The federal government has filed a lawsuit against a New York-based lender over allegations that it charged blacks and Hispanics higher interest rates and fees than similarly situated white borrowers.
A complaint was filed on Monday in U.S. District Court for the Southern District of New York.
The lawsuit alleges violations of the Fair Housing Act and the Equal Credit Opportunity Act.
Named as the defendant is GFIÂ Mortgage Bankers Inc., according to the Department of Justice, which filed the case after it was referred in 2010 by the Department of Housing and Urban Development to its Civil Rights Division. The company does business in seven states.
GFIÂ is accused of discriminating from 2005 until at least 2009. Volume during the period climbed from 974 loans in 2005 to 2,270 closings 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,” the announcement stated.
The government cited an example where a black borrower who closed on a loan in 2007 paid an average of $7,500 more during the first four years of the loan than a similarly situated white borrower.
Another example had a Hispanic borrower paying $5,600 more.
The Justice Department said that the disparities are statistically significant and unrelated to credit risk or loan characteristics.
GFIÂ allegedly had a policy that encouraged loan originators to promote products and pricing in a way that was not based on credit risk or loan characteristics. Originators shared in the additional profits — giving them a strong incentive to price loans in a discriminatory manner.
But the company failed to supervise, train or adequately monitor the originators to prevent discriminatory pricing.
“Discrimination still exists in certain quarters and it has profound consequences for the victims,” Preet Bharara, U.S. Attorney for the Southern District of New York, said in a statement.
