Accubanc Mortgage Corp., Dallas, agreed Friday to make $2.148 billion in loans to low-income borrowers to settle fair-lending charges.
The Department of Housing and Urban Development had charged that the mortgage company prequalified minority borrowers for substantially smaller loans than similarly situated white borrowers.
Accubanc's practices were monitored in eight reviews by white and minority testers in Fort Worth and Dallas. In one instance a minority tester was prequalified for an $85,000 loan while a white tester with a less favorable financial record was told he would get a loan of $110,000 to $150,000.
"It's discrimination with a smiling face," HUD Secretary Andrew Cuomo said-and, he added, it is "pervasive."
Gene M. Lugat, senior vice president at Accubanc, said the mortgage company does not believe discriminatory lending practices are "widespread," but he said it settled because it wanted to be proactive on lending bias issues.
Mr. Cuomo, who noted the deal came the day before the 30th anniversary of the assassination of civil rights leader Martin Luther King Jr., said the settlement is the start of a major crackdown. He said HUD would increase the use of testers to root out institutionalized lending bias. He also said HUD would step up its enforcement of the Fair Housing Act, which Congress passed as a tribute to Dr. King five days after his death.
"Abide by the law," Mr. Cuomo advised lenders. "If there's discrimination in housing, if there's discrimination in mortgage lending, we will find it."
The Accubanc complaints were filed with HUD by the Fort Worth Human Relations Commission and the City of Dallas. The money will be spent over three years.
As part of the agreement, Accubanc, a unit of IFS Financial Corp., will more than double its loans to the targeted groups, making a total of $2.12 billion in mortgages.
It will also spend an additional $12 million to subsidize mortgage rates and help homebuyers with down payments, closing costs, appraisal fees, and mortgage insurance premiums. That would be twice last year's spending.
For the first time, Accubanc will also advertise to minorities and send its loan officers and managers to workshops on fair-lending practices. u
