Acting New Jersey Attorney General Matthew Platkin describes the settlement as historic. It requires the brokers to create and advertise a loan subsidy fund to support ‘majority-minority’ neighborhoods.
By Matt Skoufalos | July 27, 2022
Seal of the New Jersey Office of the Attorney General. Credit: NJ-OAG.
The former home mortgage lending arm of a major tristate real estate brokerage has agreed to a historic, $20.4-million settlement with the New Jersey Office of the Attorney General (OAG) over allegations of racially discriminatory lending practices.
According to Acting New Jersey Attorney General Matthew Platkin, Trident Mortgage Company, at the time a wholly-owned subsidiary of Fox and Roach, allegedly engaged in redlining throughout the greater Philadelphia metro area, including in Burlington, Camden, and Gloucester Counties in New Jersey.
The settlement alleges that Trident “avoided providing credit services in majority-minority census tracts in those counties because of the race or national origin of the people who live there, thereby deterring Black and brown borrowers from obtaining loans in those places,” according to Platkin’s announcement.
Redlining dates back to the 1930s, when the U.S. federal government routinely labeled neighborhoods with large concentrations of non-white residents as risky to lenders, which had the effect of cutting off those neighborhoods from economic growth, and denying potential borrowers access to the financial services that would allow them to become homeowners.
Contemporarily, redlining is still a concern in communities “with high percentages of African Americans, Hispanics, or other marginalized racial and ethnic minorities” affected by the systematic behavior, Platkin’s release noted.
“The practice deprives such areas and their residents of adequate credit,” it read. “The lack of competition also makes residents of redlined neighborhoods vulnerable to unscrupulous, predatory lending.”
Fox & Roach got its start in Philadelphia, expanded into Haddonfield, and today is headquartered in West Trenton. The office of Pennsylvania Attorney General Josh Shapiro began investigating Trident four years ago, and the attorneys general of both New Jersey and Delaware joined the suit thereafter. Their work was paralleled by a federal investigation from the Consumer Financial Protection Bureau and U.S. Department of Justice.
Settlement
Under terms of the settlement with New Jersey, Trident will create an $18.4-million fund to provide as much as $10,000 to any qualified applicant seeking a loan to buy, refinance, or improve a home they own in a majority-minority neighborhood. The fund can be used to subsidize a reduction in mortgage interest rates, cover down payments or closing costs, initial mortgage insurance premium payments, and more.
The OAG estimates that the $18.4-million loan subsidy program “could spur hundreds of millions of dollars in total lending in the Camden-Philadelphia- Wilmington region,” according to its statement announcing the agreement.
Trident must also spend an additional $875,000 to advertise the loan subsidy fund to prospective applicants, $375,000 more on consumer financial education, and another $750,000 to establish a Community Development Partnership Program that will fund local, community-based, or governmental partnerships to extend credit to qualified borrowers.
Trident also must pay $250,000 to the New Jersey Division on Civil Rights and must open four new branch locations in majority-minority neighborhoods, including “within the Camden area.”
Fox & Roach will assist Trident “in facilitating increased access to residential mortgages,” according to the OAG announcement. Fox & Roach must also establish a $150,000 fund with which “to conduct targeted marketing to qualified applicants seeking loans for primary homes in the majority-minority neighborhoods that were previously underserved by the company.”
Both Trident and Fox & Roach are prohibited from engaging in any practice that constitutes redlining, and must provide “outreach and equally attentive customer service to residents of the region’s race-based majority-minority neighborhoods,” the statement reads. The companies will be subject to five years of compliance monitoring, and must also undergo anti-bias training.
HomeServices of America, Inc., the corporate parent of both Trident and Fox & Roach, “has guaranteed compliance with the agreement,” the statement noted. HomeServices is in turn owned by Berkshire Hathaway of Omaha, Nebraska.
In a written statement, HomeServices noted that, under terms of the settlement, “there has been no finding of wrongdoing by Trident.
“Trident’s mission and culture always reflected unwavering integrity and a commitment to fairness to all. We do not tolerate discrimination in any form. We strongly disagree with the agencies’ interpretation of Trident’s prior lending practices. Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race. We are committed to continuing to work to find more ways to serve homebuyers in every community we serve.”
According to the complaint, Trident claims to have discontinued its mortgage origination business, having handed off its lending operations to its affiliate, Prosperity Home Mortgage, as of April 8, 2021.
