Justice Department Settles With Luther Burbank Savings on Lending Discrimination Charges – NMP Skip to main content

Justice Department Settles With Luther Burbank Savings on Lending Discrimination Charges

NationalMortgageProfessional.com
Sep 14, 2012

The U.S. Department of Justice has announced that Luther Burbank Savings will invest $2 million in California communities and take other steps as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin. The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the Central District of California. The complaint alleges that from 2006 through mid-2011, Luther enforced a $400,000 minimum loan amount policy for its wholesale single-family residential mortgage loan program. The department alleges that this policy or practice had a disparate impact on the basis of race and national origin. The complaint alleges that from 2006 through 2010, Luther Burbank Savings, a prime lender, originated very few single-family residential mortgage loans to African-American or Hispanic borrowers or in majority-minority tracts throughout California. In the greater Los Angeles area, for example, only 5.8 percent of Luther’s single-family residential mortgage loans were made to African-American and Hispanic borrowers during this time period, compared to 31.8 percent of such loans made to African-American and Hispanic borrowers by comparable prime lenders. Similarly, only 5.2 percent of Luther’s single-family residential loans in the greater Los Angeles area were made in majority-minority census tracts (areas with a non-white population greater than 50 percent) during this time period, compared to 41.7 percent of such loans made in these tracts by comparable prime lenders. The complaint alleges that Luther continued its $400,000 minimum loan amount policy despite its knowledge that its low level of lending to African-American and Hispanic borrowers, and in majority-minority census tracts, was attributable to the policy. “Discriminatory lending practices against minorities threaten the American dream of homeownership,” said U.S. Attorney André Birotte Jr. “The Department of Justice will not allow financial institutions to have in place residential lending practices that illegally impact minority communities.” Under the settlement, Luther will invest $1.1 million in a special financing program to increase the residential mortgage credit that the bank extends to qualified borrowers seeking loans of $400,000 or less in California. The bank also will invest $450,000 in partnerships with community-based organizations that provide credit and financial services to minorities in the affected areas; spend $300,000 for outreach to potential customers and promotion of its products and services; spend $150,000 on consumer education programs; and conduct fair lending training for employees. Luther also is prohibited from establishing or implementing a $400,000 minimum loan amount policy. Since June 2011, the bank has operated with a $20,000 minimum loan amount policy for single-family residential mortgage loans. The lawsuit originated from a 2010 referral by the Office of Thrift Supervision (OTS) to the Justice Department’s Civil Rights Division. Luther is now subject to the regulatory authority of the Office of the Comptroller of the Currency. The lawsuit was developed and filed by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Justice Department’s Civil Right Division. Since the Fair Lending Unit was established in February 2010, it has filed or resolved 21 lending matters under the Fair Housing Act, the Equal Credit Opportunity Act (ECOA) and the Servicemembers Civil Relief Act. The finalized settlements in 18 of these matters provide for a minimum of $370 million in monetary relief, including compensation for more than 200,000 individual borrowers.
Published
Sep 14, 2012
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