Non-bank lender Trident Mortgage to pay over $22 million for redlining

A four-year investigation launched by the Pennsylvania State Attorney General has attracted the support and resources of the United States Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) to put in place the first-ever redlining application involving a non-bank lender. .

On July 27, Trident Mortgage Company was ordered to pay more than $22 million for discriminatory lending patterns in majority-minority neighborhoods in the greater Philadelphia metropolitan area, including Camden, New Jersey and Wilmington, Delaware. The application now goes to federal court for approval of the second-largest redlining settlement in Justice Department history.

“This settlement is a stark reminder that redlining is not a problem of a bygone era. Trident’s illegal redlining activity has deprived communities of color of equal access to residential mortgages, deprived them of the opportunity to create wealth and devalued properties in their neighborhoods,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable if they violate our fair lending laws.”

Until it stopped accepting mortgage applications in 2021, Trident operated as a noncustodial mortgage company in Delaware, Maryland, New Jersey and Pennsylvania, marketing and selling both first mortgage loans and refinancing home loans. From 2015 to 2017, approximately 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (known as the Philadelphia MSA) which includes the cities of Philadelphia, PA, Camden, NJ and Wilmington, DE, as well as Cecil County, MD.

According to the complaint, Trident’s application data revealed that only 12% of its mortgage applications came from majority-minority neighborhoods — even though more than a quarter of Philadelphia’s MSA neighborhoods are majority-minority. Of the mortgage applications Trident received from applicants in majority-minority neighborhoods, most of the applicants were white.

Citing breaches of the Equal Credit Opportunity Act, the Consumer Financial Protection Act and the Fair Housing Act, the government investigation revealed a wide range of problematic behavior by the part of Trident. Here are representative examples of this behavior:

  • Trident loan officers, assistants and other employees received and distributed emails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent over work emails included pejorative content specifically related to real estate locations and valuations. Racist content also targeted people living in majority minority neighborhoods;
  • Of Trident’s 53 different offices in MSA Philadelphia, 51 were in majority-white neighborhoods. The other two offices were in neighborhoods where minority groups made up about half of the population; and
  • A series of Trident direct mail campaigns between 2015 and 2018 depicted only white models and employees and only in majority white neighborhoods.

“Corporations that use their power to discriminate against and deny people opportunities because of the racial makeup of their neighborhoods are not only wrong, it’s illegal,” said Pennsylvania Attorney General Josh Shapiro. “Through our investigation, we allege that hard-working Pennsylvanians have been denied the chance to achieve the American dream simply because of where they live, which unfortunately in America is inextricably tied to who they are.”

To address these violations and other lending issues noted in the investigation, Trident, once approved by the Federal Court, would make available several financial resources to assist potential mortgage applicants: a $18.4 million loan that would operate in four offices located in majority minority neighborhoods. , a $4 million fine payable to the CFPB victim relief fund, and a $2 million publicity fund to generate mortgage applications in the demarcated areas.

While significant punitive measures may deter some financial institutions from violating equity lending laws, an even greater concern underlies these recent developments. For several years, mortgage lending has been diverted from the big banks to non-bank mortgage companies like Trident.

According to the most recent analysis from the Home Mortgage Disclosure Act (HMDA) Annual Report and analyzed by BankRate.com, only three of the largest mortgage lenders of 2021 by volume were banks. Last year, the largest bank lender was Wells Fargo, whose 376,000 loans totaled $141 billion. The other two banks in the top 10 were JP Morgan Chase ($112 billion) and Bank of America ($84 billion).

In contrast, the top two mortgage lenders of 2021 by volume were Rocket Mortgage at the top of the list with $340 billion loaned to fund 1.2 million issues and United Wholesale Mortgage’s $227 billion which funded 654,000 loans. . In addition, these totals represent higher loan increases than the totals recorded the previous year.

“This is the general trend since the financial crisis”, said Greg McBride, chief financial analyst at Bankrate. “Banks have backed off – but not eliminated – originations. Non-banks have more than filled the void as the market has rallied, and the big banks are often buying the management rights so they’re in the game with less risk and cyclicality on the upside. origin.

It would be naïve to move fair lending and housing law enforcement into a single financial category. Instead, it behooves consumers, regulators and advocates to all be aware of the many forms and sources of unlawful discrimination. Banks, non-banks and all lenders must be held accountable – whenever and wherever illegal lending occurs.

Charlene Crowell

Charlene Crowell is a senior researcher at the Center for Responsible Lending. She can be reached at [email protected]

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