On the other side you'll find a lawsuit I came across this morning while looking for something completely unrelated: United States of America v. PrimeLending. The residential mortgage lender, HQ'd in Victory Park, is a subsidiary of PlainsCapital, which, maybe you remember, took $87.6 mil in TARP funds two years back. Which isn't the point of the suit. This is: The Department of Justice alleges that between 2006 and '09, PrimeLending -- which signed off on 30,000 loans in 2009 alone -- has been discriminating against African-American borrowers, charging far higher interest rates than on loans to white borrowers.
Says the suit, filed earlier today in Dallas federal court, the Federal Reserve System began looking at PrimeLending's books in '08 and "found reason to believe that PrimeLending had displayed a pattern or practice of discrimination on the basis of race against African-Americans." At which point the matter was handed off to the Department of Justice, which took a closer look at the annual percentage rates of interest the lender charged between '06 and '09.
The feds alleges that the company didn't have its employees document the reasons why they charged what they did for loans, which made it easy to discriminate against borrowers. Hence, alleges the Department of Justice, an African-American customer is paying hundreds of dollars or more each year on a loan "than a similarly-situated white borrower." Which really adds up over the life of, say, a 30-year loan.
"PrimeLending's pattern or practice of discrimination has been intentional and willful, and has been implemented with reckless disregard for the rights of African-American borrowers," says the suit in which Department of Justice asks that PrimeCapital be forced to pay damages to victims and asks for the company to be slapped with a civil penalty.
Interestingly, Dow Jones is reporting that PlainsCapital has already agreed to pay $2 million to settle the suit. A DOJ attorney tells Unfair Park a press release will be issued shortly with further details.
Update: Here's the press release from the Department of Justice in which Thomas Perez, Assistant Attorney General in charge of the Justice Department's Civil Rights Division, says: "Charging borrowers more to obtain a home loan based on their race is absolutely intolerable, but it is a practice that occurred all too often during the past decade and stripped a vast amount of wealth from communities of color."
Update at 2:30 p.m.: Carol Towne, PrimeLending's chief marketing officer, sends the company's Official Statement. It follows.
"1. PrimeLending has entered into a settlement agreement with the government. We approached the government in an open and cooperative effort to seek a mutually agreeable resolution of this matter, and this agreement concludes that process.
2. We are pleased that an agreement has been reached and the issue resolved. The agreement is not an admission of liability, and PrimeLending denies any wrongdoing.
3. We work diligently to meet or surpass the standards set by all federal and state regulations that apply to our businesses.
4. Over the past year, PrimeLending introduced a new Pricing Policy and Price Monitoring Policy to ensure that the price charged for its residential loan products is set in a nondiscriminatory manner."
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