Federal officials and attorneys general in Pennsylvania, Delaware, New Jersey announced a $20 million settlement with a mortgage company owned by a prominent regional residential real estate firm.
The Department of Justice, the Consumer Financial Protection Bureau (CFPB), and the attorneys general announced agreements to resolve allegations that Trident Mortgage Company owned by Berkshire Hathaway Inc., engaged in a pattern or practice of lending discrimination or “redlining” in the Philadelphia metropolitan area, including neighborhoods in Philadelphia, Camden, and Wilmington.
Berkshire Hathaway is best known as the investment vehicle for Warren Buffett, one of the world’s richest men. Holdings include HomeServices, the nation’s largest residential broker as well as Geico insurance and the Burlington Northern Santa Fe railroad.
In Delaware and the region Trident operated under the Berkshire Hathaway HomeServices Fox & Roach umbrella. Trident is no longer accepting mortgage applications. Berkshire Hathaway HomeServices over the years snapped up many large residential brokers that sometimes had mortgage subsidiaries.
This resolution is the first redlining settlement that the Justice Department has reached with a non-bank lender and the second largest redlining settlement in the department’s history.
“Last fall, I announced the Department’s Combatting Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country,” said Attorney General Merrick B. Garland. “As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color.”
“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” said CFPB Director Rohit Chopra. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”
Redlining is a practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color, or national origin of residents of those communities.
The complaint filed in federal court today alleges that from at least 2015 to 2019, Trident failed to provide mortgage lending services to neighborhoods of color in the metropolitan area, that its offices were concentrated in majority-white neighborhoods, and that its loan officers did not serve the credit needs of neighborhoods of color. The complaint also alleges that loan officers and other employees sent and received work e-mails containing racial slurs and referring to communities of color as “ghetto.”
Under the proposed consent order, which is subject to court approval and was filed in conjunction with a complaint today in the U.S. District Court for the Eastern District of Pennsylvania, Trident has agreed to invest over $20 million to increase credit opportunities in neighborhoods of color in the Philadelphia metropolitan area. Trident will invest at least: $18.4 million in a loan subsidy fund for residents of neighborhoods of color in the Philadelphia metropolitan area; $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit; $875,000 for advertising and outreach; and $375,000 for consumer financial education.
Since Trident no longer operates a lending business, it will contract with another lender to provide loan subsidies and services to the “redlined” communities. Trident will ensure that the lender employs at least four mortgage loan officers dedicated to serving neighborhoods of color in and around Philadelphia, Camden, and Wilmington; maintains at least four office locations in those neighborhoods; and employs a full-time manager of community lending who will oversee the continued development of lending in neighborhoods of color in the Philadelphia metropolitan area. Trident will also pay a civil money penalty of $4 million.
Trident has also entered into agreements with Pennsylvania, New Jersey, and Delaware. Those agreements resolve allegations against both Trident and Fox & Roach LP, a real estate affiliate of Trident. In addition to the settlement terms included in the federal consent order, under the agreements with Pennsylvania and New Jersey, Trident will reimburse the states for costs incurred in conducting the investigations. Fox & Roach will also invest $150,000 in marketing to communities of color in the Philadelphia metropolitan area.
The Justice Department and the CFPB jointly investigated the matter, with support from the United States Attorney’s Office in the Eastern District of Pennsylvania. The investigation was coordinated closely with the attorneys general of the Commonwealth of Pennsylvania and the states of New Jersey and Delaware.
This settlement is part of the Justice Department’s Combatting Redlining Initiative, an enforcement effort to address this persistent form of discrimination against communities of color. Individuals may report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291, or submitting a report online.