BIRMINGHAM, Ala. — A mortgage company has reached an agreement to settle allegations of discriminatory lending practices, specifically redlining predominantly Black neighborhoods in Alabama. The company, which has been accused by federal authorities, will pay a total of $8 million along with a nearly $2 million civil penalty to settle the claims, as announced by officials.
Redlining refers to the unlawful practice where lenders refuse to extend credit to residents of certain areas based on race, color, or national origin, according to the U.S. Department of Justice. The allegations against Fairway, the mortgage lender in question, suggest that it engaged in redlining tactics that adversely affected Black communities in Birmingham through its marketing and sales strategies, actively deterring residents from seeking mortgage loans.
As part of the settlement, Fairway is required to allocate $7 million towards a loan subsidy initiative aimed at providing affordable home purchase, refinancing, and improvement loans specifically in Birmingham’s majority-Black neighborhoods. Furthermore, the company is expected to invest an additional $1 million in support programs for this loan subsidy fund, in addition to a civil penalty of $1.9 million to the Consumer Financial Protection Bureau’s victims relief fund.
Fairway, a non-depository mortgage entity headquartered in Madison, Wisconsin, operates in the Birmingham region under the brand name MortgageBanc. Although Fairway professed to serve the entire metropolitan area of Birmingham, it primarily focused its retail loan offices in majority-white neighborhoods. Less than 3% of their direct mail advertising was directed at consumers in majority-Black areas, which contributed to a significantly lower rate of loan applications returned from those neighborhoods compared to its competitors.
Attorney General Merrick B. Garland expressed that this settlement is a step forward in making sure future generations of Americans inherit a legacy of homeownership that has too often eluded them. He emphasized that this case underscores the ongoing reality of redlining and that the Justice Department remains committed to fighting lending discrimination and supporting affected communities.
Kristen Clarke, the Assistant Attorney General for the Justice Department’s Civil Rights Division, highlighted that this settlement will enhance access to credit in Birmingham’s Black neighborhoods, thereby promoting opportunities for homeownership and wealth accumulation across generations. She stressed the Justice Department’s resolve to eliminate modern-day redlining practices throughout the country, including in the Deep South.
This settlement marks the Justice Department’s 15th redlining resolution in just three years. Under its initiative to combat redlining, it has managed to secure significant relief that is projected to generate over $1 billion in investments aimed at supporting communities of color in cities such as Houston, Memphis, Los Angeles, Philadelphia, and Birmingham.