The Justice Department reached a settlement with Massachusett-based Sage Bank over allegations that the mortgage lender violated the Fair Housing Act and the Equal Credit Opportunity Act (ECOA). According to a November 30 complaint and proposed consent order, DOJ alleged that Sage Bank engaged “in a pattern or practice of discrimination on the basis of race and national origin in the pricing of its residential mortgage loans.”
Sage Bank is a community bank in Lowell, Massachusetts with two branches and $195 million in assets. DOJ alleged that the bank charged Hispanic and black borrowers higher prices for home loans than were charged to “similarly situated white borrowers for reasons unrelated to their creditworthiness.” The complaint against Sage Bank also contended that its officers were assigned a “target price,” which was the price a loan officer was required to achieve on each home loan, regardless of a borrower’s creditworthiness. DOJ alleged that Sage Bank loan officers to whom the lender had assigned higher target prices disproportionately served black and Hispanic borrowers. The complaint alleges that as a result, the average black borrower paid approximately $2,500 more for a loan than “a similarly qualified white borrower.” Furthermore, the complaint alleged, the average Hispanic borrower paid approximately $1,400 more.
The consent order for the settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the District of Massachusetts. Under the consent order, Sage Bank will pay $1,175,000 into a settlement fund to compensate borrowers and applicants who were allegedly harmed by Sage Bank. The settlement also requires the bank to establish a new loan pricing policy and a new loan officer compensation policy. Additionally, loan officers and bank employees must “undergo fair housing and fair lending training, and establish a monitoring program to detect future unlawful disparities in mortgage loan pricing.”