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Wholesaler Settles Discrimination Charges

$2 million settlement accompanied by consent judgment

Sept. 12, 2012

By MortgageDaily.com staff


A wholesale mortgage lender in California has settled charges of discrimination over its use of a minimum loan amount.

The settlement between Luther Burbank Savings and the Department of Justice was filed in conjunction with a complaint in U.S. District Court for the Central District of California, according to an announcement Wednesday.

As part of the agreement, Luther Burbank will invest $2 million in California communities and take other steps to resolve allegations of discrimination.

At issue is the minimum $400,000 residential loan amount required by the Santa Rosa, Calif.-based financial institution on business originated from mortgage brokers between 2006 and 2011. The minimum loan policy allegedly had a disparate impact on the basis of race and national origin -- with only 6 percent of all of its Los Angeles loans made to black and Hispanic borrowers during the period.

"Luther will invest $1.1 million in a special financing program to increase the residential mortgage credit that the bank extends to qualified borrowers seeking loans of $400,000 or less in California," the Justice Department said. "The bank also will invest $450,000 in partnerships with community-based organizations that provide credit and financial services to minorities in the affected areas; spend $300,000 for outreach to potential customers and promotion of its products and services; spend $150,000 on consumer education programs; and conduct fair lending training for employees."

Luther Burbank, which in June 2011 lowered its minimum loan amount to $20,000, is prohibited from establishing or implementing a $400,000 minimum loan amount again.

The settlement with the $3.7 billion financial institution originated from a referral by the now-defunct Office of Thrift Supervision to the Justice Department's Civil Rights Division in 2010.

"It is critical that lenders have policies in place to ensure that they don't discriminate in their lending programs," the statement said. "We commend Luther Burbank Savings for revising its policies and working with the Justice Department to reach an appropriate resolution in this case."

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