For the third time in as many months, a mortgage lender has settled allegations that it discriminated against loan applicants who rely on disability income.
The first of the three settlements was announced in August between Fifth Third Mortgage Co. and the Department of Housing and Urban Development.
Later that same month, HUD said that a settlement was reached with Mount Laurel, N.J.-based Freedom Mortgage Corp.
On Monday, HUD said it entered into an initial decision and consent order with American Bank Federal Savings Bank and Jesse Menke, a senior mortgage banker at the financial institution.
The Rockville, Md.-based company is accused of requiring applicants to provide documentation about their disabilities. It also attempted to obtain information about the nature and extent of those disabilities.
Such lending practices violate the Fair Housing Act, according to HUD.
The settlement resulted from a complaint filed with HUD by a Pierpoint, S.D., couple. The couple claimed that American Bank required the husband, who is on permanent disability, to provide Social Security Administration documentation proving his disability-related income for the past two years.
Since the documentation provided indicated that there was no end date, the applicants were required to provide additional medical documentation proving that they would continue to receive disability income for at least three years. In addition, the physician’s contact information was requested for verification of the term of disability — which the physician confirmed was permanent.
In all, American Bank allegedly discriminated against at least five other loan applicants.
“The Fair Housing Act makes it illegal to discriminate in the terms and conditions of a loan to an individual based on a disability, including imposing different application or qualification criteria,” HUD said. “The Fair Housing Act also makes it illegal to inquire about the nature or severity of a disability except in limited circumstances.”
American Bank agreed to pay the South Dakota couple $25,000. It also agreed to change its written policies to comply with the Fair Housing Act.
In addition, American Bank agreed to identify another 2,900 applications taken between 2011 and 2013 listing disability income. A third-party administrator will review each of these files to determine which applicants were required to document medical conditions, and some of these applicants might be eligible to receive up to $5,500 in compensatory damages.
The allegations were denied by American Bank, which reportedly agreed to the consent order so that it could avoid the expense and uncertainty of litigation.
