Fairway, accused of redlining in Alabama, agrees to settle for $1.9 million

Fairway Independent Mortgage Corp. has agreed to a settlement with the Consumer Financial Protection Bureau (CFPB) and the US Department of Justice (DOJ) on regulators’ allegations of mortgage lending discrimination in predominantly black neighborhoods of Birmingham, Alabamametro area.

The agreement, which was submitted to the court for approval, requires the Madison, Wisconsin-based mortgage lender to pay a $1.9 million civil penalty. It must also provide $7 million for a home loan subsidy program in majority-black neighborhoods, and it must pay at least $1 million to serve the neighborhoods it has rezoned., under the terms of the agreement released Tuesday.

As in other lending discrimination cases, the CFPB and DOJ accuse Fairway of redlining because the company allegedly discouraged people from predominantly Black neighborhoods from applying for mortgages, including through marketing and sales promotions.

Fairway released a lengthy statement on Tuesday saying it had been investigated by the CFPB on the matter since the opening days of the Biden administration in 2021. The company also said it received the allegations after a settlement was reached.

“The complaint significantly mischaracterizes the matter at issue and appears to be deliberately inflammatory in nature.“ the company said. “First, the complaint characterizes Fairway’s actions as intentional and reckless, a claim that was mutually rejected by the parties prior to the settlement. Furthermore, the complaint characterizes Fairway’s actions as deliberate and intentional, despite the government authorities’ failure to find any evidence to support such a claim. Fairway is disappointed with these statements in the complaint, which indicate bad faith on the part of the government authorities.“

The company ranked 12th among the largest U.S. mortgage lenders in the first half of 2024, with $11.8 billion in home loan originations. That was down 18% year over year, as of Within mortgage financing estimates. Fairway operates under its trade name in the Birmingham area Mortgage Bankthat it acquired in 2009.

Regulators said data showed just 3.77% of Fairway applications from 2018 to 2022 were for properties in Birmingham’s predominantly black areas. This compared to 12.2% for peer lenders, which regulators cited as evidence of redlining. In neighborhoods with a black population of 80% or more, Fairway made loans at less than one-eighth the rate of its competitors.

The regulators added that in the Birmingham area — which covers six counties and has a population of about 1.1 million — Fairway had three retail lending offices and three real estate office desks, all in predominantly white areas. From 2018 to 2020, it targeted less than 3% of its direct mail ads to consumers in predominantly Black areas and, despite knowing the disparities, failed to address them.

“Fairway’s unlawful redlining discouraged families from applying for loans for homes in Birmingham’s Black neighborhoods,” CFPB Director Rohit Chopra said in a statement.

“This case reminds us that redlining is not a relic of the past, and that the Department of Justice will continue to work urgently to combat credit discrimination wherever it occurs and ensure relief for communities harmed by it,” said Attorney General Merrick B. Garland. added.

Through the Combating Redlining Initiative, the DOJ has raised more than $150 million in assistance for communities across the country over the past three years. Redlining is the legal practice of denying certain neighborhoods equal access to credit based on their racial or ethnic makeup.

Fairway’s statement said the multi-year investigation found no evidence of redlining or discrimination. It said the CFPB reviewed loan application data the company reported under the Home Mortgage Disclosure Act. The agency calculated the ratio of Fairway’s lending activities in census tracts with a majority white population to its activities in areas with a majority black population, and then compared the ratio to that of other lenders.

“The state agencies refused to take into account the fact that Fairway took more loan applications and made more loans, in terms of the number of loan units, in census tracts with a majority black population than any other non-bank lender with a physical presence in the Birmingham MSA.“ read the statement.

“Fairway vigorously defended itself against the government authorities’ allegations and continues to deny that the company has engaged in discriminatory behavior. Fairway also continues to strongly disagree with government authorities’ legal and statistical approach to identifying potential discrimination. However, to resolve the matter and curb further expenditure of resources, Fairway determined that a settlement with the Bureau and the DOJ would be the most appropriate solution.“

Editor’s note: This story has been updated with a statement from Fairway.