Case 3:13-cv-02327-H-RBB Document 1 Filed 09/26/13 Page 1 of 14

1

ERIC H. HOLDER, JR. Attorney General

2

JOCELYN SAMUELS Acting Assistant Attorney General

3

Civil Rights Division STEVEN H. ROSENBAUM

4

Chief COTY R. MONTAG

5

Deputy Chief Cal. State Bar No. 255703

6

United States Department of Justice Civil Rights Division

7 Housing and Civil Enforcement Section 950 Pennsylvania Avenue, N.W. – G Street

8

Washington, D.C. 20530 (202) 305-0122

9 LAURA E. DUFFY

10

United States Attorney JOSEPH P. PRICE, JR.

11

Assistant United States Attorney Cal. State Bar No. 131689

12 Southern District of California 880 Front Street, Room 6293

13

San Diego, CA 92101 (619) 546-7642

14 Attorneys for Plaintiff 15 United States of America

16 UNITED STATES DISTRICT COURT
17 SOUTHERN DISTRICT OF CALIFORNIA
18

19 UNITED STATES OF AMERICA,

20

Plaintiff,

21

v.

22 PLAZA HOME MORTGAGE, INC.,

23 Defendant.

24

'13CV2327 H RBB COMPLAINT

25

Plaintiff, United States of America, alleges:

26

INTRODUCTION

27

1. The United States brings this action against Plaza Home Mortgage, Inc.

28 (“Plaza” or “the lender”) for discriminating against African-American and Hispanic

Case 3:13-cv-02327-H-RBB Document 1 Filed 09/26/13 Page 2 of 14

1 borrowers in its residential mortgage lending. The action to enforce the Fair Housing

2 Act, 42 U.S.C. §§ 3601-3619 (“FHA”), and the Equal Credit Opportunity Act,

3 15 U.S.C. §§ 1691-1691f (“ECOA”), is brought to redress the discrimination based on

4 race and national origin that Plaza engaged in from 2006 through at least 2010.

5

2. From 2006 through at least 2010, Plaza charged thousands of African-

6 American and Hispanic wholesale borrowers higher fees than non-Hispanic white

7 (“white”) borrowers. Th e higher fees were not based on their creditworthiness or

8 other objective criteria related to borrower risk, but because of race or national origin.

9 Plaza also permitted its mortgage brokers to charge fees in excess of the lender’s

10 stated fee caps, and these brokers charged African-American and Hispanic borrowers

11 excessive fees in violation of the lender’s stated policies more frequently than white

12 borrowers. It was Plaza’s business practice to a llow its mortgage brokers who

13 generated loan applications for Plaza to vary their fees and thus alter the price set

14 based on a borrower’s objective credit-related factors. This subjective and unguided

15 pricing discretion resulted in African-American and Hispanic borrowers paying more 16 than white borrowers for home mortgage loans,1 for reasons unrelated to borrower

17 risk, both on a nationwide basis and in numerous geographic markets across the

18 country. A s a result of Plaza’s discriminatory practices, an African-American or

19 Hispanic borrower paid, on average, hundreds of dollars more for a Plaza loan.

20

3. This Court has jurisdiction of this action pursuant to 28 U.S.C. § 1345,

21 42 U.S.C. § 3614, and 15 U.S.C. § 1691e(h). V enue is appropriate pursuant to

22 28 U.S.C. § 1391.

23

PARTIES

24

4. Plaza is a nationwide wholesale mortgage lender headquartered in San

25 Diego, California. Plaza has offices in 15 cities and is licensed to conduct business in

26

27

1 For purposes of this Complaint, and consistent with the Home Mortgage Disclosure Act (“HMDA”), the term “home mortgage loan” or “home loan” refers to

28

loans originated for the purchase or refinance of owner-occupied, one-to-four family dwellings.

