The Department of Justice has more than 15 “open investigations” into violations of the nation's fair lending laws, probes that could lead to charges against lenders if a pattern of abuse is uncovered, according to a key department official.
The investigations, which involve redlining, wholesale and retail pricing, steering and consumer credit, among other things, are on top of five "authorized suits" that are in "pre-suit negotiations," DoJ's Eric Halperin said at CBA Live 2011 in Orlando, Fla.
Halperin, who is special counsel for fair lending in the department's civil rights division, did not reveal the exact nature of any of the investigations. But he said the current enforcement docket includes actions that are similar to those brought recently against AIG, Bank of America Servicing and Citizens Republic Bankcorp/Citizens Bank.
And the docket contains some big cases.
"We will bring relatively few cases in the next several months," he said. "But they will be larger ones."
Under attorney general Eric Holder, the Justice Department has made fair lending a priority. It has created a new fair lending unit with lawyers, economists and statisticians, and together with bank regulatory agencies, is focusing on civil rights issues unique to lending.
And, according to Halperin, "mortgages are a focus of the department and will continue to be."
Justice enforces three statutes—the Fair Housing Act, Equal Credit Opportunity Act and Servicemembers Civil Relief Act. But it is now collaborating with not just banking regulators but also state attorneys general. And when the Consumer Finance Protection Bureau opens it doors, Halperin said, it will work closely with that agency, too.
"Collaboration is now government-wide," he said.
The Justice Department obtains most of its cases as referrals. And according to Halperin, last year was a record for referrals.
This year's case in which Citizens Republic Bankcorp and Citizens Bank were charged with mortgage redlining came from the Federal Reserve Board. In that case, the complaint alleged that the two institutions failed to offer mortgages to residents of majority African-American neighborhoods in the Detroit area in the same way they provided those services to predominantly white neighborhoods.
"Redlining is an issue we will focus on going forward," Halperin said.
Last year's action against Prime Lending, one of the country's largest FHA lenders with 168 offices in 32 states, also was referred by the Fed. In that case, the company was charged with discriminating against African-American borrowers in pricing its loans over a three-year period from 2006 to 2009.
The disparities, DoJ charged, were in conventional and VA loans as well as in FHA mortgages and resulted because Prime Lending paid brokers on their ability to charges overages and avoid underages.
The case last year against AIG was referred by the Office of Thrift Supervision. That complaint alleged "disparate impact" on African-American borrowers who were charged "significantly higher fees" than white borrowers for loans underwritten and funded by AIG and Wilmington Finance.
In his talk, Halperin also highlighted a couple of cases brought under SCRA, which caps the interest rate of covered credit at 6% while the service member is on active duty and blocks foreclosures on pre-service mortgages.
The case against BAC Home Loans Servicing alleged the servicer illegally foreclosed on some 160 servicemen without court orders and consistently failed to check on the military status of borrowers before initiating foreclosure procedures.
The BAC case was settled in late May, with the company agreeing to pay $20 million to the 160 or so identified servicemembers, review all nonjudicial foreclosures between June 2009 and December 2010, and provide additional compensation for any new victims found as a result of that review.
