On October 15, 2024, the CFPB and the DOJ took action against Fairway Independent Mortgage Corporation for illegal mortgage lending discrimination against majority-Black neighborhoods in the greater Birmingham, Alabama area. According to the CFPB and DOJ, Fairway illegally redlined Black neighborhoods, including through its marketing and sales actions, by discouraging people from applying for mortgage loans in the Birmingham metropolitan area’s Black neighborhoods.
CFPB Director Rohit Chopra said the following in a statement:
“The CFPB and DOJ are holding Fairway accountable for redlining Black neighborhoods. Fairway’s unlawful redlining discouraged families from seeking loans for homes in Birmingham’s Black neighborhoods.”
Fairway Independent Mortgage Corporation is a non-depository mortgage company that operates in the Birmingham area under the trade name MortgageBanc. The complaint against Fairway describes how it redlined majority-Black neighborhoods in the Birmingham Metropolitan Statistical Area. It was found that while Fairway claimed to serve the 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 from 2018-2020, and for years discouraged homeownership in majority-Black areas by generating loan applications at a rate far below its peer institutions.
The CFPB and DOJ allege that Fairway violated the ECOA, the CFPA, and the FHA by:
Failing to address known signs of discrimination. Fairway’s data indicated it was not serving majority-Black neighborhoods in Birmingham. Before October 2022, it only instructed loan officers not to discriminate. From 2018 to 2022, just 3.7% of Fairway’s applications were in majority-Black areas, versus 12.2% for peers. In neighborhoods with 80% Black residents, Fairway lent at less than one-eighth the rate of its peers. Despite this disparity, Fairway did not adopt a written plan to address the issue.
Redlining Black neighborhoods. From 2015 to 2022, Fairway operated three retail loan offices and three loan production desks in the Birmingham area, all in majority-white neighborhoods. It relied on referrals from real estate professionals in these areas, directing its marketing primarily to majority-white communities. As a result, Fairway unlawfully discouraged mortgage loan applications for properties in majority-Black neighborhoods.
The proposed order filed by CFPB and DOJ would require Fairway to:
Pay a $1.9 million civil penalty which would be paid into the victims relief fund;
Provide $7 million for a loan subsidy program that would be used to offer home purchase, refinance, and home improvement loans on a more affordable basis than otherwise available in majority-Black neighborhoods in the Birmingham metropolitan area;
Pay at least $1 million to serve neighborhoods it redlined including opening a new loan production office or full-service retail office in a majority-Black neighborhood in the Birmingham metropolitan area; and
Pay at least $500,000 for advertising and outreach, at least $250,000 on consumer financial education, and at least $250,000 on partnerships with one or more community-based or governmental organizations to serve neighborhoods previously redlined by the company.
Read the CFPB’s press release here.
The proposed order can be found here.