Complaint

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1 48 states and the District of Columbia. P laza also is licensed to make reverse

2 mortgages in 44 states and is qualified to make conventional and government-insured

3 loans. Plaza is subject to the enforcement authority of the Federal Trade Commission

4 (“FTC”). As of January 5, 2012, the Consumer Financial Protection Bureau also has

5 supervisory authority over Plaza.

6

5. Plaza is subject to the federal laws governing fair lending, including the

7 FHA and ECOA and their respective implementing regulations, the fair housing

8 regulations of the Department of Housing and Urban Development, 24 C.F.R. § 100.1,

9 et seq., and Regulation B of the Consumer Financial Protection Bureau,

10 12 C.F.R. § 1002.1, et seq. The FHA and ECOA prohibit financial institutions from

11 discriminating on the basis of, inter alia, race or national origin in t heir mortgage

12 lending practices.

13

6. Plaza is a “creditor” within the meaning of section 702(e) of ECOA,

14 15 U.S.C. § 1691a(e), and is engaged in “residential real estate-related transactions”

15 within the meaning of section 805 of the FHA, 42 U.S.C. § 3605. Plaza also is subject

16 to the Home Mortgage Disclosure Act (“HMDA”), 12 U.S.C. § 2803, which requires

17 mortgage lenders to maintain data on the race and ethnicity of each borrower.

18

FACTUAL ALLEGATIONS

19

7. In early 2009, the FTC examined data reported under HMDA in 2 006

20 and 2007 to determine whether any wholesale lenders showed substantial rate spread

21 disparities between white and minority borrowers. Based on this initial targeting

22 analysis, the FTC identified Plaza as a lender with high disparities. In 2009, the FTC

23 issued two civil investigative demands to Plaza, requesting loan data for 2006 to 2009

24 and information regarding the lender’s policies and mortgage business practices. In

25 2011, at the FTC’s request, the Department of Justice took over the investigation and

26 obtained loan data for 2010.

27

8. Brokered loans accounted for approximately 98% of Plaza’s loan

28 originations between 2006 and 2010. During that time period, Plaza’s relationship

Complaint

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1 with its brokers was governed by a Broker Agreement. The Broker Agreement stated

2 that the broker may identify and qualify potential borrowers for conventional,

3 residential mortgage loans that Plaza may, upon its approval, underwrite, close, and

4 sell into the secondary mortgage market. Plaza made the credit decision and had the

5 sole and absolute discretion to approve or reject any application submitted by a

6 broker.

7

9. From 2006 to 2010, Plaza’s policies and practices established a two-step

8 process for the pricing of wholesale loans that it originated. T he first step was to

9 establish a base or par rate for a particular type of loan for an applicant with specified

10 credit characteristics. I n this step, Plaza accounted for numerous objective credit-

11 related characteristics of applicants by setting a variety of prices for each of the

12 different loan products that reflected its assessment of individual applicant

13 creditworthiness, as well as the current market rate of interest and the price it could

14 obtain for the sale of such a loan from investors. Plaza communicated these prices

15 through rate sheets that it issued to brokers on a daily basis. The rate sheets spelled

16 out the “par” interest rates based on a borrower’s credit characteristics and the yield

17 spread premiums (“YSPs”) that Plaza paid the broker when the loan application

18 requested an interest rate that exceeded the par rate.

19

10. Plaza’s second step of pricing wholesale loans permitted mortgage

20 brokers to exercise subjective, unguided discretion in setting the amount of broker

21 fees charged to individual borrowers, unrelated to an applicant’s credit risk

22 characteristics. M ortgage brokers who supplied Plaza with wholesale loans were

23 compensated in two ways: thr ough direct fees paid by the borrower to the broker

24 and/or through YSPs. T aken together, this compensation is hereinafter referred to

25 collectively as “total broker fees.”

