On Thursday, the CFPB and the Department of Justice (DOJ) filed a joint complaint against the second-largest private mortgage company in the United States alleging it engaged in discriminatory lending practices from 2006 to at least 2011. Specifically, the complaint alleges that Provident Funding Associates violated the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) by giving brokers discretion to determine the fees they charged in connection with individual loan applications, which resulted in brokers charging higher fees to African-American and Hispanic borrowers. The complaint alleges that brokers exercised “subjective, unguided” discretion in setting higher-than-base interest rates on loans, from which brokers would receive some of the increased revenue, and in setting fees borrowers paid directly to them.
The parties filed a proposed consent order on the same day to resolve the allegations in the complaint. Provident denies any wrongdoing but, under the consent order, has agreed to do the following:
- Establish a $9 million fund to compensate aggrieved borrowers.
- Maintain a nondiscriminatory broker compensation policy.
- Continue a monitoring program to ensure compliance with the consent order. This includes periodic analyses of Provident’s portfolio to identify disparities in broker fees based on race or national origin and implementing corrective action where necessary.
- Train relevant management officials and employees on the FHA, ECOA and consent order requirements.
The consent order requires court approval.
This cooperation between the CFPB and DOJ follows a December 2012 Memorandum of Understanding between the agencies to coordinate on fair lending investigations and enforcement actions, available here.
Click here to read the complaint and here to read the proposed consent order.