Justice Department Sues GFI for Overcharging Minority Consumers

by devteam April 3rd, 2012 | Share

GFI Mortgage Bankers Inc., a mortgage banker with operations in seven states, is being sued by the federal government for violations of fair housing and lending laws.  The suit, filed this morning by the Department of Justice and the U.S. Attorney’s Office for the Southern District of New York, alleges that GFI charged African-American and Hispanic borrowers higher interest rates and fees on home mortgage loans based on their race or national origin rather than their creditworthiness.</p

The government charges that from 2005 through at least 2009 GFI engaged in a pattern of structuring fees in a manner that violated both the Fair Housing Act and the Equal Credit Opportunity Act.  “For example, an African-American borrower who took out a home mortgage loan in 2007 paid on average approximately $7,500 more over the first four years of the loan than a similarly-situated white borrower.”  For a Hispanic borrower, the difference was approximately $5,600 under the same circumstances.  The suit says that the disparities are statistically significant and unrelated to credit risk or loan characteristic.</p

During the period covered by the suit the number of home mortgage loans issued by GFI increased from 974 in 2005 to 2,270 in 2009 and its revenue from home mortgage loan services more than doubled, from $305 million in 2005 to $768 million in 2009.  </p

Further, the suit says that GFI had a policy or practices of allowing and encouraging loan officers in New York and New Jersey to promote and price products and charge fees in a manner unrelated to credit risk or loan characteristics and was aware that its loan officers priced loans in ways unrelated to creditworthiness.  This resulted in thousands of dollars of overcharges to minority borrowers based on race or national origin.  GFI failed to supervise, train, or adequately monitor its loan officers to ensure that they were not fair lending and housing laws and utilized a compensation scheme that provided strong financial incentives to discriminate.</p

U.S. Attorney for the Southern District of New York Preet Bharara said, “As the lawsuit we filed today alleges, discrimination still exists in certain quarters and it has profound consequences for the victims.  At a time when so many American homeowners of all races and nationalities are struggling to make their mortgage payments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers paying higher fees and interest rates for their residential mortgages.  As today’s suit demonstrates, this type of discriminatory action will not be tolerated.  We will continue to work to ensure that fair lending laws are enforced throughout the district.”</p

This case resulted from a referral by HUD to the Justice Department’s Civil Rights Division in 2010.  Borrowers who feel they may have been affected by actions charged in the suit can contact the U.S. Department of Justice at 1-800-896-7743, mailbox 9992.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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