A national lender that claims to be the 10th biggest FHA originator in the country has settled for $2 million allegations that it charged blacks higher rates. Since the allegations first emerged, the company has implemented policies and procedures to ensure its originators don’t disparately charge overages.
The settlement was announced Wednesday by the Department of Justice.
In conjunction with the agreement, a complaint was filed by the government against PrimeLending in U.S. District Court for the Northern District of Texas.
The government alleges that the Dallas-based subsidiary of PlainsCapital Co. violated the Fair Housing Act and the Equal Credit Opportunity Act by charging higher annual percentage rates to black borrowers on retail loans made through its branch offices. The discrimination allegedly occurred between 2006 and 2009 on fixed-rate and government mortgages.
“PrimeLending gave its employees wide discretion to increase their commissions by adding ‘overages’ to loans, which increased the interest rates paid by borrowers,” the news release said. “This policy had a disparate impact on African-American borrowers. The Justice Department for more than a decade has identified the charging of overages as a means by which lending discrimination can occur”
In its own statement, PrimeLending, through a spokeswoman, clarified that the settlement was “not an admission of liability,” and it denies any wrongdoing. The company says that it works diligently to meet and surpass federal and state regulatory standards.
“We approached the government in an open and cooperative effort to seek a mutually agreeable resolution of this matter, and this agreement concludes that process,” PrimeLending said.
The case was launched after the Federal Reserve, of which parent PlainsCapital is a member of, referred the matter to the Justice Department’s Civil Rights Division in 2009. The company was fully cooperative in the investigation, according to the government.
The settlement requires PrimeLending to establish and maintain loan pricing policies, monitoring and employee training so that it can ensure discrimination does not occur again. The company reportedly began implementing such policies at the beginning of this year.
The agreement incorporates provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It also reflects regulations recently enacted by the Federal Reserve that restrict loan originator compensation based on the terms or conditions of a loan.
Word of the settlement follows today’s announcement by the Department of Housing and Urban Development that it is opening investigations into discriminatory policies at 22 of the nation’s biggest lenders.
The government’s statement said originations at PrimeLending were $5.5 billion during 2009. The Justice Department suggested that the lender grew too rapidly to adequately monitor compliance with Fair Lending laws.
While the government reports that PrimeLending had 168 offices in 32 states as of Dec. 31, 2009, the 1,900-employee company reported yesterday that it has more than 200 locations in 33 states.
In a news release yesterday, PrimeLending claimed to be “ranked as the top FHA lender in Texas and tenth in the nation for 2009.”
An assistant U.S. Attorney noted in the government’s announcement that the Department of Justice will “continue aggressively to pursue compensation for the victims of such discrimination.”
United States of America, Plaintiff, v. PrimeLending, a PlainsCapital Company, Defendant.
Case 3:10-cv-02494-P, Dec. 8, 2010 (U.S. District Court for the Northern District of Texas).