However, the document also noted that Prosperity “employs or offered employment to almost all of Trident’s former employees, took over Trident’s offices that are co-located with its affiliate Fox and Roach LP (Fox & Roach), and continues, without interruption, to provide mortgage services to customers in the same manner that Trident provided mortgage services.”
Investigation
According to the complaint, Trident rented space in Fox & Roach offices exclusively. Of the 53 Fox & Roach offices in which Trident operated, 51 were in predominantly white neighborhoods, despite nearly 30 percent of the census tracts in the Philadelphia metropolitan statistical area (MSA) being majority-minority neighborhoods. The other two offices were located in nominally majority-minority areas composed of 53 percent and 52 percent minority residents, respectively.
“From 2015 through 2019, Trident’s offices were located to serve the credit needs of residents in majority-white neighborhoods, and to avoid serving the credit needs of residents in majority-minority and high-minority neighborhoods,” the complaint noted.
“By concentrating nearly all its offices in majority-white areas, Trident discouraged residents of majority-minority areas from applying for and obtaining home loans from Trident and restricted their access to credit,” it read.
“Trident did not assign any loan officers to solicit applications in majority-minority communities, and failed to train or incentivize its almost exclusively white loan officers to lend in majority-minority areas.”
The complaint also alleged that Trident was anything but a diverse workplace: of its 68 Philadelphia MSA mortgage loan officers from 2015 to 2019, only four were non-white. From 2015 to 2017, Trident also employed 50 assistant loan officers; of the 40 for which they had racial and ethnic information, 36 were white.
“Trident hired new loan officers based on word of mouth and recommendations from its existing mostly white loan officers,” the complaint read. “The existing loan officers were experienced with serving, and had ties to referral sources largely in, majority-white areas.
“Trident did not make efforts to hire loan officers experienced with serving, or with ties to referral sources in, the majority-minority portions of the Philadelphia MSA,” it noted. “Trident maintained no formal policies or procedures for recruiting new mortgage loan officers.”
Neither did Trident advertise to majority-minority communities. According to the complaint, the company primarily marketed its services through Fox & Roach real estate agents, sent the vast majority (92 percent) of its direct-mail advertising to potential customers in majority-white neighborhoods, and “made virtually no effort to market to residents of majority-minority neighborhoods,” from at least January 2015 to May 2018.
Those marketing materials “contained advertising material with images of exclusively white-appearing models, or white loan officers,” which the complaint alleges “discouraged residents in majority- and high-minority neighborhoods, or those seeking credit in those neighborhoods, from seeking credit from Trident in the Philadelphia MSA.”
Perhaps most damning, the complaint alleges that Trident loan officers communicated “racial slurs and racist content” through their work e-mail accounts, “some of which indicated an intention to avoid lending in majority-minority neighborhoods.”
From references to certain properties being “in the ghetto,” to a racist chain e-mail circulated by a Trident loan officer encouraging recipients to “BE PROUD TO BE WHITE!” to an e-mail of racist imagery entitled “YOU KNOW WHEN YOU’RE IN THE HOOD,” the complaint alleges that Trident and Fox & Roach supported an environment in which such communication was commonplace.
The complaint also described a photograph that circulated in 2019 showing a Trident Senior Vice President and General Sales Manager, “whose responsibilities included hiring and overseeing loan officers, posing with others in front of a Confederate flag.
“Upon learning of this photo, Trident took no disciplinary action against this Senior Vice President or the lending employees who circulated the photo,” it noted.
The complaint also alleges that “even when Trident made loans in majority-minority and high-minority areas, the loans themselves were disproportionately made to white borrowers,” with more than 38 percent of loans made to white borrowers in high-minority census tracts, and more than 57 percent of loans made to white borrowers in majority-minority census tracts.”
The company was allegedly also aware of its behavior, according to the complaint, having received “at least six separate reports from third-party vendors engaged to report on Trident’s fair lending performance” that “consistently informed Trident that its application volume from Black and Hispanic potential borrowers, as well as for properties in high-minority and majority- minority neighborhoods, was low relative to both the overall population and to the performance of its peers.
“Before the Bureau informed Trident that it would be subject to a fair lending examination, Trident took no meaningful action in response to these analyses,” the complaint noted.
Those alleged behaviors resulted in charges of Trident and Fox & Roach violating the U.S. Fair Housing Act, the Equal Credit Opportunity Act, and the Consumer Financial Protection Act.
Follow these links for more information on the settlement, the complaint, or administration of the relief program.
