Two subsidiaries of American International Group Inc. (AIG) have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers, the Financial Fraud Enforcement Task Force (FFETF) announced Thursday.
The settlement was filed in conjunction with a complaint made by the Justice Department in U.S. District Court in Delaware. Brought under the federal Fair Housing and Equal Credit Opportunity Acts, the complaint alleges that African American borrowers nationwide were charged higher fees on wholesale loans made by AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), an affiliated mortgage lending company.
AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants. The complaint alleges that AIG FSB and WFI failed to supervise or monitor brokers in setting broker fees. This practice had a disparate impact on African American borrowers, who were charged higher broker fees than white, non-Hispanic borrowers on thousands of such loans from July 2003 until May 2006, FFETF says.
According to the settlement, which is subject to court approval, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than similarlysituated, non-Hispanic white customers, and will invest at least $1 million in consumer financial education efforts. AIG FSB and WFI will also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending.
AIG FSB and WFI are not currently engaged in the business of wholesale home mortgage lending, but the settlement provides that if either defendant re-enters that business, the lender will implement specific, non-racial standards for broker fees and monitor all fees charged on the mortgage loans they fund to ensure that all customers are treated equally.
SOURCE: U.S. Justice Department