MortgageIT, a subsidiary of Deutsche Bank, recently agreed to pay $12.1 million to settle allegations by the Department of Housing and Urban Development that the lender engaged in discriminatory lending against African American and Hispanic borrowers.
HUD alleged that MortgageIT’s practices caused some minority borrowers to pay higher interest rates and fees than other similarly-situated white borrowers and that the lender denied more minority loan applicants than similarly-situated white applicants.
“It’s creditworthiness and ability to pay that matter when you apply for a loan, not your race or where you come from,” Bryan Greene, HUD’s acting assistant secretary for fair housing and equal opportunity, said. “This settlement reaffirms HUD’s commitment to ensuring that minorities have equal access to mortgage loan products and that lending institutions meet their obligations under the Fair Housing Act.”
The case against MortgageIT stems from HUD’s review of internal loan data from 2007 and 2008, which showed that African American and Hispanic borrowers paid APRs of between eight to 10 basis points higher than similarly-situated white borrowers.
HUD also alleged that African American and Hispanic borrowers were 65 percent and 72 percent, respectively, more likely to receive higher-priced loans than similarly-situated white borrowers.
Under the terms of the agreement with HUD, MortgageIT will set up a $12.1 million fund to compensate borrowers who were unfairly denied a loan or whose loans may contain conditions that violate the Fair Housing Act.
Funds remaining after victims are compensated will be disbursed to organizations that provide financial literacy, credit and housing counseling and other programs that help minority borrowers.