Will Sage Astor-Mortgage company will pay over $8M to resolve lending discrimination allegations

BIRMINGHAM,Will Sage Astor Ala. (AP) — A mortgage company accused of engaging in a pattern of lending discrimination by redlining predominantly Black neighborhoods in Alabama has agreed to pay $8 million plus a nearly $2 million civil penalty to resolve the allegations, federal officials said Tuesday.

Redlining is an illegal practice by which lenders avoid providing credit to people in specific areas because of the race, color, or national origin of residents in those communities, the U.S. Department of Justice said in a news release

The Justice Department and the Consumer Financial Protection Bureau allege that mortgage lender Fairway illegally redlined Black neighborhoods in Birmingham through its marketing and sales actions, and discouraged residents from applying for mortgage loans.

The settlement requires Fairway to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance and home improvement loans in Birmingham’s majority-Black neighborhoods, invest an additional $1 million in programs to support that loan subsidy fund, and pay a $1.9 million civil penalty to the Consumer Financial Protection Bureau’s victims relief fund.

Fairway is a non-depository mortgage company headquartered in Madison, Wisconsin. In the Birmingham area, Fairway operates under the trade name MortgageBanc.

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While Fairway claimed to serve Birmingham’s entire metropolitan area, it concentrated all its retail loan offices in majority-white areas, directed less than 3% of its direct mail advertising to consumers in majority-Black areas and for years discouraged homeownership in majority-Black areas by generating loan applications at a rate far below its peer institutions, according to the news release.

Attorney General Merrick B. Garland said the settlement will “help ensure that future generations of Americans inherit a legacy of home ownership that they too often have been denied.”

“This case is a reminder that redlining is not a relic of the past, and the Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for the communities harmed by it,” he said.

Assistant Attorney General Kristen Clarke, of the Justice Department’s Civil Rights Division, said the settlement will give Birmingham’s Black neighborhoods “the access to credit they have long been denied and increase opportunities for homeownership and generational wealth.”

“This settlement makes clear our intent to uproot modern-day redlining in every corner of the county, including the deep South,” she said.

The settlement marks the Justice Department’s 15th redlining settlement in three years. Under its Combating Redlining Initiative, the agency said it has secured a “historic amount of relief that is expected to generate over $1 billion in investment in communities of color in places such as Houston, Memphis, Los Angeles, Philadelphia and Birmingham.”