By: Consumer Financial Protection Bureau
Settlement is the first government resolution involving illegal discrimination by a nonbank mortgage lender
Washington, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) took action to end Trident Mortgage Company’s intentional discrimination against families living in majority-minority neighborhoods in the greater Philadelphia area. The CFPB and DOJ allege Trident redlined majority-minority neighborhoods through its marketing, sales, and hiring actions. Specifically, Trident’s actions discouraged prospective applicants from applying for mortgage and refinance loans in the greater Philadelphia area’s majority-minority neighborhoods. If entered by the court, the settlement, among other things, would require Trident to pay a $4 million civil penalty to the CFPB to use for the CFPB’s victims’ relief fund. The Attorneys General of Pennsylvania, New Jersey, and Delaware also finalized concurrent actions.
“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” said CFPB Director Rohit Chopra. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”
“Last fall, I announced the Department’s Combatting Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country,” said Attorney General Merrick B. Garland. “As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color.”
“This settlement is a stark reminder that redlining is not a problem from a bygone era. Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws.”
Trident Mortgage Company is a limited partnership incorporated in Delaware. Trident is a wholly owned subsidiary of Fox and Roach/Trident LP, which is owned by Home Services of America, Inc. The ultimate holding company of Trident is Berkshire Hathaway, Inc.
Until it stopped accepting mortgage loan applications in 2021, Trident was a non-depository mortgage company operating in Delaware, Maryland, New Jersey, and Pennsylvania. Trident’s lending focus was first mortgage loans and refinancing home loans. Between 2015 and 2017, about 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (referred to as the Philadelphia MSA.) The Philadelphia MSA includes the cities of Philadelphia, PA, Camden, NJ, and Wilmington, DE, as well as Cecil County, Md.
The complaint describes how Trident redlined majority-minority neighborhoods in the Philadelphia MSA and actively discouraged applications from the people living in those neighborhoods. Trident’s self-defined market areas included majority-minority neighborhoods. However, Trident’s application data show it did not serve neighborhoods within its market areas equally. Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80% minority, more than half of the applications Trident generated were from white applicants.
Trident’s discriminatory actions, alleged by the CFPB and the DOJ, violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. The DOJ also alleged a violation of the Fair Housing Act. Specifically, the government’s investigation uncovered a wide range of problematic conduct by Trident, such as:
- Distributing racist language and messages about certain neighborhoods: Trident’s loan officers, assistants, and other employees received and distributed e-mails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent on work e-mails included content specifically related to real estate properties’ locations and appraisals. The racist content also targeted the people living in majority-minority neighborhoods.
- Avoiding sending its loan officers to market to majority-minority neighborhoods: Trident’s loan officers worked out of 53 different offices in the Philadelphia MSA, the locations of which were displayed on Trident’s website. Fifty-one of those offices were in majority-white neighborhoods. The other two offices were in neighborhoods with minority groups representing roughly 50% of the population. All 23 offices within the Philadelphia and Camden metropolitan areas that were within Trident’s lending area were in majority-white neighborhoods.
- Developing marketing campaigns and advertisements that discouraged and ignored minority mortgage loan applicants: For example, between 2015 and May 2018, Trident conducted fifteen direct mail marketing campaigns. All the individuals pictured in the campaigns’ marketing materials—both models and Trident employees—appeared to be white. These direct mail marketing campaigns would have discouraged applicants from majority-minority neighborhoods. Additionally, Trident targeted its marketing materials to majority-white neighborhoods. Trident’s open house flyers, for instance, were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods.
Congress entrusted the CFPB to enforce the Equal Credit Opportunity Act, which prohibits discrimination in any aspect of a credit transaction on a prohibited basis, including race, color, and national origin. The proposed order, if entered by the court, would be CFPB’s first nonbank mortgage redlining resolution and it would require Trident, among other things, to:
- Pay $18.4 million into a loan subsidy program: To increase nondiscriminatory access to credit, Trident will establish a loan subsidy program. A lender it contracts with to make the loans will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-minority neighborhoods in the Philadelphia MSA. The loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums. Through the lender it contracts with to make loans under the subsidy fund, Trident will ensure the lender has four offices located in majority-minority neighborhoods. These lending offices will provide similar services to those provided through Trident’s offices.
- Pay a $4 million fine: Trident will pay a $4 million penalty to the CFPB, which will be used for the CFPB’s victims’ relief fund.
- Pay an additional $2 million: Trident must spend $2 million to fund advertising to generate applications in redlined areas and take other steps to serve the credit needs of majority-minority neighborhoods in the Philadelphia MSA.
In addition to the CFPB and DOJ’s enforcement action, the states of Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with Trident and its real estate services affiliate, Fox & Roach LP.
Read today’s complaint and proposed order.
Combatting Illegal Physical and Digital Redlining
Today’s action is part of a renewed effort by federal agencies to combat illegal redlining by mortgage lenders in violation of federal law. The DOJ’s enforcement of fair lending laws is a priority for their Civil Rights Division, which is leading an initiative to combat redlining. In addition, the CFPB continues to issue policy guidance and monitor markets for digital redlining.
The Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, and the Office of the Comptroller of the Currency recently proposed updated rules implementing the Community Reinvestment Act, which was passed in 1977 to combat redlining. While these rules will only impact insured banks, several states have passed similar laws that apply to nonbank mortgage lenders, which now originate the majority of mortgage loans in the United States.
Consumers having an issue with the enforcement of fair lending laws or a consumer financial product or service can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). Employees of companies who they believe their company has violated federal consumer financial laws are encouraged to send information about what they know to email@example.com..