DOJ Accuses National Mortgage Lender of Redlining in Alabama

Federal prosecutors have accused mortgage lender Fairway Independent Mortgage Corp. of discriminatory redlining practices in predominantly Black neighborhoods in Birmingham, AL.

The allegations were made in a joint complaint filed on Tuesday by the Department of Justice and the Consumer Financial Protection Bureau.

The complaint alleged that Fairway redlined Black neighborhoods in Birmingham through its marketing and sales actions, and discouraged residents of those neighborhoods from applying for mortgages. (Redlining is the illegal practice of denying mortgage loans to residents of certain neighborhoods on the basis of those areas’ racial or ethnic composition.)

Fairway, the nation’s fourth-largest mortgage lender by originations, strenuously denies the allegations, but in a settlement agreed to pay $1.9 million in fines and spend $8 million to fund and support a loan subsidy program offering affordable mortgages in predominantly Black areas of Birmingham.

“This case is a reminder that redlining is not a relic of the past, and the Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for the communities harmed by it,” said Attorney General Merrick B. Garland in a statement.

Fairway slams ‘intentionally inflammatory’ redlining claim

In a strongly worded statement, Fairway denied key elements of the allegations, and pointedly claimed that the investigation into its practices in Birmingham had begun “the first full day after the Biden Administration took office.”

“The government agencies’ allegations in today’s complaint, filed days before the impending Presidential election, were provided to Fairway for the first time only after settlement was reached. The complaint significantly mischaracterizes the matter at issue and appears to be intentionally inflammatory in nature,” the statement added.

Fairway says the multiyear DOJ investigation “did not identify any evidence of redlining or other discrimination by Fairway” but instead relied on “quotas” to determine that the share of loan applications the company received from Birmingham’s majority-Black neighborhoods was insufficient.

The government complaint hinges on an analysis alleging that between 2018 and 2022, only 3.7% of Fairway’s loan applications in the Birmingham metro area were for properties in majority-Black areas, compared with 12.2% for Fairway’s peer lenders.

The complaint also alleged that Fairway operated three loan offices in Birmingham during that period and that all three were located in “majority-white areas.” The population of Birmingham is 60% white and 30% Black, according to U.S. Census Bureau data.

In response, Fairway says the government ignored the fact that it took more loan applications—and made a higher number of loans—in majority-Black areas than any other non-bank lender with a physical presence in the Birmingham metro area.

In other words, the company says that even though a smaller share of its total applications came from majority-Black areas than its peers, its actual number of applications and loans in such areas was higher, making it a leading mortgage lender in those areas.

“Fairway vigorously defended itself against the government agencies’ allegations and continues to deny that the company engaged in any discriminatory behavior,” the company said. “Fairway also maintains strong disagreement with the government agencies’ legal and statistical approach to identifying potential discrimination.”

Fairway is headquartered in Madison, WI, and operates in the Birmingham area under the trade name MortgageBanc. The company says that it agreed to the settlement to “resolve the matter and curb the further expenditure of resources.”

A spokesman for Fairway declined to comment further to Realtor.com® when asked if the company believes the allegations in the complaint were politically motivated.

DOJ touts fight against redlining

In a statement, the DOJ said the Fairway settlement marked the department’s 15th redlining settlement since 2021, when it launched a program dubbed the Combatting Redlining Initiative.

With this settlement, the DOJ says the initiative has surpassed $150 million in relief for communities of color nationwide that have experienced lending discrimination.

“The settlement reached with Fairway Mortgage is a win for communities of color here in Birmingham that have historically been denied access to vital economic resources,” said U.S. Attorney Prim Escalona for the Northern District of Alabama.

Birmingham played a key historical role in the civil rights movement of the early 1960s, when it was one of the most racially segregated cities in the U.S. In 1963, a campaign of boycotts and demonstrations aimed at ending segregation in the city culminated in the arrest of Martin Luther King Jr. and striking images of police using dogs and firehoses to attack demonstrators.

Meanwhile, Vice President Kamala Harris, the Democratic nominee for president, has raised the issue of historical redlining on the campaign trail, after making housing affordability a key issue for her campaign.

“We have a history of legal and procedural obstacles to that homeownership, starting with the fact nobody got 40 acres and a mule to redlining issues that this Detroit area and people around the country know to be real,” Harris said during an interview with radio host Charlamagne Tha God on Tuesday.