Lenders Targeted for Avoiding Small HELs

The National Community Reinvestment Coalition said Friday it filed five civil rights complaints with the Department of Housing and Urban Development against the lenders after a comprehensive investigation documented discrimination in lending in violation of the Federal Fair Housing Act.

The suits name Fieldstone Investment Co. and its subsidiary Fieldstone Mortgage Co.; NovaStar Financial Inc. and NovaStar Mortgage Inc.; Georgia-based wholesaler South Star Funding; EquiFirst Corp. and its affiliates, Regions Financial Corp. Regions Bank, Regions Mortgage and EFC Holdings Corp.; and Gelt Financial Corp.

The coalition’s investigation, which included “mystery shopping,” review of Home Mortgage Disclosure Act data, analysis of Census and residential property data, and a review of each companies’ underwriting practices, concluded that the lenders have instituted a discriminatory minimum value policy of denying home equity loans to applicants whose homes are valued at less than $100,000. Additionally, all lenders, except Gelt Financial, also limited or exclude loans made on row homes, according to the announcement.

John Taylor, coalition president and chief executive, said in the announcement, “These companies are denying the dream of homeownership to countless working families.”

But Taylor’s statement, which suggests these lenders somehow hindered a group of borrowers from owning homes, seems to contradict the complaint which alleges discrimination in home equity lending — borrowing against a home the consumer already owns.

The lenders’ “minimum value policy has both the purpose and effect of discriminating against African Americans and residents of African-American neighborhoods, Latinos and others where the majority of homes are valued under the lender minimum loan value and favoring residents located in majority white neighborhoods,” said David Berenbaum, the coalition’s executive vice president, in the announcement. “No legitimate business justification exists to justify this blatant violation of the Federal Fair Housing Act.”

Ari Miller, vice president of Gelt Financial, told MortgageDaily.com “it’s funny” that such a complaint was filed.

“We haven’t done a residential loan in six or seven years, probably since 1999,” Miller said. “We’re exclusively a commercial lender.”

Fieldstone, NovaStar, South Star and EquiFirst were not immediately available for comment.

The coalition says underwriting practices through use of minimum loan values to redline low to moderate income communities and/or exclude row houses situated in African American or Latino communities are “a national problem” and result in exclusion of loans for up to 25 percent of homes in metropolitan areas, with even a greater impact in rural areas.

The Mortgage Bankers Association was not immediately available for comment.