Thirty-five years after Congress passed the Fair Housing Act, do racial preferences and discrimination continue to exist in home mortgage finance? Are American home buyers still charged higher rates or fees on their loans solely because of their skin color or racial heritage?
The unfortunate answer appears to be yes. But that discrimination doesn't always take the form you might assume. Case in point: Consider the recent federal court settlement of a class-action suit involving a large and prominent savings bank that is an active player in the mortgage market nationwide.
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Under the $1.2 million settlement in U.S. District Court in Indianapolis, the lending institution -- Flagstar Bank of Troy, Mich. -- admitted "no wrongdoing, liability or improper conduct." But its internal loan pricing instructions distributed in writing to loan officers explicitly required them to charge different fees to different racial groups.
What is unusual, though, is that the instructions required loan officers to limit the fees they charged black and Hispanic home buyers while allowing higher fees to be charged to white borrowers. Here is what Flagstar's "Revenue Per Loan Procedure" policy required of loan officers:
Minority home buyers could be charged no more than 3 percent in loan origination fees or "points," but white applicants could be charged up to 4 percent.
Loan officers whose "revenue per loan average" from mortgages made to minority applicants exceeds their "non-minority [white] average" will be subject to disciplinary actions, including probation and termination.
"Non-minority will be defined as any borrower who is determined on the loan application to be white, not of Hispanic origin."
Since the advent of the fair housing law in 1968, dozens of cases have gone to federal courts involving charges of racial discrimination against minority home buyers. Lenders, insurance companies and others have been accused of charging minorities -- primarily blacks -- higher mortgage fees or rates, or "redlining" entire minority neighborhoods by ceasing to make mortgage loans.
But cases alleging intentional, enforced policies of unequal pricing against white home buyers -- reverse discrimination -- are relatively rare.
A Flagstar spokeswoman declined comment on the settlement, noting that the company has a policy against discussing litigation.