The U.S. Department of Justice has filed a lawsuit alleging that GFI Mortgage Bankers, Inc., violated the Fair Housing Act and the Equal Credit Opportunity Act by charging African-American and Latino borrowers higher interest rates and fees on home mortgage loans than white borrowers. According to the Justice Department’s press release announcing the lawsuit:
From 2005 through at least 2009, GFI charged higher loan prices to African-American and Hispanic borrowers than it charged to similarly-situated white borrowers by charging higher interest rates and fees for home mortgage loans. For example, an African-American borrower who took out a home mortgage loan in 2007 paid on average approximately $7,500 more over the first four years of the loan than a similarly-situated white borrower. For a Hispanic borrower, the difference was approximately $5,600 more over the first four years of the loan than a similarly-situated white borrower. The disparities, based on race or national origin, are statistically significant, and are unrelated to credit risk or loan characteristic.
During the period when the discrimination occurred, GFI had a policy or practice of allowing and encouraging its loan officers in New York and New Jersey to promote loan products, price loans and charge fees in a manner that was unrelated to credit risk or loan characteristics. GFI knew that its loan officers priced loans in ways unrelated to a borrower’s creditworthiness, resulting in thousands of dollars in overcharges for African-American and Hispanic borrowers based on their race or national origin. By providing its loan officers a substantial percentage of the profits generated on each loan, GFI’s compensation scheme provided strong financial incentives to loan officers to price their loan products in a discriminatory manner. Moreover, GFI failed to supervise, train, or adequately monitor its loan officers to ensure that they were pricing loans in a non-discriminatory manner.
During the period when the discrimination occurred, the number of home mortgage loans issued by GFI increased from 974 in 2005 to 2,270 in 2009. At the same time, GFI’s revenue from its home mortgage loan services increased from $305 million in 2005 to $768 million in 2009.
GFI is a New York-based mortgage banker that operates in seven states. Read the DOJ’s press release here.