WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) and the Justice Department (DOJ) have taken significant action against Fairway Independent Mortgage Corporation, accusing the company of redlining in majority-Black neighborhoods in the Birmingham, Alabama area. This joint effort underscores the federal commitment to eliminating lending discrimination and ensuring equitable access to credit.
The CFPB and DOJ allege that Fairway, operating locally as MortgageBanc, systematically discouraged mortgage applications from Black neighborhoods in Birmingham through targeted marketing and sales strategies that favored majority-white areas. As a result, homeownership opportunities in these communities were severely hampered, contravening federal laws designed to prevent such discriminatory practices.
The proposed settlement, subject to court approval, mandates that Fairway pay a $1.9 million civil penalty to the CFPB’s victims relief fund and allocate $7 million towards a loan subsidy program. This program aims to facilitate affordable home purchase, refinance, and home improvement loans in the affected neighborhoods, potentially offering benefits such as reduced interest rates and assistance with closing costs.
Attorney General Merrick B. Garland highlighted the broader impact of such settlements, noting that they serve to rectify historical injustices and promote homeownership among communities that have long been marginalized. U.S. Attorney Prim Escalona for the Northern District of Alabama emphasized that this settlement represents a critical victory for communities of color in Birmingham, which have been systematically denied access to essential economic resources.
Fairway’s discriminatory practices included concentrating its retail loan offices in majority-white areas and directing a mere fraction of its marketing efforts towards majority-Black neighborhoods, from 2018 to 2020. Despite data indicating these disparities, Fairway failed to implement corrective measures, leading to a disproportionately low number of loan applications from Black neighborhoods compared to its peer institutions.
The enforcement action, underpinned by the Consumer Financial Protection Act of 2010, highlights the CFPB’s authority to hold institutions accountable for violating federal consumer protection laws. The DOJ’s involvement further reinforces the commitment to combat redlining, a practice that remains prevalent despite being illegal.
Assistant Attorney General Kristen Clarke of the DOJ’s Civil Rights Division reiterated the importance of uprooting modern-day redlining practices, asserting that the settlement serves not only to redress past wrongs but also to create meaningful opportunities for economic advancement in marginalized communities.
As part of the settlement, Fairway will also be required to establish a presence in a majority-Black neighborhood in Birmingham by opening a new loan production or full-service retail office. Furthermore, the company must invest in advertising, consumer financial education, and partnerships with community organizations to rebuild trust and foster financial literacy in areas previously affected by its discriminatory policies.
This landmark settlement is part of the DOJ’s broader Combating Redlining Initiative, which has secured over $150 million in relief for communities nationwide, signaling a robust federal stance against discriminatory lending practices and an ongoing commitment to ensuring justice and equality in access to credit.
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