Sage Bank in Lowell, Mass., has agreed to pay about $1.2 million to settle Justice Department allegations of discrimination against minorities in mortgage lending.

The $165 million-asset bank engaged in discrimination based on race or national origin when pricing mortgage loans, running from 2011 to at least 2014, the Justice Department said. Sage Bank assigned higher prices to black and Hispanic borrowers, regardless of creditworthiness. The bank charged an average of $2,500 more to borrowers who are black and $1,400 more to Hispanic borrowers.

Sage Bank's penalty will help compensate borrowers and applicants affected by the loan policies. Sage Bank must also create new policies for loan pricing and loan officer compensation; its loan officers must undergo fair housing and lending practices; and it will create a monitoring program for loan pricing. The agreement is subject to court approval.

Sage Bank did not return requests for comment.

"Sage Bank's loan pricing policies created the risk that borrowers would be treated differently based on impermissible characteristics like race and national origin, and that was in fact the result," Vanita Gupta, head of the DOJ's civil rights division, said in a Monday news release.

The Justice Department began its investigation from a Federal Deposit Insurance Corp. referral. Kilpatrick Townsend & Stockton is legal counsel to Sage Bank.

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