NEW YORK (AP) — A Pennsylvania mortgage company owned by billionaire businessman Warren Buffett has discriminated against potential Black and Latino homebuyers in Philadelphia, New Jersey and Delaware, the Justice Department said Wednesday, in what is being called the second settlement. largest of red lines. in the history.
Trident Mortgage Co., a division of Berkshire Hathaway’s HomeServices of America, deliberately avoided issuing mortgages in majority-minority neighborhoods in West Philadelphia like Malcolm X Park; Camden, NJ; and in Wilmington, Delaware, the Justice Department and the Consumer Financial Protection Bureau said in their settlement with Trident.
As part of the settlement with the government, Trident will have to set aside $20 million to make loans in underserved neighborhoods.
“Trident’s illegal redlining activity denied communities of color equal access to residential mortgages, robbed them of the opportunity to build wealth, and devalued property in their neighborhoods,” said Kristen Clarke, Assistant Attorney General for the Division of Civil Rights of the Department of Justice, in a prepared statement.
Sen. Vincent Hughes, a Democrat from Philadelphia, grew up a few blocks from West Philadelphia Park, where a news conference on the deal was held Wednesday. Hughes said parts of his life have been framed by discriminatory lending practices that keep black and Latino communities from building wealth.
Hughes’s father worked for one of the oldest black-owned savings and loans, a company called Berean that financed mortgages for black families when other banks and lenders turned them down.
“Some people have come up to me and said, ‘Vince, your dad gave me a mortgage on my first house when I was turned down on all the others. If it wasn’t for Berean and your dad, I wouldn’t have been able to buy my house,” Hughes said. “We witnessed that discrimination in real time.”
Redlining is a term used to describe when banks deliberately avoid lending to non-white communities. Banks and the US government used to draw on maps in red marker those neighborhoods that were deemed undesirable for home loans. The neighborhoods were almost always areas where racial minorities lived, and even included other historically discriminated communities, such as Jewish neighborhoods.
The practice effectively cut off entire communities from the main path to wealth generation in the US: home ownership. To this day, Black and Latino households are much less likely to own their home than their White counterparts.
The alleged redlining activity occurred between 2015 and 2019: Trident stopped giving out mortgages in 2020. In addition to avoiding giving out mortgages in minority neighborhoods, Trident employees made racist comments about lending to Black homebuyers, calling certain neighborhoods ” ghettos”. A Trident manager was photographed posing in front of the Confederate flag. The marketing materials used by Trident exclusively involved white people, and nearly all of the company’s staff were white.
Josh Shapiro, Pennsylvania’s attorney general, who is running for governor, called Trident’s behavior “systematic racism, pure and simple.”
Philadelphia has a long history of racism toward black homebuyers. the The Philadelphia City Council released a report Wednesday which found that 95% of all home appraisers in the city were white and a racial gap remains between how black-owned homes are valued versus white-owned homes.
Hughes said he and other lawmakers were furious over the revelations by Trident and others about red lines in a 2018 investigation to be revealed in Buffett’s mortgage companies. Shapiro was pressured during an appropriations hearing, and the Attorney General responded by setting up a hotline to collect personal stories.
As part of the settlement, Trident agreed to hire mortgage loan officers in affected neighborhoods and pay a $4 million fine. Since Trident no longer operates a lending business, a separate company will be contracted to provide the $20 million in loan subsidies, the Justice Department said.
The largest redline case involved Wisconsin-based Associated Bank, which was accused of discriminatory practices between the years 2008 and 2011. The bank settled with regulators in 2015 for $200 million.
The Trident settlement also involves the first red line case against a non-bank mortgage lender. Since the Great Recession, about half of all mortgages in the country are underwritten by companies that immediately sell the mortgage to investors. These non-bank lenders include firms like Quicken Loans, Rocket Mortgage, and Loan Depot, among many others.
“Credit discrimination is illegal regardless of whether the offending company is a traditional bank or a non-bank lender,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.
In a statement, HomeServices of America said it “strongly disagrees” with the Justice Department’s and CFPB’s findings in the settlement, noting that Trident did not have to admit wrongdoing as part of the case. Buffett himself did not immediately respond to a request for comment, but has historically deferred comment to Berkshire subsidiaries.
Hughes said he had no personal experience with Trident, but said he was not surprised to learn that the company’s statement after the deal was announced denied any wrongdoing.
“That’s what these companies do, right? None of them admit it, they just end up paying the money,” she said.
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AP reporter Claudia Lauer contributed to this report from Philadelphia. AP business writer Josh Funk contributed from Omaha, Nebraska.
