The brokerages HCI Mortgage and Consumer One Mortgage will pay $665,000 in restitution to minority borrowers for alleged discriminatory lending practices, New York Attorney General Andrew Cuomo said Monday.
Mr. Cuomo also announced he has filed a lawsuit against U.S. Capital Funding LLC in U.S. District Court in Brooklyn for allegedly engaging in similar discriminatory practices.
"The blatant discrimination in this case is as illegal as it is inexcusable," Mr. Cuomo said. "These customers were charged significantly higher fees for no reason other than being a minority — something that is explicitly against the law in New York State."
HCI and Consumer One will pay restitution to about 455 black and Latino borrowers who Mr. Cuomo claims were illegally charged higher fees than similarly situated white customers. The borrowers received the loans between January 2005 and July 2007. The companies collectively operate more than 20 branches in New York State, he said.
A statistical analysis by Mr. Cuomo's office and the New York State Banking Department of loans arranged by HCI and Consumer One concluded that black and Latino borrowers were charged several thousand dollars more in up-front fees than white customers.
As part of the agreements, HCI and Consumer One will adopt a standard fee schedule, internally monitor and analyze the imposition of fees to ensure minority customers are treated fairly, and provide detailed reports to the Attorney General's Office to ensure compliance.
Mr. Cuomo's office, in its lawsuit filed Monday, claims U.S. Capital Funding violated fair-lending laws by charging much higher fees to minority borrowers between January 2006 and July 2007.
The attorney general is seeking restitution for more than 100 minority borrowers and a court order requiring the company to cease discriminatory practices.
The lawsuit claims U.S. Capital Funding charged African-American and Latino borrowers who received a single home mortgage loan 58% more in fees on average than white customers.
The investigations by Mr. Cuomo's office grew out of a prior probe into loans made by GreenPoint Mortgage, a shuttered unit of Capital One Financial Corp.
GreenPoint paid more than $900,000 in restitution to minority customers as part of a March 2007 agreement with Mr. Cuomo's office. The probe revolved around alleged discriminatory pricing by independent brokers who originated mortgages for GreenPoint. Capital One acquired the GreenPoint Mortgage business in December 2006 as part of its $13.2 billion purchase of North Fork Bancorp.