Federal agencies continue to crack down on redlining, with the Department of Justice (DOJ) and Consumer Financial Protection Bureau (CFPB) taking action against Fairway Independent Mortgage Corporation for allegedly discriminating against majority-Black neighborhoods in Birmingham, Alabama.
A settlement agreed upon by Fairway requires the company to pay a penalty of $1.9 million into the CFPB’s Civil Penalty Fund and provide $7 million in loan subsidies for majority-Black areas. Fairway, according to a statement, decried the allegations and denied that it has engaged in any discriminatory behavior. However, to resolve the matter and curb further spending of resources, it determined that a settlement would be the most appropriate solution.
Per the CFPB and DOJ, Fairway, through marketing and sales actions, violated the Fair Housing Act, the Equal Credit Opportunity Act and the Consumer Financial Protection Act by illegally discouraging people in the metro’s predominantly minority areas from applying for its mortgages. According to Fairway’s own data, the two agencies said, just 3.7% of Fairway’s applications from 2018 through 2022 were for homes in majority-Black areas; Fairway’s peer lenders, in comparison, saw a rate of 12.2%.
That gap grows even wider when looking at neighborhoods with 80% or more Black residents. In those cases, Fairway made loans at less than an eighth of the rate of other lenders. CFPB and DOJ allege that Fairway failed to adopt a plan to address the disparities despite being aware of the figures.
The agencies also noted that from 2015 through 2022, Fairway’s physical locations were all located in majority-white areas and allegedly directed its marketing predominantly to such communities. As part of the settlement, Fairway will be required to open or acquire a new location in a majority-Black neighborhood within the Birmingham metro, while also paying at least $1 million toward advertising, outreach, community partnerships and other initiatives to serve redlined neighborhoods.
“Birmingham lies at the heart of our nation’s civil rights struggle but is also a community that bears the legacy of discriminatory redlining and other exclusionary policies. … This settlement makes clear our intent to uproot modern day redlining in every corner of the country, including in the deep South,” said Assistant Attorney General Kristen Clarke of the DOJ’s Civil Rights Division.
“The CFPB and DOJ are holding Fairway accountable for redlining Black neighborhoods,” said CFPB Director Rohit Chopra. “Fairway’s unlawful redlining discouraged families from seeking loans for homes in Birmingham’s Black neighborhoods.”
Fairway, meanwhile, accused the agencies’ complaint for “mischaracterizing the matter at issue” and characterized the investigation as being “intentionally inflammatory in nature.” The complaint paints the company’s actions as willful, intentional and reckless, despite the agencies’ failure to give evidence to support such claims, a statement from Fairway said. The company also took issue with the methodology of the regulators’ comparisons of Fairway’s lending practices compared with those of other lenders.
“The government agencies refused to consider the fact that Fairway took more loan applications and made more loans, in terms of number of loan units, in majority-Black census tracts than any other non-bank lender with a physical presence in the Birmingham MSA,” Fairway’s statement said. “The government agencies also refused to consider Fairway’s lending performance among residents of majority-Black census tracts who may have chosen properties outside of their neighborhoods and elsewhere in the Birmingham MSA, which indicates the government’s preference for furthering racial segregation.”
