The DOJ challenged the company's past practice of allowing its loan officers and mortgage brokers to vary a loan's interest rate and other fees from the price it set based on the borrower's objective credit-related factors. This subjective and unguided pricing discretion allegedly resulted in African-American and Hispanic borrowers paying more.
The company changed its practices prior to the settlement, by substantially reducing the discretion of its loan officers and mortgage brokers to vary a loan's interest rate and other fees from the price it set based on the borrower's objective credit-related factors, and by requiring the reasons for variations to be documented and reviewed by a supervisor. According to the DOJ, "[t]hose policies, operating in concert with rules imposed by the Federal Reserve in April 2011 and incorporated into the settlement, restrict compensating loan officers and mortgage brokers based on the terms or conditions of a particular loan."
The settlement requires the company to maintain these policies for at least the next three years, to monitor its lending for signs of discrimination, and to provide monitoring reports to the United States.
The proceeds of the settlement will be used to compensate the alleged victims identified by the DOJ, through an independent administrator.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
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Chicago, Illinois 60602
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