WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has announced enforcement measures against Draper & Kramer Mortgage Corporation for engaging in discriminatory lending practices. Draper, based in Downers Grove, Illinois, is accused of “redlining” by discouraging mortgage applications in majority-Black and Hispanic neighborhoods in both the greater Chicago and Boston areas.
This alleged behavior, outlined in the CFPB’s findings, resulted in significantly lower application and loan origination rates in these communities compared to other lenders in the same regions. Under a proposed court order, Draper would be prohibited from engaging in residential mortgage lending activities for five years and must pay a $1.5 million civil money penalty.
Allegations of Redlining
The CFPB accuses Draper of intentionally steering its mortgage activities toward majority-white communities while neglecting neighborhoods with significant Black and Hispanic populations. During the period from 2019 to 2021, Draper allegedly avoided opening offices or conducting outreach in majority-Black and Hispanic areas, resulting in disproportionately low levels of mortgage loan activity within these communities.
“Draper illegally excluded homeowners and engaged in redlining across the Chicago and Boston metro areas,” said CFPB Director Rohit Chopra. “Today’s order bans Draper from mortgage lending for five years and ensures that the company pays for its unlawful discrimination.”
Among its peers, Draper underperformed significantly in majority-Black and Hispanic neighborhoods. According to the CFPB’s findings, other lenders in the Chicago metro area were initiating loan applications at more than double the rate Draper achieved, while in the Boston area, Draper’s peers outpaced its origination rates by a similar margin.
Additionally, Draper allegedly failed to allocate resources such as loan officers or marketing efforts to better serve these communities. By not offering loan services equitably across racial and ethnic demographics, the company created a business model that discouraged borrowers from seeking financing for homes in Black and Hispanic neighborhoods.
Violations of Anti-Discrimination Laws
The CFPB’s investigation determined that Draper violated both the Equal Credit Opportunity Act (ECOA) and Regulation B by discriminating against mortgage applicants on the basis of race, color, and national origin. The ECOA explicitly prohibits lenders from discouraging or denying applicants based on these protected characteristics. By structuring its marketing and outreach efforts to exclude specific communities, Draper’s actions effectively denied access to fair lending opportunities for many potential borrowers.
Enforcement Measures
If approved by the court, CFPB’s order against Draper lays out the following sanctions and corrective actions to address its alleged discriminatory practices:
- Ban on Residential Mortgage Lending for Five Years: Draper will be prohibited from conducting any mortgage lending activities or earning compensation related to residential mortgage loans during this period.
- Financial Penalty: The company is required to pay $1.5 million in civil penalties to the CFPB’s victims relief fund. This fund is used to provide restitution to those harmed by violations of consumer protection laws.
Broader Implications
The CFPB’s action against Draper underscores continued challenges in addressing discriminatory practices in lending. Redlining, a historically entrenched issue, has long denied access to homeownership and wealth-building opportunities for communities of color. This latest enforcement effort highlights the agency’s commitment to holding financial firms accountable for actions that exacerbate economic disparities.
Mortgage lenders play a critical role in expanding equitable access to housing markets. Instances of systemic exclusion, as seen in Draper’s alleged practices, not only undermine public trust but also perpetuate financial inequality. The CFPB’s strict penalties send a strong signal that discriminatory tactics will not be tolerated.
For the affected communities in Chicago and Boston, the CFPB’s order aims to bring some measure of accountability while signaling the importance of fair lending standards across the industry. The action also serves as a reminder to other financial institutions to review their practices and ensure they meet the legal and ethical expectations of equitable service delivery.
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