In a story being widely reported across the media, banking giant J.P. Morgan Chase & Co. has agreed to a $55 million settlement with the U.S. Department of Justice in the face of allegations that the bank discriminated against minority borrowers by allowing mortgage brokers to charge them more for home loans. The DOJ’s complaint accuses J.P. Morgan Chase of willfully violating the Fair Housing Act and the Equal Credit Opportunity Act between 2006 and 2009, showing what is described as “reckless disregard” for the rights of over 50,000 Hispanic and African-American borrowers.
The complaint focuses on “wholesale loans,” made through independent mortgage brokers the bank used; JP Morgan allowed the brokers to change the rates from those originally set by objective credit-related factors. The result was that minorities got charged more for home loans than white borrowers with the same credit profiles, resulting in tens of millions in additional mortgage costs. The complaint further notes that the bank did not require these mortgage brokers to document any reasons for the altered rates and failed to address racial discrimination, encouraging that discrimination to continue.
Reuters points out that the settlement comes in the wake of Wells Fargo’s $175 million settlement over similar charges and that “Cities around the country, including Miami, Baltimore and Los Angeles, also have filed lawsuits claiming that major banks targeted minorities for high-cost loans that often ended in foreclosures.”
You can read the Reuters article, read the USA Today article, and read the Wall Street Journal article (subscription). Explore this website for more information on the ongoing anti-discrimination lawsuits by cities against the major U.S. banks.