For the second time in as many weeks, a large home lender has agreed to settle allegations of discriminating against persons who receive disability income.
Last week, the Department of Justice announced that it had reached a settlement reached with Fifth Third Mortgage Co.
The Cincinnati-based lender allegedly violated the Fair Housing Act and the Equal Credit Opportunity Act when in 2010 it asked a husband and wife who were applying for a loan to provide a doctor’s letter documenting Social Security Disability Insurance income.
The couple, Robert and Marilyn Carruthers, reportedly provided a Social Security award letter, bank statements, tax documents and other relevant documents — none of which indicated that the benefits had an expiration date.
The Carruthers filed a complaint with the Department of Housing and Urban Development in May 2011 then elected in August 2013 to have the case heard in federal court.
“A person’s medical information is often some of the most personal information in and about their life,” U.S. Attorney for the Middle District of Georgia Michael J. Moore said in the statement.
The complaint in that case additionally named mortgage broker Cranbrook Mortgage Corp. as a defendant.
Fifth Third agreed in the settlement to pay $1,522,000 and provide training to underwriters and loan officers. It will also monitor loan applications to ensure that doctors’ letters are not requested from applicants with disabilities.
Cranbrook, which will pay $2,000 to compensate impacted loan applicants, agreed to revise its underwriting practices and train its loan officers even though the “Department of Justice does not allege that Cranbrook Mortgage Corp. discriminated against other loan applicants.”
Fifth Third reportedly fully cooperated with a Justice Department investigation.
The second settlement, announced by HUD on Wednesday, was with Freedom Mortgage Corp.
The Mount Laurel, N.J.-based company allegedly discriminated against 69 loan applicants with disabilities by subjecting them to different terms and conditions than other applicants by requiring either doctors’ notes or letters from the Social Security Administration verifying that the disability income would continue for three years.
“In one case, a loan applicant provided medical documentation of his disability, a Department of Labor Work Capacity Evaluation form, and a benefits statement showing regular disability payments since 2009,” HUD said. “Nonetheless, Freedom Mortgage allegedly continued to request proof that the income would continue for at least three years.”
HUD originally filed a complaint against Freedom Mortgage in 2013.
The settlement will cost Freedom Mortgage $104,000. The 69 impacted loan applicants will receive payments of between $1,000 and $5,000.
In addition, Freedom Mortgage will revise its underwriting guidelines to eliminate disability-related income verification requirements and require employees to attend training on the Fair Housing Act.
