The Department of Justice (DOJ) announced a settlement with The Mortgage Firm, a non-bank mortgage lender based in Altamonte Springs, Florida, as part of its Combatting Redlining Initiative. The settlement includes a $1.75 million loan subsidy fund aimed at addressing allegations that the company engaged in redlining practices in Miami-Dade County.

Background and Context

The DOJ’s investigation into The Mortgage Firm was initiated following a referral from the Consumer Financial Protection Bureau (CFPB). Unlike previous settlements with Fairway Independent Mortgage Corporation and Townstone Financial, the CFPB was not directly involved in this case. The proposed consent order, pending court approval, requires The Mortgage Firm to implement measures aimed at improving access to credit in majority-Black and Hispanic neighborhoods.

Settlement Terms

The settlement outlines several actions for The Mortgage Firm, including conducting a Community Credit Needs Assessment, maintaining a physical office in a majority-Black and Hispanic neighborhood in Miami-Dade County, enhancing fair lending training, and diversifying its advertising and loan officer recruitment efforts. These measures are intended to support the effective distribution of the $1.75 million loan subsidy fund.

DOJ Findings

The DOJ’s investigation focused on The Mortgage Firm’s lending practices from 2016 to 2021. During this period, the company reportedly underperformed compared to its peers in generating mortgage applications from majority-Black and Hispanic neighborhoods in the Miami metropolitan statistical area (MSA). Data from the DOJ revealed that only 30.4% of The Mortgage Firm’s applications came from these neighborhoods, compared to 59% for peer lenders.

The DOJ’s complaint highlighted several contributing factors, including a lack of diverse loan officers, limited marketing to Hispanic communities, and an absence of Spanish-language resources on the company’s website. Additionally, internal emails containing derogatory references to certain neighborhoods further underscored concerns about discriminatory practices.

Referral Networks and Disparate Impact

The DOJ attributed the alleged redlining to The Mortgage Firm’s reliance on loan officers to develop referral networks with minimal oversight. According to the complaint, the company did not make sufficient efforts to market or establish referral partnerships in majority-Black and Hispanic neighborhoods, nor did it adequately monitor the distribution of marketing materials to ensure broad outreach.

These practices resulted in limited access to The Mortgage Firm’s mortgage lending services for residents of majority-Black and Hispanic areas, creating what the DOJ characterized as a discriminatory impact on prospective applicants.

Regulatory Implications

This settlement follows recent actions taken under the DOJ’s Combatting Redlining Initiative, underscoring federal agencies’ commitment to enforcing fair lending laws. The case also highlights ongoing debates over regulatory enforcement, including concerns about balancing fair lending requirements with race-neutral lending practices in light of recent Supreme Court decisions.

Conclusion

The Mortgage Firm’s settlement with the DOJ represents a continued effort to address and remediate alleged redlining practices. The company’s commitment to the terms of the settlement, including increased outreach and improved lending practices, is expected to facilitate greater access to credit for historically underserved communities in the Miami MSA.