Legal News

Cuomo?s Settlement Over Allegedly Discriminatory Mortgage Fees

By Dan Slater

A WSJ front-pager from yesterday, entitled “Housing Push for Hispanics Spawns Wave of Foreclosures,” documents the fated push by low-income housing groups, Hispanic lawmakers and mortgage lenders to increase home ownership for Hispanics. The article explains that, prior to this push, minority borrowers seeking loans were often stopped cold by a practice called red-lining, in which lenders were reluctant to lend within particular geographical areas, often, it appeared, on the basis of race. And then things changed.

“We saw what we refer to in the advocacy community as reverse red-lining,” Aracely Panameno, director of Latino affairs for the Center for Responsible Lending, told the Journal. “Lenders were seeking out those borrowers and charging them through the roof.” In 2005 alone, notes the WSJ, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%.

Also yesterday: New York AG Andrew Cuomo announced that about 455 black and Latino borrowers will split $665,000 in restitution from mortgage brokers HCI and Consumer One. The settlement is meant to compensate minority borrowers for alleged discriminatory practices regarding fees charged for mortgage-brokerage services.

“The blatant discrimination in this case is as illegal as it is inexcusable,” Cuomo said in a statement. “These customers were charged significantly higher fees for no reason other than being a minority - something that is explicitly against the law in New York State.”

In the statement, Cuomo also announced he’d filed a lawsuit against U.S. Capital Funding in the Eastern District of New York for allegedly engaging in similar discriminatory practices.

An HCI spokesman didn’t immediately have a comment when reached by Dow Jones Newswires on Monday. Spokesmen at Consumer One and U.S. Capital Funding didn’t immediately return phone calls seeking comment.

A statistical analysis by Cuomo’s office and the New York State Banking Department of loans arranged by HCI and Consumer One concluded black and Latino borrowers were charged several thousand dollars more in up-front fees than white customers.

As an example, Cuomo said Latino borrowers who received a single home-mortgage loan through HCI paid on average 55% more in fees, or about $2,680, than their white counterparts. African-American borrowers who received a single home mortgage loan were charged about 46% more in fees, or $2,260, than white customers, he said.

Full post as published by Law Blog - WSJ.com on January 06, 2009 (boomark / email).