Two subsidiaries of ""American International Group Inc. (AIG)"":http://aig.com have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern of discrimination against African American homebuyers, representatives of President Obama's Financial Fraud Enforcement Task Force (FFETF) announced Thursday.[IMAGE]
The settlement was filed in conjunction with a ""complaint made by the Justice Department"":http://www.justice.gov/crt/housing/documents/aigcomp.pdf in U.S. District Court in Delaware. Brought under the federal Fair Housing and Equal Credit Opportunity Acts, the complaint alleges African American borrowers nationwide were charged higher fees on wholesale loans made by ""AIG Federal Savings Bank (FSB)"":https://www.aigbank.com/aigbank, based in Wilmington, Delaware, and ""Wilmington Finance Inc. (WFI)"":http://www.wilmingtonfinance.com/WilmingtonFinance, an affiliated mortgage lending company headquartered in Pennsylvania.
""Discriminatory practices by lenders, brokers, and other players in the mortgage market contributed to our nation's housing crisis and economic meltdown. Lenders who looked the other way and ignored the discriminatory practices of brokers must be held accountable,"" said Thomas E. Perez, assistant attorney general in charge of[COLUMN_BREAK]
the Justice Department's Civil Rights Division. ""We will continue to pursue cases attacking a wide range of abuses that have destroyed communities and transformed the American dream of homeownership into a nightmare.""
According to documents from the Department of Justice, AIG FSB and WFI contracted with mortgage brokers to underwrite and fund home loans, but the two subsidiaries allegedly failed to supervise or monitor how the brokers set fees. The complaint claims that this practice had a disparate impact on African American borrowers, who were charged higher broker fees than white, non-Hispanic borrowers on thousands of loans between July 2003 and May 2006 Ã¢â‚¬" before the federal government obtained an ownership interest in AIG.
""Today's settlement is significant because it marks the first time the Justice Department has held a lender responsible for failing to monitor its brokers to ensure that borrowers are not charged higher fees because of their race. If necessary, it will not be the last time,"" Perez said.
As part of the settlement, which is subject to court approval, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees. The two companies have also agreed to invest at least $1 million in consumer financial education efforts.
This case resulted from a referral by the Treasury Department's Office of Thrift Supervision to the Justice Department's Civil Rights Division in 2007.
AIG FSB and WFI are not currently engaged in wholesale home mortgage lending, but the settlement provides that if either defendant re-enters that business, the lender will implement specific, nonracial standards for broker fees and monitor all fees charged on the mortgage loans they fund to ensure that customers are treated equally.