway’s own data showed very little service in Black neighborhoods since 2017. Despite this, the company took no action to address the issue before October 2022, as between 2018 and 2022, only 3.7% of Fairway’s mortgage applications were for properties in neighborhoods with a majority of Black residents, compared to 12.2% for other lenders. This figure is even worse in areas with 80% or more Black residents, where Fairway’s lending rate was less than one-eighth of its competitors’.

The same investigation found that most of Fairway’s operations were located in majority-white neighborhoods. Marketing efforts were also concentrated in majority-white areas, and the company neither trained nor incentivized its loan officers to effectively serve Black communities.

It is worth noting that the $1.9 million fine imposed on Fairway will be deposited into the CFPB’s Civil Penalty Fund, which provides relief to victims of financial discrimination.

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By Elías DaSilva | 10 de Enero de 2025