26

11. From at least 2006 through 2010, Plaza had written policies placing a

27 ceiling on total broker fees that changed several times during the relevant period. As

28 of December 6, 2006, Plaza capped total mortgage broker compensation at 5% of the

Complaint

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1 principal amount of the loan, up to $25,000, and compensation in excess of $10,000

2 required approval in order to limit broker fraud. Plaza amended its broker fee caps

3 several times from 2006 through 2009. In June 2007, Plaza specified that YSP was

4 included in the 5% cap. In December 2007, Plaza lowered the maximum amount of

5 broker compensation to $10,000. I n mid-2009, Plaza issued a new policy on total

6 broker compensation. The policy specified that Plaza would not close a loan if the

7 total points and fees charged to the borrower exceeded the lesser of 5% or $10,000 of

8 the mortgage amount on conventional loans and the lesser of 3% or $10,000 on FHA

9 or VA loans. YSP was capped at 3% of the mortgage amount.

10

12. In December 2009, Plaza determined that a number of its loans closed

11 over the past six months had exceeded its maximum broker compensation policy and

12 revised its broker compensation policy once again. The new policy capped total

13 broker compensation at the lesser of 4.5% or $10,000 for conventional loans up to

14 $500,000 and the lesser of 4.5% or $20,000 for loans greater than $500,000. F or

15 government and USDA loans, Plaza capped broker compensation at 4% or $10,000

16 for loans up to $250,000, 3.5% or $10,000 for loans between $250,001 and $500,000,

17 and 3% or $20,000 for loans greater than $500,000. The limit included the sum of all

18 fees paid by the borrower to the broker and any fees paid by the lender to the broker,

19 such as YSP. YSP remained capped at 3%, and Plaza charged one administration or

20 underwriting fee that was inclusive of its own costs.

21

13. Through at least December 2009, Plaza explicitly permitted exceptions in

22 excess of its caps. For example, managers could approve broker compensation on

23 government loans in excess of 3% if the total compensation was below $10,000.

24 Further, they could approve compensation up to $12,000 on any loan if the 3% or 5%

25 cap (depending on the loan type) was not exceeded. Documents produced by Plaza

26 from this time period indicated that brokers sought approval for compensation even

27 above $12,000, if the total amount was below the 3% or 5% cap. Additionally, Plaza

28 ran promotions that increased the amount of allowable broker compensation. For

Complaint

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1 example, in November 2009, the lender permitted the Chicago office to increase the

2 cap on government loans to 4% as a holiday special. After December 2009, Plaza’s

3 policies stated that the lender no longer permitted exceptions to its fee policies.

4

14. Other than its shifting fee caps, which were not strictly enforced, Plaza

5 did not establish any objective criteria, or provide guidelines, instructions, or

6 procedures to be followed by brokers (a) in setting the amount of direct fees they

7 should charge, or (b) in determining to charge an interest rate for a loan above that set

8 by its r ate sheet, which in turn determined the amount of YSP Plaza would pay the

9 broker. M ortgage brokers exercised this fee pricing discretion Plaza gave them,

10 untethered to any objective credit characteristics, on every loan they brought to Plaza

11 for origination and funding. Plaza affirmed or ratified these discretionary fee pricing

12 decisions for all the brokered loans it originated and funded. Further, Plaza did not

13 conduct any type of broker monitoring to determine whether there were disparities

14 between the total fees charged to minority and white borrowers.

15

15. For each loan originated by Plaza, information about each borrower’s

16 race and national origin and the amounts and types of broker fees paid was available

17 to, and was known or reasonably should have been known by Plaza prior to the

18 approval and funding of the loan. Plaza was required to collect, maintain, and report

19 data with respect to certain loan terms and borrower information for residential loans,

20 including the race and national origin of each wholesale residential loan borrower,

21 pursuant to HMDA, 12 U.S.C. § 2803.

