On July 27, 2022, the Consumer Financial Protection Bureau (CFPB) and the United States Department of Justice (DOJ) filed a complaint in the United States District Court for the Eastern District of Pennsylvania against Trident Mortgage Company LP alleging discrimination against minority families one in the Philadelphia area.
According to the CFPB press release, the proposed order contained in the complaint, if accepted by the court, would be the CFPB’s first order with a non-bank mortgage lender and would require Trident to invest $18.4 million in a loan subsidy program to pay in order not to become discriminatory access to credit; Paying a US$4 million civil penalty to the CFPB Victims Relief Fund; and pay an additional $2 million to take the necessary steps to meet the borrowing needs of majority-minority neighborhoods.
In the complaint, the CFPB and DOJ accused Trident of violating the Equal Credit Opportunity Act, the Consumer Financial Protection Act, and the Fair Housing Act. Specifically, the complaint alleges that from 2015 to 2019 Trident engaged in a pattern or practice of unlawfully discriminating against applicants and potential applicants on the basis of race, color,
or national origin, including through redlining of majority-minority neighborhoods in the Philadelphia
Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area (MSA) and engaging in acts and practices designed to discourage prospective applicants from applying for credit.
The complaint alleged the following discriminatory acts and practices:
Trident reportedly maintained nearly all of its offices and all of its loan officers in white-majority neighborhoods and avoided having offices in — or loan officers in — majority- and minority-held areas. Specifically, Trident operated 53 offices, 51 of which were in majority-white neighborhoods. According to the CFPB and DOJ, by concentrating almost all of its offices in white-majority areas, Trident discouraged residents of majority-minority areas from applying for and receiving home loans. The CFPB and DOJ also allege that Trident took no action to compensate for its lack of offices in majority-minority areas, including its failure to appoint loan officers to solicit applications in majority-minority communities. Regarding marketing materials, the CFPB and DOJ also allege that the use of all white-appearing models and images of all white mortgage loan officers in Trident’s marketing materials discouraged residents in majority- and minority-ownership neighborhoods from applying for a loan with Trident.
From 2015 to 2019, Trident’s contract workers reportedly sent and received emails containing racist slurs and racist content. According to the complaint, loan officers or other Trident employees labeled properties in majority-minority areas as “ghettos” and distributed multiple emails containing racial slurs and derogatory content, specifically related to the location and valuation of properties.
CFPB and DOJ also relied on HMDA data. According to the complaint, HMDA data confirms that Trident has avoided serving majority and minority neighborhoods in the Philadelphia MSA. The HMDA data showed that Trident significantly lagged its “peer lenders” in generating mortgage applications for homes from majority-minority neighborhoods in the Philadelphia MSA. In the same vein, HMDA data showed that Trident significantly underperformed its peer lenders in originating home loans in majority-minority neighborhoods in the Philadelphia MSA.
Overall, the complaint describes Trident’s actions to redline majority-minority neighborhoods in the Philadelphia MSA and to actively discourage applications from individuals in such majority-minority neighborhoods. In response, Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division stated, “Trident’s unlawful redlining activities denied communities of color equal access to residential mortgages, deprived them of an opportunity to build wealth, and devalued real estate in their neighborhoods.”
The Trident Complaint highlights the importance of ensuring that your fair lending and fair housing efforts cover all aspects of your operation – from hiring and marketing to lending and mentoring. According to the CFPB and DOJ, Trident used an old form of housing discrimination (ie, redlining) with “modern” methods that reached all aspects of the lender’s operations. The CFPB has clarified that the Fair Lending and Fair Housing Act applies to all phases of a mortgage lender’s business. Therefore, industry members should ensure that their fair credit controls are comprehensive enough to meet the Bureau’s expectations.