SunTrust Mortgage Inc., a subsidiary of the nation’s 11th-largest commercial bank, agreed Thursday to pay $21 million to resolve a Justice Department lawsuit accusing the company of a pattern or practice of discrimination that increased loan prices for qualified black and Hispanic borrowers.
The settlement, filed in federal court in Richmond, where SunTrust Mortgage is headquartered, said the discrimination took place for those who obtained loans between 2005 and 2009 through SunTrust Mortgage’s regional retail offices and national network of mortgage brokers.
It comes after a 2 1/2-year investigation, which included the review of company documents and data on more than 850,000 residential mortgage loans.
The Justice Department said SunTrust Mortgage denied wrongdoing but cooperated in the investigation and agreed to settle the matter to avoid costly and potentially risky litigation. The settlement is subject to court approval.
The proceeds of the settlement are to be used to compensate the victims of discrimination.
SunTrust Mortgage’s parent company, Atlanta-based SunTrust Bank, is one of the nation’s largest, with $178 billion in assets and more than 1,600 branches in the South and mid-Atlantic regions, including 26 in the District, 134 in Maryland and 242 in Virginia.
“Today’s settlement demonstrates that the Department of Justice takes seriously its responsibility to investigate mortgage lending practices during the mortgage boom years and, when the evidence shows the law was broken, to obtain compensation for victims of illegal conduct,” said Assistant Attorney General Thomas E. Perez, who heads the department’s Civil Rights Division.
“We will, however, work constructively with responsible lenders like SunTrust Mortgage that are willing to take the necessary steps to ensure equal credit opportunity for all borrowers,” he said in announcing the proposed settlement.
The settlement was filed in conjunction with a complaint accusing SunTrust Mortgage of violating the Fair Housing Act and Equal Credit Opportunity Act by charging more than 20,000 black and Hispanic borrowers higher fees and interest rates than white borrowers - not based on borrower risk, but because of their race or national origin.
Justice Department officials said the accusations involve loans made to black borrowers between 2005 and 2008 through more than 200 retail offices operated by SunTrust Mortgage. The accusations also involved loans to black and Hispanic borrowers between 2005 and 2009 through SunTrust Mortgage’s national network of mortgage brokers.
“Racial and ethnic bias have no place in the lending market,” said U.S. Attorney Neil H. MacBride in the Eastern District of Virginia. “We are pleased that SunTrust Mortgage is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”
According to the lawsuit, SunTrust Mortgage’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors. This “subjective and unguided pricing discretion” resulted in black and Hispanic borrowers paying more, the suit said.
The Justice Department’s investigation into SunTrust Mortgage began in December 2009 after a referral by the Board of Governors of the Federal Reserve to the Justice Department’s Civil Rights Division for potential patterns or practices of discrimination.
“Racial or other illegal discrimination has no place in our credit markets,” said Federal Reserve Board Gov. Elizabeth A. Duke. “We are pleased that this settlement is designed to ensure fair access to credit.”