22

16. Between 2006 and 2010, African-American borrowers nationwide were

23 charged total broker fees that were 28.2 to 93.8 basis points higher as a percentage of

24 the loan amount than the total broker fees charged to white borrowers. These

25 disparities in total broker fees mean, for example, that on a nationwide basis Plaza 26 charged its African-American customers borrowing $214,0002 between $604 and

27

28

2 This is the average home loan amount that Plaza originated to AfricanAmerican borrowers in the period from 2006 to 2010.

Complaint

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1 $2,007 more in total broker fees not based on borrower risk. T hese disparities are 2 statistically significant.3

3

17. These disparities between African-American and white borrowers

4 extended to at least the following 15 metropolitan statistical areas (“MSAs”) in which

5 Plaza made a substantial number of brokered loans to African-American and white

6 borrowers: Baltimore-Towson, MD; Boston-Quincy, MA; Chicago-Naperville-Joliet,

7 IL; Dallas-Plano-Irving, TX; Fort Worth-Arlington, TX; Houston-Sugar Land-

8 Baytown, TX; Los Angeles-Long Beach-Glendale, CA; Oakland-Fremont-Hayward,

9 CA; Orlando-Kissimmee-Sanford, FL; Phoenix-Mesa Glendale, AZ; San Diego-

10 Carlsbad-San Marcos, CA; St. Louis, MO-IL; Vallejo-Fairfield, CA; Virginia Beach-

11 Norfolk-Newport News, VA-NC; and Washington-Arlington-Alexandria, DC-VA-

12 MD-WV. In these MSAs, from 2006 to 2010, African-American borrowers paid total

13 broker fees ranging from 20.4 and 130.0 basis points higher, on average, than the total

14 broker fees paid by white borrowers. All of these disparities are statistically

15 significant. F rom 2006 to 2010, there was only one MSA (Killeen-Temple-Fort

16 Hood, TX) in w hich Plaza charged white borrowers statistically significantly higher

17 total broker fees for wholesale loans than African-American borrowers.

18

18. For the combined time period of 2006 to 2010, nationwide, the odds that

19 an African-American borrower who obtained a wholesale loan from Plaza would

20 receive a loan with total broker fees that exceeded Plaza’s stated fee caps rather than a

21 loan with total broker fees within the caps were approximately 1.6 times as high as the

22 odds for a white borrower. Overall, 20% of African-American borrowers paid total

23 broker fees in excess of Plaza’s stated caps, while only 13.8% of white borrowers paid

24 total broker fees in excess of the caps. These differences persisted when Plaza’s

25 various fee caps are examined independently. For example, as stated in Paragraph 11,

26

27

3 Statistical significance is a measure of probability that an observed outcome would not have occurred by chance. As used in this Complaint, an outcome is

28

statistically significant if the probability that it could have occurred by chance is less than 5%.

Complaint

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1 Plaza instituted a cap of 3% on YSP in mid-2009 that remained in effect at least

2 through 2010, and the lender officially no longer permitted exceptions to its fee

3 policies after December 2009. N evertheless, from July 1, 2009 through the end of

4 2010, nationwide, the odds than an African-American borrower who obtained a

5 wholesale loan from Plaza would receive a loan with YSP in excess of 3% were

6 approximately 2.2 times as high as the odds for a white borrower. Overall, 13.1% of

7 African-American borrowers received loans with YSPs in excess of the 3% cap, while

8 only 6.3% of white borrowers received loans with YSPs in excess of the cap. All of

9 these disparities are statistically significant.

