Dive Brief:

• Nonbank lender Trident Mortgage Co. agreed to invest more than $20 million to increase credit opportunities in neighborhoods of color after the Justice Department (DOJ) and Consumer Financial Protection Bureau (CFPB) announced a settlement Wednesday over allegations the company engaged in lending discrimination through its marketing, sales and hiring actions in the Philadelphia metropolitan area.
• “Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia [metropolitan statistical area] are majority-minority,” the CFPB said. “Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white.”
• The government’s investigation also uncovered “a wide range of problematic conduct,” including distribution of emails containing racial slurs and racist content about certain neighborhoods, the CFPB said. “This was systemic racism — pure and simple,” Pennsylvania Attorney General Josh Shapiro said, according to the Philadelphia Inquirer.

Dive Insight:

Between 2015 and 2019, Trident, a subsidiary of Warren Buffett’s Berkshire Hathaway, redlined majority-nonwhite neighborhoods in the Philadelphia area and discouraged applications from borrowers living in those neighborhoods, the CFPB alleged. Trident stopped accepting mortgage loan applications in 2021.

Trident’s self-defined market areas included majority-nonwhite neighborhoods, but the lender’s application data shows it did not serve neighborhoods within its market areas equally, the CFPB asserted.

In Philadelphia neighborhoods that were more than 80% nonwhite, more than half of the applications Trident generated were from White applicants, the bureau alleged.

“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” CFPB Director Rohit Chopra said in a statement Wednesday. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”

A spokesperson for HomeServices of America, Trident’s parent company, disputed allegations of racism, and said in a statement to the Inquirer that the company admitted no wrongdoing as part of the deal.

“We are committed to supporting additional lending that will help to close the racial gap in home ownership,” the statement said. “Trident’s mission and culture always reflected unwavering integrity and a commitment to fairness to all. We do not tolerate discrimination in any form.”

The DOJ and CFPB claim Trident’s actions violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. Additionally, the DOJ claimed the lender violated the Fair Housing Act. 

The consent order is the first redlining settlement the DOJ has reached with a nonbank lender, and stands as the second-largest redlining settlement in DOJ history, the department said.

The agencies’ action follows last fall’s announcement of a joint initiative between the DOJ, CFPB and the Office of the Comptroller of the Currency (OCC) to crack down on redlining, the practice of denying financial services on the basis of race or in low- to moderate-income neighborhoods.

The DOJ has made the issue a top priority, with Attorney General Merrick Garland in October calling its Combating Redlining Initiative the department’s “most aggressive and coordinated effort” to address discrimination in lending.

“As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color,” Garland said Wednesday.