FTC accuses lender of overcharging Latinos

Have mortgage lenders discriminated against minority borrowers by charging them higher interest rates and fees? Fair-lending advocacy groups have long maintained that this is so, and federal consumer protection officials are agreeing in a case involving a California home lender.

The Federal Trade Commission said today that it had accused a Bakersfield-based mortgage banking company of charging Latinos higher prices for mortgage loans than it charged non-Latino whites. The agency alleged that the discrepancies could not be explained by the applicants' credit histories or underwriting risk.

A lawyer for the company, Golden Empire Mortgage Inc., disputed the FTC's methodology and said he would fight the allegations in court.

The FTC lawsuit, filed last week in U.S. District Court in Los Angeles, names as defendants Golden Empire, which has offices throughout California and other Western states, and its owner, Howard D. Kootstra.

Federal law bars creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age or the fact that an applicant's income is derived from public assistance.

The FTC alleged that the problem stemmed from Golden Empire's practice of giving its employees and branch managers wide leeway to make more money by charging "overages," higher fees and interest rates than the borrowers qualified for. The complaint alleged that the practice resulted in Hispanics being charged more because of their national origin

"The defendants allegedly paid loan officers a percentage of the overages as a commission and failed to monitor whether Hispanic consumers were paying higher overages than non-Hispanic white borrowers," the FTC said in a news release.

The attorney for Golden Empire and Kootstra, Paul F. Hancock of Miami, said the charges resulted from a multiyear investigation by the FTC and focus on an analysis of loans made in 2006, at the height of the housing boom and easy-money era. 

Hancock said that, by the government's traditional standard for comparing loans, the annual percentage rate, that Latinos did not receive "materially different" loans after factoring in the prevailing costs of loans in different areas, the types of loans received and the credit histories of the borrowers.

The lawsuit, alleging violations of the Equal Credit Opportunity Act, asks the federal court to order Golden Empire to stop its alleged discrimination, repay the borrowers who were overcharged and refund the FTC's costs in pursuing the case.

--E. Scott Reckard

Comments

[NewtoLA]

Let me attack my friends on the left and right simultaneously on this one. Assuming this story is true, this is the kind of action that defines racism. But without an outward declaration of hatred of Latinos, it doesn't receive that attention. So while this is the kind of behavior that the Sharpton's of the world should identify and illuminate, they spend far too much time looking for the "racist" police shooting, or "racist" politician/public figure who mispeaks. Those on the right look at this and say "no evidence of hatred, must not be racist." The shame in all this is that the civil rights movement was never about love and friendship. It was about equal treatment under the law. Unfortunately, we're still turning over every rock looking for the "racist." As a result, Imus and Lott lose their jobs, and Sharpton and well meaning Republicans can declare that they all want to eliminate racism. Big deal! Latinos in CA are paying too much for their mortgages. Fix that Al!

[Nelcisco]

I never heard of Golden Empire, sounds like a broker, very
typical of brokers to do when minority borrowers come into the scene, my guess is that the latino borrowers in this case are illegal immigrants that didn't know the difference between LTV and DTI, therefore should never have taking out a home loan.

I speak fluent spanish so I've had my share of latino borrowers and bless their souls, all they want is a piece of the
American dream, my frustration with them is that they've been accomodated to where they don't need to learn to speak english all, thats OK if they're going to a fast food resturant
and understand that a burger cost x number of dollars, because five bucks in english is five bucks in spanish but loan docs are in english, I've held alot of hands and done alot of interpreting from taking a 1003 to attending the siging at closing at a title company, its like a dad showing his child his/her ABCs for the first time, so can one see how these poor folks are taken advantage of by these vermon??

Which leads to why loan mods are very important at times like these, it had its critics early on even by alot you.

Use an attorney based loan mod company that has the power to send a qualified writen request on an attorney letter head to the lender to hand over the original loan docs and do a forensic audit on them. that will show all the violations that Empire or the original lender committed under R.E.S.P.A and use it as leverage to modify the loan, if not., sue them.

[PeteR]

According to the complaint, the company's lending records simply showed that Hispanics paid more for their mortgages than did whites. Barring any evidence whatsoever of racial animosity, couldn't one just as easily argue that the explanation for this pattern is that Hispanics were more easily convinced by the loan officers into paying more? Perhaps the Hispanic customers were bad negotiators, or pushovers or just uninformed or unwilling to shop around. I would be surprised if the employees didn't pursue *any* reasonable/doable method of increasing their revenues with any customer.

Should a company be required to act toward its customers so as to counterbalance any poor judgement or behavior they exhibit that exceeds some racial average? Will the FTC be collecting grocery store sales data and find that this or that racial/ethnic/religious group overpaid for their produce and end up taking Vons or somebody to court over it? I guess this is the kind of thing we can expect from Jon Leibowitz running the FTC.

[Michael Snyder]

Nelcisco makes a valid point. In the United States our language is English. You can coddle those too lazy, ignorant or self righteous to learn the language; but this is a perfect example of what those policies buy society. Many of his clients are functionally crippled simply because they can't understant what they're being told or signing. Let's face it; if you can't read the language, there are sharks out there that will take advantage of you.
Having said that, I hope the principles of Golden Empire end up in a jail where everyone speaks Spanish.

[Lou]

As a person who worked in wholesale mortgage lending, I can say one thing: Latino brokers were the kings of ripping of fellow Latinos.

Don't believe the hype, it isn't some old white man. It's some American raised Latino.

[Nelcisco]

PeteR,
Thats why I used the fast food resturant vs. loan doc analogy, Vons scenario would go under the fast food example, english and non english can understand food prices but loan documents is another story. Sorry, not a great arguement.

Lou,
true that the biggest crooks in the latino market were fellow latinos.

Michael Snyder,
good to hear from

[Jacinto]

Thank you Lou. Great point. I’ve never worked in mortgage lending but in my younger days worked on a company client who was a large car dealership. In spending time at the client’s premises, I quickly became appalled at how ruthless and corrupt Latino salesmen would be with less-educated Latino customers, even more so with the female ones.

Those customers wouldn’t trust the white guy, but for that same reason, and assuming they could speak reasonable English, could probably have negotiated a better deal from the white guy.

All the ethnic-pride and social justice types should have a similar experience, and maybe then they’d understand that ethnic and racial generalizations are exceedingly poor at explaining much of anything, and that the reasons why Latinos, blacks, etc may differ from “averages” are far more complex than the US census category they happen to fall under.

[PeteR]

Nelcisco, my point is that you cannot look at data on the operation of a business and draw conclusions regarding possible racial bias simply because different racial groups have different outcomes when dealing with the business. Different racial groups have LOTS of differences in many respects - not just in language, or knowledge about mortgages or finances, or preferred methods of space travel or whatever - and not just in how they may be discriminated against. It's across the board.

Left wing activist bureaucrats like Jon Leibowitz tend to reflexively choose the "racial discrimination" explanation whenever the chance arises, when others explanations make as much or more sense.

[Dave]

Tragically, virtually every intentional case of discrimination that I've seen against Latinos in SoCal has been the type of situation identified by Lou and Jacinto. What I can't believe is Hancock's argument "that Latinos did not receive 'materially different' loans after factoring in the prevailing costs of loans in different areas, the types of loans received and the credit histories of the borrowers."

So he's essentially going to argue "separate but equal" in court? I doubt that's going to be a winner with the jury. I think justice is on the way in this case.

[Nelcisco]

PeterR, your point regarding left wing bureaucrats is well taken, they do tend to use race whenever they can. Thanx for your clearity.