10

19. These disparities in fees exceeding Plaza’s stated caps between African-

11 American and white borrowers extended to at least the following 7 MSAs in which

12 Plaza made a substantial number of brokered loans to African-American and white

13 borrowers: Baltimore-Towson, MD; Chicago-Naperville-Joliet, IL; Dallas-Plano-

14 Irving, TX; Houston-Baytown-Sugar Land, TX; Riverside-San Bernardino-Ontario,

15 CA; St. Louis, MO-IL; and Vallejo-Fairfield, CA. From 2006 to 2010, African-

16 American wholesale borrowers had statistically significant odds ratio disparities in

17 approximately 23% (7 of 31) of high loan-volume markets where Plaza made a

18 substantial number of brokered loans to African-American and white borrowers. For

19 this combined time period, in the high-volume markets with statistically significant

20 odds ratio disparities, the odds of an African-American borrower receiving a subprime

21 wholesale loan in a given year were up to 8.4 times as high as the odds for a white

22 borrower. From 2006 to 2010, only one market (Boston-Quincy, MA) had

23 statistically significant disparities favoring African-American wholesale borrowers

24 over white borrowers.

25

20. Between 2006 and 2010, Hispanic borrowers nationwide were charged

26 total broker fees that were 34.4 to 61.4 basis points higher than the total fees charged

27 to white borrowers. These disparities in total broker fees mean, for example, that on a

28

Complaint

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1 nationwide basis Plaza charged its Hispanic customers borrowing $230,0004 between

2 $791 and $1,412 more in total broker fees not based on b orrower risk. These

3 disparities are statistically significant.

4

21. These disparities between Hispanic and white borrowers extended to at

5 least the following 27 MSAs in which Plaza made a substantial number of brokered

6 loans to Hispanic and white borrowers: Albuquerque, NM; Bakersfield-Delano, CA;

7 Boston-Quincy, MA; Chicago-Naperville-Joliet, IL; Dallas-Plano-Irving, TX; Denver-

8 Aurora-Broomfield, CO; Fort Worth-Arlington, TX; Fresno, CA; Houston-Sugar

9 Land-Baytown, TX; Kennewick-Pasco-Richland, WA; Las Vegas-Paradise, NV; Los

10 Angeles-Long Beach-Glendale, CA; Madera-Chowchilla, CA; Oakland-Fremont-

11 Hayward, CA; Orlando-Kissimmee-Sanford, FL; Phoenix-Mesa Glendale, AZ;

12 Providence-New Bedford-Fall River, RI-MA; Riverside-San Bernardino-Ontario, CA;

13 Sacramento-Arden Arcade-Roseville, CA; Salem, OR; San Antonio-New Braunfels,

14 TX; San Diego-Carlsbad-San Marcos, CA; Santa Ana-Anaheim-Irvine, CA; Stockton,

15 CA; Tucson, AZ; Vallejo-Fairfield, CA; and Visalia-Porterville, CA. In these MSAs,

16 from 2006 to 2010, Hispanic borrowers paid total broker fees ranging from 20.4 and

17 100.2 basis points higher, on average, than the total broker fees paid by white

18 borrowers. A ll of these disparities are statistically significant. F rom 2006 to 2010,

19 there was only one MSA (Santa Barbara-Santa Maria-Goleta, CA) in w hich Plaza

20 charged white borrowers statistically significantly higher total broker fees for

21 wholesale loans than Hispanic borrowers.

22

22. For the combined time period of 2006 to 2010, nationwide, the odds that

23 a Hispanic borrower who obtained a wholesale loan from Plaza would receive a loan

24 with total broker fees that exceeded Plaza’s stated fee caps instead of a loan with total

25 broker fees within the caps were approximately 1.2 times as high as the odds for a

26 white borrower. Overall, 16% of Hispanic borrowers paid total broker fees in excess

27

28

4 This is the average home loan amount that Plaza originated to Hispanic borrowers in the period from 2006 to 2010.

Complaint

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1 of Plaza’s stated caps, while only 13.8% of white borrowers paid total broker fees in

2 excess of the caps. These differences persisted when Plaza’s various fee caps are

3 examined independently. From July 1, 2009 through the end of 2010, nationwide, the

4 odds than a Hispanic borrower who obtained a wholesale loan from Plaza would

5 receive a loan with YSP in excess of 3% were approximately 1.8 times as high as the

6 odds for a white borrower. Overall, 10.6% of Hispanic borrowers received loans with

7 YSPs in excess of the 3% cap, while only 6.3% of white borrowers received loans

8 with YSPs in excess of the cap. All of these disparities are statistically significant.

