A senior loan officer posing with colleagues in front of a Confederate flag.
Loan officers exchanging company emails proclaiming: "Proud to be White."
Mortgage officers swapping racist images and racial slurs while referring to some Philadelphia neighborhoods as "the hood," or "ghetto."
Modern-day redlining takes many forms and — in the eyes of the Consumer Financial Protection Bureau and the Department of Justice — emails and photos exchanged by mortgage loan officers are seen as proof, along with key lending statistics, of
The
The settlement with Trident is part of a flurry of exams and investigations that CFPB Director Rohit Chopra has launched since January focused on fair lending and redlining by banks and mortgage lenders, lawyers said.
The CFPB often requests documents such as emails as part of routine lending exams. But emails can provide a smoking-gun for regulators.
"There's a lot of redlining exams of mortgage lenders going on around the country and if a lender is asked by an examiner to produce emails, they should not take it lightly," said Daniella Casseres, a partner and head of the mortgage regulatory group at Mitchell Sandler.
Ken Thomas, a longtime banking consultant and the president of Community Development Fund Advisors, said mortgage lenders should be held accountable — as banks are — for specific lending requirements in minority areas under the Community Reinvestment Act.
"The crackdown has begun in both CRA and fair lending, and it is in full gear now," Thomas said.
The CFPB said it is working with its government partners to combat illegal redlining by mortgage lenders.
"As part of that effort, the bureau reviews bank and nonbank communications for employee statements that reflect discriminatory content, including emails," a CFPB spokesman said.
Though Trident ceased originating loans in 2020, its lending operations, former employees and office locations were taken over by Prosperity Home Mortgage, a separate but affiliated mortgage lender, whose parent company, HomeServices of America, is also a subsidiary of Berkshire.
During the financial crisis, nonbank mortgage lenders were sometimes compared to the whack-a-mole carnival game because they would go out of business after being hit with state or federal regulatory enforcement actions only to resurface under a new name with many of the same personnel. In Trident's case, the company rebranded to become Prosperity Home Mortgage, which "employs or offered employment to almost all of Trident's former employees, took over Trident's offices … and continues, without interruption, to provide mortgage services to customers in the same manner that Trident provided mortgage services," according to the July consent order.
The CFPB found that Trident significantly underperformed its peers in lending in Philadelphia from 2015 to 2019. Trident originated 12% of home loans in majority-minority areas, compared with 21.5% by peers in the same area during that period, the bureau said.
But in addition to those already poor lending statistics, the emails and photos in the Trident case provide regulators with valuable insight as to the motive and intent behind a lack of lending to minority borrowers, lawyers said.
In its consent order, the CFPB cited a photo emailed by Trident's lending staff that showed a 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 the photo, Trident "took no disciplinary action" against the official or other employees, the CFPB said.
On another occasion, a Trident assistant loan officer received an email under the subject "Being White, reminder" that was forwarded by other employees. One employee's email response was: "There is nothing improper about this email. ... But let's see which of you are proud enough to send it on. I sadly don't think many will."
The emails and photos are reminders, mortgage experts said, that lenders should increase training and oversight.
"It's a wake-up call for the mortgage industry when you have thousands of sales people and it is impossible to control their individual prejudices and what they say on social media," said Dave Stevens, the CEO of Mountain Lake Consulting and a former head of the Federal Housing Administration and the Mortgage Bankers Association. "Independent mortgage bankers ought to really step up the obligatory training for all employees around diversity and increase their operational oversight of social media and emails that pass through the company's server, to make sure this outrageous crap doesn't happen."
Nearly all mortgage lenders use compliance software, their own internal auditing and internal quality reviews to identify red flags from a fair-lending perspective.
Mortgage lenders also are being advised to get to know their Home Mortgage Disclosure Act data and to have a strategy to mitigate findings and respond.
In the Trident case, Casseres said, "Some emails implied that loan officers and real estate agents wanted to avoid going into certain areas."
She suggested that mortgage lenders review their marketing strategies and ensure home loans are being advertised in minority areas. Casseres said the emails played a big role in the dollar amount of the settlement and in triggering the referral to the Department of Justice.
Jeff Gentes, managing attorney at the Connecticut Fair Housing Center, said internal emails can be helpful to regulators in proving "willfulness" on the part of employees and also provide insight into a company's culture.
"If a regulator told the company to shape up and nothing changed, then in that context, a company is put on notice," said Gentes, whose nonprofit sued Liberty Bank, a $7.5 billion-asset lender in Middletown, Connecticut, in 2018 for redlining, resulting in a $15 million
Trident now only exists as a legal entity to fund an $18.4 million loan subsidy program, subject to the CFPB's approval, said Liz Litin, a HomeServices of America spokeswoman.
Nearly all of Trident's loan officers worked in the real estate offices of Fox & Roach, a company also owned by Berkshire that was cited in the CFPB and Justice Department settlement and is still operating.
Trident is required to hire an independent third-party credit-needs-assessment consultant in the next month, according to the settlement.
Despite the settlement, HomeServices of America disputed regulators' allegations of redlining and discrimination.
"We do not tolerate discrimination in any form," the company said in a statement. "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."
