One of the nation’s 25-largest lenders has settled allegations that minority borrowers were charged higher rates and fees on loans originated through its wholesale lending channel.
Provident Funding Associates LP ranked among the 25-biggest residential lenders last year based on the Mortgage Daily 2014 Mortgage Origination Survey.
While the Santa Rosa, California-based company originates through correspondent, retail and wholesale production channels — mortgage brokers were responsible for 63 percent of its first-quarter 2015 production.
But Provident’s
brokers have been charging higher fees to black and Hispanic borrowers, according to the Consumer Financial Protection Bureau.
The discrimination allegedly occurred between 2006 and 2011 — prior to the implementation of the Loan Origination Compensation Rule. More than 450,000 wholesale loans were reportedly funded by the lender during the period.
Brokers allegedly gouged minorities on interest rates that generated yield spread premiums. They also are accused of charging higher fees.
The alleged activities violated the Equal Credit Opportunity Act and the Fair Housing Act.
“The agencies allege that Provident’s discretionary broker compensation policies caused the differences in total broker fees, and that Provident unlawfully discriminated against African-American and Hispanic borrowers in mortgage pricing,” the CFPB said in a news release Thursday. “Approximately 14,000 African-American and Hispanic borrowers paid higher total broker fees because of this discrimination.”
The bureau said that Provident has agreed to settle the charges with the regulator and the Department of Justice.
The settlement, if approved by the court, will cost the company $9 million. The proceeds will go to impacted borrowers.
In addition, Provident will hire an administrator to distribute the funds and will maintain non-discretionary broker compensation policies and procedures.