9

23. These disparities in fees exceeding Plaza’s stated caps between Hispanic

10 and white borrowers extended to at least the following 14 MSAs in which Plaza made

11 a substantial number of brokered loans to Hispanic and white borrowers: Chicago-

12 Naperville-Joliet, IL; Corpus Christi, TX; Dallas-Plano-Irving, TX; Denver-Aurora,

13 CO; Fort Lauderdale-Pompano Beach-Deerfield Beach, FL; Fort Worth-Arlington,

14 TX; Fresno, CA; Houston-Baytown-Sugar Land, TX; Madera, CA; Miami-Miami

15 Beach-Kendall, FL; Modesto, CA; New York-Wayne-White Plains, NY-NJ;

16 Riverside-San Bernardino-Ontario, CA; and Vallejo-Fairfield, CA. F rom 2006 to

17 2010, Hispanic wholesale borrowers had statistically significant odds ratio disparities

18 in approximately 30% (14 of 46) of high loan-volume markets where Plaza made a

19 substantial number of brokered loans to Hispanic and white borrowers. For this

20 combined time period, in the high-volume markets with statistically significant odds

21 ratio disparities, the odds of a Hispanic borrower receiving a subprime wholesale loan

22 in a given year were up to 4.5 times as high as the odds for a white borrower. From

23 2006 to 2 010, five markets (Portland-Vancouver-Beaverton, OR-WA; San Diego-

24 Carlsbad-San Marcos, CA; San Jose-Sunnyvale-Santa Clara, CA; Santa Ana-

25 Anaheim-Irvine, CA; and Santa Barbara-Santa Maria-Goleta, CA) had statistically

26 significant disparities favoring Hispanic wholesale borrowers over white borrowers.

27

24. In setting the terms and conditions for its loans, Plaza accounted for

28 individual borrowers’ differences in c redit risk characteristics by setting the prices

Complaint

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Case 3:13-cv-02327-H-RBB Document 1 Filed 09/26/13 Page 11 of 14

1 shown on its rate sheets for each loan product that included its assessment of applicant

2 creditworthiness. Mortgage brokers’ deviations from the rate sheet prices, as

3 measured by total broker fees, were separate from and not controlled by the credit risk

4 adjustments already reflected in the rate sheet prices. P laza reviewed these total

5 broker fees and charged them to borrowers in the loans it originated and funded.

6 Accordingly, the race- and national origin-based disparities described above are not

7 adjusted for borrowers’ credit risk characteristics.

8

25. No Plaza policy directed its mortgage brokers to consider a borrower’s

9 credit risk characteristics for a second time in deviating from the interest rate fixed by

10 its rate sheets for a specific loan product for a borrower with specified credit

11 qualifications or in assessing direct fees. Nevertheless, statistical regression analyses

12 of total broker fees that control for credit risk factors such as the loan amount, whether

13 the borrower took out a subordinate loan (vs. first lien only), whether the loan was a

14 refinance (vs. purchase), and the specific month of origination, demonstrate a similar

15 pattern of pricing disparities, with the magnitude only slightly diminished from the

16 disparities described above. T hus, accounting for credit risk factors a second time

17 does not explain the race- and national origin-based disparities with respect to the

18 amount of fees paid by minority borrowers as opposed to white borrowers, even if

19 those factors were relevant to the total broker fees not based on borrower risk.

