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Many Forms Of Racial Bias

However, the lawyer for the plaintiffs, Amy Ficklin DeBrota of Indianapolis, said the bank's loan pricing policy -- initiated in May 2001 and discontinued at the end of January 2002 -- resulted in higher mortgage fees being paid by approximately 1,000 white mortgage borrowers. The affected borrowers will receive refunds and non-economic damage awards from the proceeds of the $1.2 million settlement. The lead plaintiff will receive $10,000.

DeBrota said Flagstar's policy was discovered when one of its loan officers resisted following the pricing instructions and was fired. The loan officer "felt that any sort of preferential treatment to one racial group over others violated the law," said DeBrota. "She refused to do that."

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DeBrota, a specialist in employment and fair housing issues with the law firm of Young Riley Dudley & DeBrota, sued the bank on the loan officer's behalf.

But when the implications of the underlying discriminatory pricing requirements began to sink in, DeBrota realized that potentially large numbers of non-minority borrowers had possibly been charged higher fees than minority applicants. She located a nucleus of plaintiffs and filed a class action on their behalf.

DeBrota believes that while racial preferences in mortgage lending may appear to favor one group over another, the reality is that "it is a lose-lose situation." Those charged lower fees can also be harmed, she argues, "because it creates a disincentive to lend to them." When loan officers stand to earn less from one category of borrowers than another, they will naturally tend to emphasize making loans to clients who will bring them the highest fees and income -- white borrowers, in this case.

The irony behind the Flagstar loan pricing policy? Though not confirmed by Flagstar, DeBrota said the dual-standard loan fee policy originally was put into place as a way to avoid any appearance of discrimination against black and Hispanic borrowers.

Auditors from the federal Office of Thrift Supervision had warned the bank about a possible pattern of higher fees to minority applicants, DeBrota said. The resulting policy instruction to loan officers -- the "Revenue Per Loan Procedure" -- had a subtitle: "Monitoring Fair Lending Practices."

The way to achieve fair lending for minorities, in other words, was to enforce a policy of higher-fee lending to non-minorities.

That's not exactly what Congress had in mind back in 1968. Fair means equal. Period.

Kenneth R. Harney's e-mail address is kharney@winstarmail.com.


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