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Fair housing lawsuits are one tool for addressing illegal discrimination in the real estate and mortgage credit industries, though the bar is high for determining liability. Cases alleging discrimination in lending practices were highlighted in NAR’s 2019 Legal Pulse report. Here’s a summary of three notable cases:
1. The city of Miami Gardens, Fla., sued mortgage lender Wells Fargo alleging that it had engaged in discriminatory or predatory lending in violation of the Fair Housing Act between 2004 and 2008, citing its use of redlining and reverse redlining tactics. The city asserted that Wells Fargo denied credit to particular neighborhoods based on race (redlining) and of “flooding a minority community with exploitative loan products” (reverse redlining).
Result: Miami Gardens was unable to prove that it suffered an injury as a result of alleged redlining and reverse redlining by Wells Fargo. The court determined that “the undisputed evidence confirmed that none of the 153 loans originated by Wells Fargo [within the limitation period] foreclosed.” Thus, the city could not have suffered an injury as a result of any of these loans.
2. The U.S. Department of Justice filed a civil complaint against First Merchants Bank alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act committed between 2011 and 2017. The suit alleged that the bank engaged in unlawful redlining by not providing mortgage credit services to majority Black areas in Marion County, Ind. The complaint further alleged that the bank failed to have any branch locations in majority Black areas, refused to market in majority Black counties, and had a disproportionately low number of loan applications and loan originations from majority Black neighborhoods.
Result: The parties filed a settlement agreement. In it, the bank denied the allegations but agreed to take all actions necessary to ensure that it offers and provides all persons with an equal opportunity to apply for and obtain credit, retains an independent third-party consultant to assess its fair lending risk management program, maintains a fair lending monitoring program, and provides training to all employees.
3. Prince George’s County and Montgomery County, Md., filed suit against Wells Fargo for alleged predatory and discriminatory residential mortgage lending, servicing, and foreclosure practices in violation of the Fair Housing Act. In the complaint, the counties alleged five categories of injuries: foreclosure processing costs; the increased cost of municipal services; economic injuries to the counties’ tax bases; lost municipal income; and non-economic injuries.
Result: The court held that the counties sufficiently pleaded claims associated with foreclosure processing costs but found the alleged non-economic injuries were too far removed from the alleged discriminatory conduct to have been plausibly caused by Wells Fargo.