JP Morgan to Pay $55 Million to Settle Mortgage Discrimination Complaint
JP Morgan Chase & Co has agreed a $55 million settlement for a US Justice Department lawsuit. The lawsuit accused the company of discriminating against minority borrowers, allowing mortgage brokers to charge more for mortgages.
The US Justice Department complaint was filed in Manhattan federal court, accusing the bank of willfully violating the Equal Credit Opportunity Act and the US Fair Housing Act between 2006 and 2009. According to the complaint, this showed disregard for the rights of at least 53,000 Hispanic and African-American borrowers.
JP Morgan denies any wrongdoing and has stated it is committed to providing equal access to credit. It has agreed to settle these allegations in relating to pricing set by independent brokers. Apparently, the alleged discrimination involved wholesale loans made through mortgage brokers to the bank used to help originate loans. The bank allowed brokers to change rates charged for loans from those that were initially based on objective credit -related factors. Mortgage brokers were not required to document the reasons for changing rates so the argument is that the company encouraged this discrimination to continue.
This resulted in minorities being charged more for home loans than white borrowers who had the same credit profile. Over the years this resulted in tens of millions of dollars of additional mortgage costs. Over the first five years of a $191,100 loan, an African-American paid an average of $1126 more than a white borrower. On a $236,800 loan, a Hispanic borrower paid an average of $968 more than a white borrower.
The Justice Department has been pursuing a number of cases of alleged discrimination and in one such case, Wells Fargo & Co agreed a $175 million settlement for allegations that it charged Hispanic and African-American borrowers higher rates and fees on mortgages. Around the country, several cities that include Los Angeles, Baltimore and Miami also have lawsuits claiming major cranks have targeted minorities for high-cost mortgages that frequently ended in foreclosure.