CFPB and DOJ Reach Agreement With Trident Mortgage Over ECOA Violations

The U.S. Department of Justice (DOJ); along with the Consumer Financial Protection Bureau (CFPB) and the Attorneys General of Pennsylvania, New Jersey, and Delaware have jointly announced agreements to resolve allegations that Trident Mortgage Company (owned by Berkshire Hathaway Inc.), engaged in a pattern or practice of lending discrimination by “redlining” in the Philadelphia metropolitan area, including neighborhoods in Philadelphia, Camden, and Wilmington. This resolution marks the first redlining settlement that the CFPB and DOJ has reached with a non-bank lender, and the second largest redlining settlement in the DOJ’s history.

According to the allegations, Trident discouraged prospective applicants from applying for mortgage and refinance loans in the greater Philadelphia area’s majority-minority neighborhoods. If entered by the court, the settlement, among other things, would require Trident to pay a $4 million civil penalty to the CFPB to use for the CFPB’s victims’ relief fund. The Attorneys General of Pennsylvania, New Jersey, and Delaware also finalized concurrent actions.

“Last fall, I announced the Department’s Combatting Redlining Initiative, and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country,” said U.S. Attorney General Merrick B. Garland. “As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color.”

Until it stopped accepting mortgage loan applications in 2021, Trident was a non-depository mortgage company operating in Delaware, Maryland, New Jersey, and Pennsylvania. Trident’s focus was first mortgage loans and refis. Between 2015-2017, approximately 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (MSA).

“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” said CFPB Director Rohit Chopra. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”

The complaint describes how Trident redlined majority-minority neighborhoods in the Philadelphia MSA, and actively discouraged applications from the people living in those neighborhoods. Trident’s self-defined market areas included majority-minority neighborhoods. However, Trident’s application data show it did not serve neighborhoods within its market areas equally. Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80% minority, more than half of the applications Trident generated were from white applicants.

Trident’s discriminatory actions, alleged by both the CFPB and the DOJ, violated the Equal Credit Opportunity Act (ECOA) and the Consumer Financial Protection Act. The DOJ also alleged a violation of the Fair Housing Act. Specifically, the government’s investigation misconduct by Trident, including:

• Distributing racist language and messages about certain neighborhoods: It was alleged that Trident’s loan officers, assistants, and other employees received and distributed e-mails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent on work e-mails included pejorative content specifically related to real estate properties’ locations and appraisals.
• Avoiding sending its loan officers to market to majority-minority neighborhoods: Trident’s loan officers worked out of 53 different offices in the Philadelphia MSA, the locations of which were displayed on Trident’s website. Fifty-one of those offices were in majority-white neighborhoods. The other two offices were in neighborhoods with minority groups representing roughly 50% of the population. All 23 offices within the Philadelphia and Camden metropolitan areas that were within Trident’s lending area were in majority-white neighborhoods.
• Developing marketing campaigns and advertisements that discouraged and ignored minority mortgage loan applicants: For example, between 2015 and May 2018, Trident conducted 15 direct mail marketing campaigns. All the individuals pictured in the campaigns’ marketing materials—both models and Trident employees—appeared to be white. These direct mail marketing campaigns would have discouraged applicants from majority-minority neighborhoods. Additionally, Trident targeted its marketing materials to majority-white neighborhoods. Trident’s open house flyers, for instance, were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods.

“This settlement is a stark reminder that redlining is not a problem from a bygone era. 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,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws.”

The proposed order, if entered by the court, would be CFPB’s first non-bank mortgage redlining resolution and it would require Trident to:

• Pay $18.4 million into a loan subsidy program: To increase non-discriminatory access to credit, Trident will establish a loan subsidy program. A lender it contracts with will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-minority neighborhoods in the Philadelphia MSA. The loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums. Through the lender it contracts with to make loans under the subsidy fund, Trident will ensure the lender has four offices located in majority-minority neighborhoods. These lending offices will provide similar services to those provided through Trident’s offices.
• Pay a $4 million fine: Trident will pay a $4 million penalty to the CFPB, which will be used for the CFPB’s victims’ relief fund.
• Pay an additional $2 million: Trident must spend $2 million to fund advertising to generate applications in redlined areas as well as to take other steps to serve the credit needs of majority-minority neighborhoods in the Philadelphia MSA.

In addition to the CFPB and DOJ’s enforcement action, the states of Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with Trident and its real estate services affiliate, Fox & Roach LP.