Dive Brief:
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JPMorgan Chase is set to pay $55 million to settle a lawsuit with the U.S. Justice Department amid claims that the bank discriminated against black and Hispanic mortgage borrowers between 2006 and 2009, according to The Wall Street Journal.
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The suit claims that the bank's independent brokers charged more than 53,000 minority borrowers higher interest rates and fees — to the tune of an additional $1,000 each — compared to similarly qualifying white borrowers during the period.
- The brokers were instructed to set the rates based on factors like the down payment amount and borrowers' credit scores, but they could depart from that formula.
Dive Insight:
JPMorgan Chase is not the first big bank to be pursued by the government over allegations of discriminatory practices during and after the latest housing bubble. In July 2012, the Justice Department announced that Wells Fargo Bank had agreed to pay $175 million to settle claims that it charged qualified black and Hispanic borrowers higher rates and fees on mortgages from 2004 to 2009. In June 2015, the department settled with Countrywide Financial Corporation for $335 million over similar practices from 2004 to 2008.
Many industry experts believe the housing collapse hit minorities the hardest, driven in large part by subprime mortgage products. And the consequences of predatory lending practices are still being seen. Homeowners in majority black communities are doubly likely to be in negative equity on their mortgages compared to homeowners in primarily white neighborhoods, according to a recent report by Zillow.
The issue extends beyond lending practices. A lawsuit filed last month against Fannie Mae by U.S. housing groups in a California federal district court claims that the government-backed mortgage lender does not maintain and market foreclosures in primarily black and Latino neighborhoods to the same standards as it does those in primarily white neighborhoods.
The decline in minority homeownership rates lingers, with the Pew Research Center reporting last month that the drop in ownership rates has been most pronounced in households headed by adults younger than 35 years old as well as among blacks and individuals in lower-income tiers.
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