After Resistance, GFI Mortgage Settles with DOJ

New York-based ""GFI Mortgage Bankers Inc.,"":http://gfimortgage.com/index.html reached a $3.5 million settlement with the ""Department of Justice"":http://www.justice.gov/ regarding discriminatory lending practices Tuesday.

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The lawsuit, filed in a Manhattan federal court, alleged GFI priced ""residential mortgage loans for qualified African-American and Hispanic borrowers higher than for similarly-qualified non-Hispanic white borrowers between 2005 and 2009,"" according to the ""DOJ."":http://www.justice.gov/opa/pr/2012/August/12-crt-1052.html

GFI ""allowed its loan officers to make subjective and unguided pricing adjustments to home mortgage loans that were not based on a borrower's objective credit characteristics,"" according to the ""consent order"":http://www.justice.gov/iso/opa/resources/663201282893646754668.pdf file Monday in a New York Southern District Court.

GFI admitted there were ""significant disparities"" between loans offered to African-American and Hispanic borrowers and non-Hispanic white borrowers, according to the DOJ's press release Tuesday.

""The company also admitted that it provided financial incentives to its loan officers to charge higher interest rates and fees to borrowers,"" the DOJ stated.

""This type of practice has no place in the mortgage market,"" said John, Trasvi├âãÆ├é┬▒a, assistant secretary with ""HUD."":http://portal.hud.gov/hudportal/HUD

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""HUD and the Justice Department have made a vigorous commitment to ending unlawful lending discrimination,"" Trasvi├âãÆ├é┬▒a added.

The settlement will compensate about 600 borrowers who were treated unfairly and requires GFI to establish new pricing guidelines that eliminate the personal discretion allowed to individual loan officers.

After launching an investigation in June 2007, HUD reported GFI to DOJ in January 2010. When DOJ filed suit in April 2012, GFI initially ""filed"":http://www.dsnews.com/articles/gfi-moves-to-dismiss-doj-fair-lending-suit-2012-06-04 a motion to dismiss the case.

""This lawsuit advances very aggressive and untested enforcement theories,"" said Andrew L. Sandler, GFI's lead defense attorney. Sandler stated that GFI ""look[ed] forward to the opportunity to challenge DOJ's flawed legal theories and factual allegations.""

However, after the court declared it was ""skeptical"" federal laws allows loans to be priced with such wide discrepancies as seen at GFI, the lending company changed its tune and settled the suit.

The case is one of the latest actions from the ""Financial Fraud Enforcement Task Force,"":http://www.fincen.gov/fraudenftaskforce.html initiated by President Obama in 2009.

""The Justice Department will not hesitate to litigate against lenders to enforce federal fair lending laws where the evidence warrants,"" stated Thomas E. Perez, assistant attorney general for the DOJ's Civil Rights Division.

""With the settlement we announce today, the hundreds of victims of lending discrimination committed by GFI will be made whole, and the company has admitted the conduct that led to this lawsuit, and agreed to reform its residential lending practices,"" said Preet Bharara, U.S. Attorney for the Southern District of New York.

GFI did not immediately return a request for comment on the settlement.