20

26. The statistically significant race- and national origin-based disparities

21 described above for African-Americans and Hispanics who Plaza determined had the

22 credit characteristics to qualify for a home mortgage loan resulted from the

23 implementation and the interaction of Plaza’s policies and practices that: (a) included

24 pricing terms based on the subjective and unguided discretion of brokers in setting

25 total broker fees not based on borrower risk in the terms and conditions of loans Plaza

26 originated after par rates had been established by reference to credit risk

27 characteristics; (b) did not require mortgage brokers to justify or document the reasons

28 for the amount of total broker fees not based on borrower risk; (c) failed to monitor for

Complaint

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1 or remedy the effects of racial and ethnic disparities in those broker fees; (d) permitted

2 mortgage brokers to charge fees in excess of Plaza’s stated caps; and (e) failed to

3 monitor for or remedy the effects of racial and ethnic disparities in those fees that

4 exceeded Plaza’s stated caps. Total broker fees specifically measure the pricing

5 variation caused by the subjective and unguided pricing adjustments not based on

6 borrower risk. Plaza continued to use these discretionary wholesale broker fee pricing

7 policies, to inadequately document and review the implementation of that pricing

8 component, and to incentivize upward broker adjustments to the par interest rate at

9 least through the end of 2010.

10

27. The higher total broker fees charged to African-American and Hispanic

11 borrowers as compared to white borrowers were a result of Plaza’s policy and practice

12 of ratifying the subjective discretion of its brokers in the setting of their fees, and

13 cannot be fully explained by factors unrelated to race or national origin that Plaza

14 claims were taken into account. This policy and practice is not justified by business

15 necessity or legitimate business interests.

16

FAIR HOUSING ACT AND EQUAL CREDIT OPPORTUNITY ACT

17

VIOLATIONS

18

28. Plaza’s actions, policies, and practices, as alleged herein, constituted:

19

a. Discrimination on the basis of race or national origin in making available,

20 or in the terms or conditions of, residential real estate-related transactions, in violation

21 of the FHA, 42 U.S.C. § 3605(a);

22

b. Discrimination on t he basis of race or national origin in the terms,

23 conditions, or privileges of sale of a dwelling in violation of the FHA, 42 U.S.C. §

24 3604(b); and

25

c. Discrimination against applicants with respect to credit transactions on

26 the basis of race or national origin in violation of ECOA, 15 U.S.C. § 1691(a)(1).

27

28

Complaint

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1

29. Plaza’s actions, policies, and practices, as alleged herein, constituted:

2

a. A pattern or practice of resistance to the full enjoyment of rights secured

3 by the FHA, 42 U.S.C. §§ 3601 et seq., and ECOA, 15 U.S.C. § 1691e(h); and

4

b. A denial of rights granted by the FHA to a group of persons that raises an

5 issue of general public importance.

6

30. Persons who have been victims of Plaza’s discriminatory actions,

7 policies, and practices are aggrieved persons as defined in the FHA,

8 42 U.S.C. § 3602(i), and as described in ECOA, 15 U.S.C. § 1 691(e)(i), and have

9 suffered injury and damages as a result of Plaza’s violation of both the FHA and

10 ECOA, as described herein.

11

31. Plaza’s pattern or practice of discrimination was intentional and willful,

12 and was implemented with reckless disregard for the rights of African-American and

13 Hispanic borrowers.

14

WHEREFORE, the United States prays that the Court enter an ORDER that:

15

(1) Declares that the policies and practices of the Defendant constitute a

16 violation of the FHA, 42 U.S.C. §§ 3601-3619, and ECOA, 15 U.S.C. §§ 1691-1691f;

17

(2) Enjoins Defendant, its agents, employees, and successors, and all other

18 persons in active concert or participation with Defendant, from:

19

(A) Discriminating on account of race or national origin in any aspect

20

of its lending business practices;

21

(B) Failing or refusing to take such affirmative steps as may be

22

necessary to r estore, as nearly as practicable, the victims of Defendant’s

23

unlawful practices to the position they would be in but for the discriminatory

24

conduct;

