It turns out Bank of America isn’t the only big lender in hot water over allegations of discriminatory practices. A Deutsche Bank subsidiary has agreed to pay more than $12 million to settle allegations that it discriminated against African American and Hispanic borrowers.
MortgageIT, an indirect subsidiary of the banking giant, paid $12.1 million to settle the claim by the Department of Housing and Urban Development. HUD had alleged that the company’s practices resulted in minority borrowers being charged higher annual percentage rates and fees than similarly qualified white borrowers. The company also denied mortgages to black and Hispanic borrowers more often than similarly qualified white borrowers, according to HUD. Deutsche Bank has denied the allegations.
In a review of MortgageIT’s internal loan data for 2007 and 2008, HUD found that black and Hispanic borrowers allegedly paid APRs averaging eight to 10 basis points higher than similarly qualified white borrowers. African American borrowers were allegedly 65% more likely to receive higher-priced loans than white borrowers with similar creditworthiness, and Hispanic borrowers were 72% more likely to receive higher-priced loans. African Americans were also 45% more likely to be denied a loan altogether, and Hispanic applicants 35% more likely, than similarly-situated white applicants, HUD alleged.
“It’s creditworthiness and ability to pay that matter when you apply for a loan, not your race or where you come from,” said Bryan Greene, HUD’s Acting Assistant Secretary for Fair Housing and Equal Opportunity. “This settlement reaffirms HUD’s commitment to ensuring that minorities have equal access to mortgage loan products and that lending institutions meet their obligations under the Fair Housing Act.”
Under the terms of the settlement, MortgageIT will use the $12.1 million as a fund to compensate borrowers who were unfairly denied a mortgage, or those whose loan terms and conditions may have violated the Fair Housing Act, according to HUD. If funds remain after all victims have been compensated, the balance will be distributed to organizations that promote financial literacy or provide credit and housing counseling.