Tuesday, April 22, 2014

FYI: FTC Settles Mortgage Lending Discrimination Case for $1.5M

Thursday, September 23, 2010

The Federal Trade Commission reached a $1.5 Million settlement with a mortgage lender and its owner as to charges that the lender illegally charged Latino consumers higher prices for mortgage loans than non-Latino white consumers, which could not be explained by the applicants' credit characteristics or underwriting risk.
Copies of the FTC's complaint, and the Stipulated Final Judgment and Order For Permanent Injunction and Other Equitable Relief, are available at:
The FTC filed a complaint in the U.S. District Court for the Central District of California on May 7, 2009, alleging that Golden Empire Mortgage, Inc. and Howard D. Kootstra violated the Equal Credit Opportunity Act. According to the FTC, the defendants allegedly gave loan officers and branch managers wide discretion to charge some borrowers, in addition to the risk-based price, "overages" through higher interest rates and higher up-front charges.  The FTC alleged that the defendants then paid loan officers a percentage of the overages as a commission, failed to monitor whether Latino consumers were paying higher overages than non-Latino white borrowers.
The settlement order imposes a $5.5 million judgment that will be suspended when $1.5 million has been paid for consumer redress. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.  It also permanently prohibits Golden Empire and Kootstra from discriminating on the basis of national origin in credit transactions, or otherwise failing to comply with the Equal Credit Opportunity Act and its implementing Regulation B.
In addition, the settlement order also requires Golden Empire to implement a policy that restricts loan originators' pricing discretion, a fair lending monitoring program, a program to ensure the accuracy and completeness of their data, and employee training programs. The pricing policy and fair lending monitoring program set forth in the settlement order are intended to facilitate order enforcement in this case.
In its press release, the FTC stated:  "The extent to which other lenders should use the same methodology in monitoring ECOA compliance will depend on the facts and circumstances of each lender. An appropriate monitoring program requires an examination of a lender's policies, business model and business necessities and should include statistical analyses that consider, as warranted by the lender's particular circumstances, various information such as loan characteristics, geographic variations and other relevant factors."

Eric Tsai
McGinnis Wutscher Beiramee LLP
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