Fairway agrees to pay nearly $10 million for redlining in Birmingham

The
Department
of
Justice
and
the
Consumer
Financial
Protection
Bureau
on
Tuesday
hit
Fairway
Independent
Mortgage
Corp.
with
a
consent
order
alleging
the
company
discriminated
against
applicants
in
Black
neighborhoods
in
Birmingham,
Alabama,
by
discouraging
people
from
applying
for
mortgage
loans.

The
Madison,
Wisconsin-based
mortgage
lender
agreed
to
pay
nearly
$10
million
under


a
proposed
settlement
for
redlining
Black
neighborhoods
in
Birmingham
and
failing
to
address
known
signs
of
discrimination,
according
to
the
consent
order.
Fairway,
the
fifth-largest
mortgage
lender
by
origination
volume,
operates
in
Birmingham
under
the
name
MortgageBanc,
though
it
is
not
a
bank. 

“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,”
Attorney
General
Merrick
B.
Garland
said


in
a
press
release.

The
complaint
alleges
that
Fairway
concentrated
its
retail
loan
offices
in
majority-white
areas
and
spent
less
than
3%
of
its
direct
mail
advertising
in
majority-Black
areas.
Though
the
company
claimed
to
serve
the
entire
Birmingham
area
of
1.1
million
people,
Fairway
for
years
discouraged
homeownership
in
majority-Black
areas
by
generating
loan
applications
at
a
rate
far
below
its
peer
institutions.

The
Justice
Department
said
that
Fairway
took “no
meaningful
action,”
to
address
redlining
risk
and
failed
to
train
or
incentivize
its
loan
officers
to
serve
majority-Black
neighborhoods.

Between
2018
and
2022,
only
3.7%
of
Fairway’s
mortgage
applications
were
for
properties
in
majority-Black
areas,
compared
to
12.2%
for
the
company’s
peers.

Fairway’s
CEO
Steve
Jacobson
and
the
company
did
not
immediately
respond
to
requests
for
comment. 

Under
the
proposed
consent
order,
Fairway
has
agreed
to
pay
$8
million
for
a
loan
subsidy
program
in
Birmingham’s
majority-Black
neighborhoods
that
will
provide
lower
interest
rates
and
down
payment
assistance,
among
other
forms
of
relief. 

The
company
also
agreed
to
pay
$1.9
million
to
the
CFPB’s
victims
relief
fund
and
will
invest
at
least
$1
million
in
redlined
neighborhoods
in
Birmingham
by
opening
a
loan
production
or
retail
office
and
by
spending
at
least
$500,000
on
advertising
and
outreach
plus
$250,000
on
financial
education.
The
settlement
still
awaits
approval
by
the
Federal
District
Court
for
the
Northern
District
of
Alabama.

CFPB
Director
Rohit
Chopra
said
the
consent
order
would
hold
Fairway
accountable
for
redlining
Black
neighborhoods.

“Fairway’s
unlawful
redlining
discouraged
families
from
seeking
loans
for
homes
in
Birmingham’s
Black
neighborhoods,”
Chopra
said


in
a
press
release. 

From
2015
to
2022,
Fairway
operated
three
retail
loan
offices
and
three
loan
production
desks
within
real
estate
offices
— all
of
which
were
in
majority-white
areas
of
Birmingham.
The
mortgage
company
relied
on
referrals
from
real
estate
agents
and
its
loan
officers’
personal
contacts
to
generate
mortgage
applications,
of
which
the
vast
majority
were
located
in
white
areas,
the
complaint
states.

“By
taking
these
actions,
Fairway
discriminated
against,
and
unlawfully
discouraged,
mortgage
loan
applications
for
properties
in
majority-Black
neighborhoods,”
the
Justice
Department
said. 

Competing
mortgage
lenders
generated
applications
at
over
three
times
the
rates
of
Fairway
in
majority-Black
neighborhoods,
the
Justice
Department
said.
The
disparity
was
even
higher
in
areas
with
80%
or
more
Black
residents,
where
Fairway
originated
loans
at
less
than
one-eighth
the
rate
of
its
peers,
the
DOJ
said.

Despite
the
findings,
Fairway
failed
to
adopt
any
written
plan
for
marketing
or
growth
to
address
the
issue
of
redlining. 

The
settlement
is
the
third
case
that
the
Justice
Department
and
CFPB
have
brought
jointly,
and
it
brings
the
amount
of
relief
for
the
DOJ’s
Combating
Redlining
Initiative
to
more
than
$150
million,
Garland
said.