April 2 (Bloomberg) -- GFI Mortgage Bankers Inc. was sued by the U.S. Attorney’s office in Manhattan for allegedly engaging in a pattern of discriminatory lending practices against African-American and Hispanic borrowers.
GFI Mortgage is a mortgage lender that describes itself on its website as “one of the largest licensed home mortgage firms” and says it has lent out more than $1 billion in mortgages. Manhattan U.S. Attorney Preet Bharara’s office said in a lawsuit filed today in federal court in New York that the company engaged in a “pattern or practice of discrimination on the basis of race and national origin” in making hundreds of loans from 2005 to 2009.
GFI Mortgage, which the U.S. says is licensed in seven states and operates 13 branches, charged higher loan prices to African-American and Hispanic borrowers than it charged to similarly situated white borrowers by charging higher interest rates and fees for home mortgage loans, Bharara’s office alleges.
“At a time when so many American homeowners of all races and nationalities are struggling to make their mortgage payments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers paying higher fees,” Bharara said in a statement.
$768 Million Revenue
A voice-mail message left at GFI’s New York office in Manhattan after business hours wasn’t immediately returned.
GFI Mortgage also provided “strong financial incentives” to loan officers to price their loan products as high as possible by compensating them with a percentage of the profits they generated on each loan, the U.S. said. As a result, the number of home mortgage loans which GFI Mortgage issued increased from 974 in 2005 to 2,270 in 2009, prosecutors alleged.
At the same time, its revenue from home mortgage loan services increased from $305 million in 2005 to $768 million in 2009, the U.S. said.
African-American borrowers who took out home loans in 2007 paid on average $7,500 more during the first four years of their loans as compared with similarly situated white borrowers, prosecutors said.
Hispanic borrowers paid $5,6000 more during the first four years of their loans as compared with similarly situated white borrowers, Bharara’s office said.
Bharara’s office seeks a declaration that GFI Mortgage’s practices were illegal, a court order against further discrimination, compensatory damages for victims of the firm’s discrimination as well as other unspecified civil penalties.
The case is U.S. v. GFI Mortgage Bankers Inc., 12-CV-2502, Southern District of New York (Manhattan).
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