Florida mortgage firm denies redlining — but will pay $1.75 million

The U.S. Department of Justice and The Mortgage Firm have different interpretations of what happened regarding federal accusations that the Florida mortgage company engaged in redlining from Miami to Fort Lauderdale to the Palm Beaches.

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The Mortgage Firm, based in Altamonte Springs, and the Justice Department have agreed on a consent order that still needs to be approved by a court.

In the view of the U.S. Assistant Attorney General Kristen Clarke: “By denying predominantly Black and Hispanic neighborhoods in the greater Miami area access to credit, The Mortgage Firm violated the law, denied communities equal access to credit and exacerbated the racial wealth gap.”

“This settlement,” she said “will provide impacted communities in Miami with expanded access to homeownership, and makes clear that no matter the type of financial institution — bank, credit union or mortgage company — the department is committed to rooting out redlining across the country.”

The Mortgage Firm’s Chief Operating Officer Sheri Nedley pointed to the company’s record that’s free of “legal or regulatory violations” since its 1995 founding as evidence it plays by the rules.

“As reflected in the publicly available proposed settlement terms, The Mortgage Firm does not agree with the contention that its South Florida lending practices violated any laws or regulations, and the company is not required to pay a civil money penalty under the settlement,” Nedley said.

“The Mortgage Firm’s decision to settle this matter out of court is based on its desire to avoid the cost of litigation and to move on from this disagreement relating to business activities that occurred approximately 5 to 10 years ago.”

Also, Nedley said, The Mortgage Firm already does many of the actions agreed upon in the settlement.

Part of the settlement requires the company to put up $1.75 million for a loan program that will offer “affordable home purchase, refinance and home improvement loans in predominantly Black and Hispanic neighborhoods.” Help with down payments, closing costs, first mortgage insurance premiums, as well as lower interest rates can be part of that program.

What is ‘redlining?’

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Cornell Law School’s Legal Information Institute explains that “redlining can be defined as a discriminatory practice that consists of the systematic denial of services such as mortgages, insurance loans, and other financial services to residents of certain areas, based on their race or ethnicity.”

The term comes from the red that banks used to denote areas of Black residents during the Great Depression when assisting the federal government’s Home Owners Loan Corp. Those areas, no matter the income of the residents, were considered to be higher risk than majority Black areas and treated that way.

The 1968 Fair Housing Act made redlining illegal.

A March 2022 referral to the U.S. Justice Department from the Consumer Financial Bureau reported that The Mortgage Firm was “intentionally redlining minority neighborhoods in the Miami metropolitan statistical area” with actions toward potential customers “that would discourage reasonable people on the basis of race or national origin from applying for credit.”

Justice’s complaint said its investigation found that “from at least 2016 through 2021, The Mortgage Firm avoided providing home loans and other mortgage services in majority-Black and Hispanic neighborhoods and high-Black and Hispanic neighborhoods” in the Miami metropolitan area, covering South Florida.

“From 2016 through 2021, The Mortgage Firm’s peer lenders made home loans in majority-Black and Hispanic areas at almost twice the rate of The Mortgage Firm, and nearly five times the rate of The Mortgage Firm in high-Black and Hispanic areas.”

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Nedley’s statement said: “Throughout its 29-year history, The Mortgage Firm has been committed to providing equal credit access to all communities within its lending footprint. The complete absence of legal or regulatory violations on The Mortgage Firm’s record speaks for itself.”

What the Justice Department claims The Mortgage Firm did

In the Miami metropolitan area — 1,200 census tracts in Miami-Dade, Broward and Palm Beach counties — Hispanic and non-Hispanic Black residents make up the majority of 64% of the census tracts. In 36% of the census tracts, more than 80% of the residents are Hispanic and non-Hispanic Black. According to the U.S. Census, “census tracts are small, relatively permanent statistical subdivisions of a county or statistically equivalent entity” usually of 1,200 to 8,000 people.

Here’s how Justice’s complaint claims The Mortgage Firm engaged in redlining:

▪ “Locating and maintaining nearly all its Miami MSA offices and its loan officers in majority-white neighborhoods and avoiding having offices in — or having loan officers serve — majority- and high-Black and Hispanic areas.”

▪ The complaint says The Mortgage Firm didn’t market toward, advertise in or even try to reach customers in those areas.

As an example, the complaint points out despite South Florida’s strong Hispanic demographic, The Mortgage Firm’s website had no Spanish translation, no indication which offices Spanish-speaking customers could visit and claimed the company did nothing when it knew referral partners steered Spanish-speaking customers elsewhere.

Also, the complaint said, The Mortgage Firm’s website home page “prominently featured a couple who appeared to be non-Hispanic white, and not any individuals who appeared to be other races, colors, or ethnicities” among the models.

The website’s current home page features a series of photos with a Hispanic family, Black couple, biracial family and Asian-American family.

▪ The Mortgage Firm didn’t “train or incentivize its loan officers to market, advertise, or develop referral partnerships in majority- or high-Black and Hispanic neighborhoods.”

▪ Speaking of the loan officers, whose faces were shown on the website, 46 worked for The Mortgage Firm during the 2016 to 2021 period. Of the 46, none were Black non-Hispanic and 15 were Hispanic, only four of which lasted longer than a year at the company. But of the 31 white non-Hispanic loan officers, 30 stayed with The Mortgage Firm for more than a year.

The complaint said: “The Mortgage Firm’s conduct was not justified by a legitimate, non-discriminatory reason or business necessity and was not necessary to achieve a substantial, legitimate, nondiscriminatory interest.”