Warren Buffett’s mortgage company was found to have discriminated against Black and Latino homebuyers in three states in what the Department of Justice said was the second-largest redlining settlement in 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 in a statement released on Wednesday about the historic settlement.
“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,” he added.
Trident Mortgage Co, a division of the billionaire investor’s Berkshire Highway, was found to have deliberately avoided providing mortgages to homebuyers across three states in minority-majority neighbourhoods, including West Philadelphia, Pennsylvania, Camden, New Jersey, and Wilmington, Delaware.
As part of the settlement with the DOJ and the Consumer Financial Protection Bureau (CFPB), Trident will be required to put aside $20m to provide loans to underserved communities in America.
“This settlement is a stark reminder that redlining is not a problem from a bygone era,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division in the statement released Wednesday. “Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth, and devalued properties in their neighborhoods,” she added, noting that the settlement would help ensure that significant resources are rededicated to communities in and around Phildelphia that have “historically experienced racial discrimination”.
Employees of Trident, which stopped writing mortgages in 2020, were accused of making racialised comments when discussing issuing loans for Black homebuyers and had allegedly called certain neighbourhoods in cities “ghettos”, the DOJ alleged.
The federal complaint filed against the company was carried out from at least 2015 to 2019, and the DOJ alleged that Trident didn’t provide mortgage lending services to minority-majority neighbourhoods, its loan officers didn’t serve the needs of communities of colour and a majority of its offices were located in white-majority metropolitan areas.
A manager of Trident, whose parent company is HomeServices of America, also reportedly took a picture next to a Confederate Flag, the complaint alleged.
This redlining settlement is also the first of its kind that the DOJ has reached with a non-bank lender, Delaware Business Now reported.
For at least half a century, there have been laws on the books that sought to curb redlining, the practise where loaners discriminate against homebuyers based on their race or the neighbourhood they live in, but the practise has continued well into the 21st century with long term repercussions being felt in communities across the nation.
For instance, the average net worth a Black family in the US is a fraction of a typical white household, with an average white family being ten times greater – $171,000 – than that of a Black family ($17,150) in 2016, according to the Brookings Institute.
Homes in historically redlined communities have “caused long-run declines in home ownership, house values, and credit scores relative to higher-graded neighborhoods”, the Hamilton Project, an economic policy initiative within the Brookings Institution, found in a report that studied the impact of the racist policy in 1930s US maps.
In addition to the $20m that Trident has agreed to reinvest into historically excluded communities, the company also said it would create an $18.4m loan subsidy for residents of Philadelphia’s metropolitan area who live in minority-majority communities, invest $750,000 into community partnerships that will help increase residential mortgage credit and it will dedicate $375,000 for consumer financial education, the settlement said.
“For far too many years Philadelphia’s Black, Latino, and other communities of color have lacked equal access to lending and legal deed ownership,” said US Attorney Jacqueline Romero for the Eastern District of Pennsylvania in a prepared statement. “I am pleased that my office could support the Attorney General’s Combatting Redlining Initiative through this resolution, and I look forward to our continued partnership with the Civil Rights Division.”
The DOJ and the CFPB jointly investigated the case with the support of the United States Attorney’s Office in the Eastern District of Pennsylvania, and the proposed consent order reached with Trident is subject to court approval.
HomeServices of America, the parent company of Trident Mortgage, said to The Independent in an emailed statement that they “strongly disagree with the agencies’ interpretation of Trident’s prior lending practices”.
“As reflected in the resolution, there has been no finding of wrongdoing by Trident. Trident’s mission and culture always reflected unwavering integrity and a commitment to fairness to all,” a spokesperson for HomeServices of America wrote in an emailed statement. “We do not tolerate discrimination in any form. We strongly disagree with the agencies’ interpretation of Trident’s prior lending practices. Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race.
“The Department of Justice, the Consumer Financial Protection Bureau, the attorneys general of Pennsylvania, New Jersey and Delaware, and Trident Mortgage Company have agreed to facilitate continued expansion of homeownership opportunities for communities of color in the Philadelphia region as well as in Delaware and New Jersey,” the statement added. “We are committed to supporting additional lending that will help to close the racial gap in homeownership.”
