CFBP’s Investigation into Mortgage Company Discriminatory Lending Practices Presents New Whistleblower Opportunities
The Consumer Financial Protection Bureau (CFPB) sent warning notices to 44 mortgage companies and lenders warning them that they may be out of compliance with federal mortgage data reporting requirements. The CFPB uses this information to ferret out discriminatory lending practices.
According to the notice , the agency already has information that the targeted companies are not in compliance. The CFPB has not published the names of the companies receiving the warning letters, however.
The Home Mortgage Disclosure Act of 1975 and Regulation C require for profit lenders to collect and report loan data. The law does not apply to banks, savings associations or credit unions, however. Those entities are regulated separately.
Whistleblower Awards for Reg C and Anti Discrimination Violations
The notices were all sent from the CFPB’s Fair Lending Director. Although the notice says that receipt of the letter is not an indication that the recipient is guilty of any violation, the notice also says that the agency isn’t waiving its rights to seek penalties for any wrongdoing.
Under the federal False Claims Act, any fraud or wrongdoing in connection with federally insured home loans may be a violation of the Act. Since most home mortgages are backed by the FHA, Fannie Mae, the VA or Freddie Mac, a violation of federal anti-discrimination laws could also violate the False Claims Act. Under that law, a whistleblower with inside information about violations of mortgage discrimination laws could receive between 15% and 30% of whatever the government collects from the wrongdoer.
In 2012, Wells Fargo settled discriminatory lending practice charges brought by Shelby County, Tennessee. While the case was pending prosecutors discovered that some Wells Fargo employees referred to minority customers as “mud people” and subprime loans as “ghetto loans.”
Wells Fargo tried getting the case dismissed but the court refused. After the judge found that the data suggested significant disparities in loan pricing between minority and white communities, the case settled.
Wells Fargo isn’t alone. Countrywide Financial, one of the largest subprime lenders, agreed to pay $335 million in damages for its discriminatory practices.
A bank employee or other insider with knowledge of discriminatory practices could see a large whistleblower award. With the CFPB hot on the trail of non-bank lenders, the time is right to step forward.
Forms of Racially Biased Mortgage Loan Discrimination
Years ago, some lenders refused to write loans in certain areas considered to be a high credit risk. Rather than rate each borrower by their own creditworthiness, lenders would draw a line round certain neighborhoods and refuse to even consider a loan application from those with an address in the targeted neighborhood. This practice became known as redlining. The people living within those red lines were often disproportionately minority.
Today redlining is quite rare. It has been replaced by “reverse redlining,” however. In this scenario, people in certain neighborhoods or of a particular race are offered loan with higher fees or less advantageous terms.
Obviously race, ethnic status or national origin should never have any bearing on how loans are offered. Even in 2016, however, discrimination appears alive and well in some sectors of the mortgage industry. If you have inside information about these schemes, you may be entitled to a large whistleblower award.
To qualify for an award, one must be the first to file a sealed complaint in federal court. We can investigate your claims, file the action and present the case to federal prosecutors. Thereafter we can directly prosecute or work with the Justice Department and assist in their prosecution of the claim.
In the last several years our mortgage industry whistleblower clients have received over $100 million in awards. The next award could be yours.
For more information, please contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries kept strictly confidential.
Mahany Law – America’s Whistleblower Lawyers