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‘Landmark’ settlement: Mortgage co. to pay $20M over redlining allegations

State, federal investigations charge Trident for discriminatory lending

Jessica Perry//July 28, 2022//

‘Landmark’ settlement: Mortgage co. to pay $20M over redlining allegations

State, federal investigations charge Trident for discriminatory lending

Jessica Perry//July 28, 2022//

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Following a four-year investigation by the Division on Civil Rights, New Jersey entered a historic settlement with a former home mortgage lender to provide for more than $20 million in loan subsidies and other relief.

The agreement, announced July 26 by acting Attorney General Matthew Platkin, resolves allegations that Trident Mortgage Co. LP and real estate brokerage Fox & Roach LP engaged in racially discriminatory redlining lending in New Jersey, Pennsylvania and Delaware.

Trident is required to create an $18.4 million fund to provide individual subsidies of up to $10,000 per qualified applicant in support of home purchases, refinancing, and home improvement loans for owner-occupied houses in majority-minority neighborhoods, the OAG’s office said.

It also requires Trident to spend:

  • $875,000 more on targeted advertising and public outreach to create awareness about the fund;
  • $375,000 on funding for consumer financial education; and
  • $750,000 to launch a Community Development Partnership Program to fund collaborations between local community- or government-based groups that can help extend credit to qualified borrowers.
Acting Attorney General Matthew Platkin
Platkin

According to Platkin, the settlement sends a clear message.

“We will never tolerate race-based bias or race-driven business practices that deny equal opportunity to individuals and families of color seeking housing in our State,” he said in a statement accompanying the announcement. “We are proud to have been part of this collaborative effort with our federal and state law enforcement partners.”

The investigations in New Jersey and neighboring Delaware and Pennsylvania ran concurrently with  a federal investigation of Trident by the Consumer Financial Protection Bureau and the U.S. Department of Justice. The state inquiry was initiated by the Pennsylvania Attorney General’s Office under AG Josh Shapiro and later joined by the corresponding offices in New Jersey and Delaware. According to New Jersey officials, the settlement is a collective achievement reached collaboratively by all parties, state and federal.

The state investigation found Trident – a mortgage lender operating in South Jersey until it ceased lending in December 2020 – engaged in redlining in Camden, Burlington and Gloucester counties.

The term redlining dates back to the New Deal. Federal government maps were color-coded to indicated where it was safe to insure mortgages; areas with large Black populations were coded red to indicate they were too risky.

Today, redlining typically refers to banks and mortgage lenders systematically underserving or discriminating against neighborhoods with high percentages of African Americans, Hispanics or other marginalized racial and ethnic minorities.

According to the CFPB and USDOJ, the federal agreement is the first government resolution involving illegal redlining by a nonbank mortgage lender. If entered by the court, the settlement would, among other things, require Trident to pay a $4 million civil penalty to CFPB to use for its victims’ relief fund.

“This settlement is a stark reminder that redlining is not a problem from a bygone era,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division.

Between 2015 and 2017 about 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area, which includes parts of New Jersey, according to the federal government’s announcement about the complaint and proposed order. Though Trident’s defined market area included majority-minority neighborhoods, its application data show it was not serving those areas equally.

The investigation also revealed alleged conduct including: distributing racist language and messages about certain neighborhoods, avoiding sending loan officers to market to majority-minority neighborhoods, and developing marketing campaigns and advertisements discouraging and ignoring minority mortgage loan applicants.

Looking ahead

The OAG said the $18.4 million fund – which can be used to subsidize mortgages with reduced interest rates, offer closing cost assistance and more – could spur hundreds of millions of dollars in total lending in the region.

Though its lending business is defunct, Trident will continue to operate to implement the settlement over its five-year term, according to the announcement. Trident and Fox & Roach’s corporate parent – HomeServices of America Inc., an affiliate of Berkshire Hathaway Inc. – has guaranteed compliance with the agreement.

“The Department of Justice, the Consumer Financial Protection Bureau, the attorneys general of Pennsylvania, New Jersey and Delaware, and Trident Mortgage Co. have agreed to facilitate continued expansion of homeownership opportunities for communities of color in the Philadelphia region as well as in Delaware and New Jersey,” a spokesperson for HomeServices of America Inc. said in a statement to NJBIZ. “We are committed to supporting additional lending that will help to close the racial gap in homeownership.”

The company said it disputed the assessments reached by the investigators.

“As reflected in the resolution, there has been no finding of wrongdoing by Trident,” the statement continued. “Trident’s mission and culture always reflected unwavering integrity and a commitment to fairness to all. We do not tolerate discrimination in any form. We strongly disagree with the agencies’ interpretation of Trident’s prior lending practices. Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race. We are committed to continuing to work to find more ways to serve homebuyers in every community we serve.”

HomeServices confirmed that Trident will create the loan subsidy program, adding it will “further expand long-standing partnership programs with community-based housing authorities and broaden consumer financial education activities. We look forward to working with local organizations, industry associations, and real estate agents to support the homeownership opportunities that create thriving neighborhoods. Finding solutions for customers is our goal every day, and this additional investment will allow us to put even more resources to work on their behalf.”

Fox & Roach is the former real-estate affiliate of Trident, even sharing offices in some instances, and according to the OAG many of the firm’s customers comprised the latter’s mortgage lending business. The agreement requires the brokerage to assist Trident in facilitating increased access to residential mortgages.

Fox & Roach must create a $150,000 fund to conduct marketing to qualified applicants seeking loans for primary homes in neighborhoods formerly underserved by the company.

In addition to the monetary terms of the settlement, the agreement with Trident and Fox & Roach also prohibits the companies from engaging in any practice that constitutes redlining. Beyond that, the OAG said it also requires:

  • outreach and equal customer services to residents of racial majority-minority neighborhoods in the region,
  • compliance monitoring during the term of the settlement, and
  • anti-bias training.

Trident also agreed to pay $250,000 to the NJDCR on top of the loan subsidy funds, according to the announcement, and it must open four new branches in majority-minority neighborhoods–including one in the Camden area.

“DCR will not tolerate race-based discriminatory lending practices that perpetuate racial segregation and rob Black and brown communities of the basic opportunity to build generational wealth through homeownership,” DCR Deputy Director Rosemary DiSavino said in a prepared statement. “Today’s settlement marks an important step toward narrowing the racial wealth gap and making New Jersey a fairer and more equitable place for its residents.”

Trident’s settlement with New Jersey is in the form of an Assurance of Voluntary Compliance. The federal agencies entered into a Consent Order with Trident, filed in U.S. District Court for the Eastern District of Pennsylvania. This matter was handled by DCR interim Chief of Strategic Initiatives and Enforcement Aarin Williams and Legal Specialist Iris Bromberg; Section Chief Peter Basso; Deputy Attorneys General Eve Weissman, Nadya Comas and Shireen Farahani; and former Deputy Attorney General Sarah Levine of the Affirmative Civil Rights & Labor Enforcement Section within the Division of Law’s Affirmative Civil Enforcement Practice Group.