Mortgage lender to pay nearly $10M to settle 'redlining' allegations in Black neighborhoods

Oct. 15 (UPI) -- Fairway Independent Mortgage Corporation agreed to pay $8 million and a $1.9 million civil penalty to settle allegations of redlining mostly Black neighborhoods in Birmingham, Ala.

The Department of Justice Consumer Financial Protection Bureau jointly announced the settlement Tuesday and said the settlement came about through the DOJ's Combating Redlining Initiative .

"This settlement marks the Justice Department's 15th redlining settlement in three years," Attorney General Merrick Garland said Tuesday in a news release . "The department has secured a historic amount of relief that is expected to generate over $1 billion in investment in communities of color in places such as Houston, Memphis, Los Angeles, Philadelphia and Birmingham."

The DOJ and CFPB accused Fairway of redlining Black neighborhoods in Birmingham by discouraging the residents of such communities from applying for mortgage loans.

Garland said the DOJ has secured more than $150 million in relief for communities throughout the nation, including a recent $13.5 million settlement by First National Bank of Pennsylvania.

"This case is a reminder that redlining is not a relic of the past," Garland said. "The Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for communities harmed by it."

Redlining dates back the President Franklin Roosevelt 's administration and was put into practice in 1934 following the creation of the Federal Housing Administration, which immediately used redlining to deny mortgages to Blacks and continued the practice into the 1960s, according to the Federal Reserve .

The FDR administration required FHA officials to ensure only "economically sound" loans were made to home buyers and concluded loans weren't sound if made for properties located in or near neighborhoods that might become populated by Blacks, the Federal Reserve says.

The settlement announced Tuesday requires Fairway to provide $7 million for a loan subsidy program and invest another $1 million to support the loan subsidy program that offers affordable mortgages, refinancing and home-improvement loans in majority-Black neighborhoods in Birmingham.

Fairway also will pay a $1.9 million civil penalty that will go into the CFPB's victims relief fund.