FTC accuses Golden Empire Mortgage of bias against Latino borrowers
Have mortgage lenders discriminated against minority borrowers by charging them higher interest rates and fees? Fair-lending advocacy groups have long maintained that this is so, and federal consumer protection officials are agreeing in a case involving a California home lender.
The Federal Trade Commission said Monday that it had accused a Bakersfield-based mortgage banking company of charging Latinos higher prices for mortgage loans than it charged non-Latino whites. The agency alleged that the discrepancies could not be explained by applicants’ credit histories or underwriting risk.
A lawyer for the company, Golden Empire Mortgage Inc., disputed the FTC’s methodology and said he would fight the allegations in court.
The FTC lawsuit, filed last week in U.S. District Court in Los Angeles, names as defendants Golden Empire, which has offices throughout California and other Western states, and its owner, Howard D. Kootstra.
Federal law bars creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age or the fact that an applicant’s income is derived from public assistance.
The FTC alleged that the problem stemmed from Golden Empire’s practice of giving its employees and branch managers wide leeway to make more money by charging “overages,” higher fees and interest rates than the borrowers qualified for. The complaint alleged that the practice resulted in Latinos being charged more because of their national origin.
“The defendants allegedly paid loan officers a percentage of the overages as a commission and failed to monitor whether Hispanic consumers were paying higher overages than non-Hispanic white borrowers,” the FTC said in a news release.
The attorney for Golden Empire and Kootstra, Paul F. Hancock of Miami, said the charges resulted from a multiyear investigation by the FTC and focused on an analysis of loans made in 2006, at the height of the housing boom and easy-money era.
Hancock said his analysis of the same data that the FTC subpoenaed did not show that Latinos received significantly worse loans than non-Latino whites when all factors were considered.
The lawsuit, alleging violations of the Equal Credit Opportunity Act, asks the federal court to order Golden Empire to stop its alleged discrimination, repay the borrowers who were overcharged and refund the FTC’s costs in pursuing the case.
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