On July 27, 2022, the Consumer Financial Protection Bureau (CFPB) and the United States Department of Justice (DOJ) filed a complaint in the United States District Court for the Eastern District of Pennsylvania against Trident Mortgage Company LP for alleged discrimination against minority families in the greater Philadelphia area.

According to the CFPB’s press release, the proposed order contained in the complaint, if entered by the court, would be the CFPB’s first resolution with a non-bank mortgage lender and would require Trident to pay $18.4 million into a loan subsidy program to increase nondiscriminatory access to credit; pay a $4 million civil penalty to the CFPB’s victims’ relief fund; and pay an additional $2 million to take steps necessary to serve the credit needs of majority-minority neighborhoods.

In the complaint, the CFPB and DOJ alleged violations of the Equal Credit Opportunity Act, the Consumer Financial Protection Act, and the Fair Housing Act by Trident. Specifically, the complaint alleges that from 2015 through 2019, Trident engaged in a pattern or practice of unlawful discrimination against applicants and prospective applicants on the basis of race, color,

or national origin, including by redlining majority-minority neighborhoods in the Philadelphia-

Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area (MSA) and engaging in acts and practices directed at discouraging prospective applicants from applying for credit.

The complaint alleged the following discriminatory acts and practices:

• Failure to Market to Majority-Minority Neighborhoods

Trident purportedly maintained nearly all its offices and all its loan officers in majority-white neighborhoods and avoided having offices in — or having loan officers serve — majority-minority areas. Specifically, Trident operated 53 offices, of which 51 were in majority-white neighborhoods. According to the CFPB and DOJ, by concentrating nearly all its offices in majority-white areas, Trident discouraged residents of majority-minority areas from applying for and obtaining home loans. The CFPB and DOJ also allege that Trident failed to take actions that would compensate for its lack of offices in majority-minority areas, including its failure to assign any loan officers to solicit applications in majority-minority communities. Further, as it relates to marketing materials, the CFPB and DOJ allege that the use of all white-appearing models and images of all white mortgage loan officers on Trident’s marketing materials discouraged residents in majority- and high-minority neighborhoods from seeking credit from Trident.

• Staff Exchange of Racist or Discriminatory Emails and Photos

From 2015 through 2019, Trident lending staff allegedly sent and received emails containing racial slurs and racist content. According to the complaint, loan officers or other Trident employees referred to properties in majority-minority areas as being in the “ghetto” and circulated multiple emails containing racial slurs and derogatory content specifically related to real estate properties’ locations and appraisals.

• Disproportionately Low Numbers of Home Loan Applications from Majority-Minority and High-Minority Neighborhoods

The CFPB and DOJ also relied on HMDA data. According to the complaint, HMDA data confirms that Trident avoided serving majority-minority neighborhoods and high-minority neighborhoods in the Philadelphia MSA. The HMDA data revealed that Trident significantly underperformed its “peer lenders” in generating home mortgage applications from majority-minority neighborhoods in the Philadelphia MSA. In the same regard, HMDA data revealed that Trident significantly underperformed its peer lenders in making home loans in majority-minority neighborhoods in the Philadelphia MSA.

Overall, the complaint details Trident’s actions of redlining majority-minority neighborhoods in the Philadelphia MSA and actively discouraging applications from the individuals within such majority-minority neighborhoods. In response, the Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division stated, “Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods.”

Takeaways

The Trident complaint demonstrates the importance of making sure your fair lending and fair housing efforts cover all aspects of your operation — from hiring and marketing to origination and servicing. According to the CFPB and DOJ, Trident engaged in an old form of housing discrimination (i.e., redlining) using “modern” methods that reached all aspects of the lender’s operations. The CFPB has made it clear that fair lending and fair housing law applies to all phases of a mortgage lender’s business. As such, industry members should make sure that their fair lending controls are expansive enough to account for the Bureau’s expectations.