25

(C) Failing or refusing to take such affirmative steps as may be

26

necessary to prevent the recurrence of any discriminatory conduct in the future

27

and to eliminate, to the extent practicable, the effects of Defendant’s unlawful

28

practices, and providing policies and procedures to ensure all segments of

Complaint

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1

Defendant’s market areas are served without regard to prohibited

2

characteristics;

3

(3) Awards monetary damages to all the victims of Defendant’s

4 discriminatory policies and practices for the injuries caused by the Defendant,

5 pursuant to 42 U.S.C. § 3614(d)(1)(B) and 15 U.S.C. § 1691e(h); and

6

(4) Assesses a civil penalty against the Defendant in an amount authorized

7 by 42 U.S.C. § 3614(d)(1)(C), in order to vindicate the public interest.

8

The United States further prays for such additional relief as the interests of

9 justice may require.

10

DATED: September 26, 2013

11

ERIC H. HOLDER, JR.

12

Attorney General

13 LAURA E. DUFFY

14

United States Attorney Southern District of California

15

16

/s/ Joseph P. Price, Jr. JOSEPH P. PRICE, JR.

17 Assistant United States Attorney

18 Joseph.Price@usdoj.gov

19

20

21

22

JOCELYN SAMUELS Acting Assistant Attorney General Civil Rights Division
STEVEN H. ROSENBAUM Chief
/s/ Coty R. Montag COTY R. MONTAG Deputy Chief United States Department of Justice Civil Rights Division Housing and Civil Enforcement Section Coty.Montag@usdoj.gov

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28

Complaint

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 Case 3:13-cv-02327-H-RBB Document 8 Filed 10/01/13 Page 1 of 23

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UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10 UNITED STATES OF AMERICA,

Case No.: 13cv2327-H (RBB)

11

Plaintiff,

12

v.

ORDER ENTERING CONSENT

13 PLAZA HOME MORTGAGE, INC.,
14 Defendant.

ORDER BETWEEN UNITED STATES OF AMERICA AND PLAZA HOME MORTGAGE, INC.

15

16

On September 26, 2013, Plaintiff the Un ited States of America (“t he United

17 States”) filed a co mplaint against Defenda nt Plaza Home M ortgage, Inc. (“Plaza” or

18 “the lender”). (Doc. No. 1, “C ompl.”) On the same day, th e parties filed a joint m otion

19 for a consent order (“Order” ). (Doc. No . 4.) On Septem ber 27, 2013, the Court

20 conducted a telephonic hearing regarding the proposed Order. Joseph Price and Coty

21 Montag appeared for Plaintiff United States . John Alessio and Lynde Selden appeared

22 for Defendant Plaza. During the hearing, the Court inquired into the process used to

23 provide notice to aggrieved borrowers. A dditionally, the Court inquired into the

24 monitoring program and determ ined that a three year monitoring period would be

25 appropriate, without prejudice to a request for extension of m onitoring by t he United

26 States for good cause.

27

This Order was sub mitted jointly by the parties to resolve the United States’

28 claims that Plaza has engaged in a patter n or practice of lending discri mination in

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1 violation of the Fair Housing Act (FHA), 42 U.S.C. §§ 3601-3619, and the Equal Credit

2 Opportunity Act (ECOA), 15 U.S.C. §§ 16 91-1691f, by allowing its wholesale

3 mortgage brokers to charge African-Ameri can and Hispanic bor rowers higher broker

4 fees for residential real estate-related loans than non-Hispanic white (“white”)

5 borrowers.

6

There has been no factual finding or a djudication with respect to any m atter

7 alleged by the United States. Accordingly, the execution of this Order is not, and is not

8 to be considered as, an ad mission or finding of any violation of the FHA or ECOA by

9 Plaza. Rather, the p arties have entered into this agreed Order to resolve voluntarily the

10 claims asserted by the United States in order to avoid the risks and burdens of litigation.

11 The parties agree that full im plementation of the terms of this Order will provide a fair

12 and reasonable resolution of the allegations of the United States in a manner consistent

13 with Plaza’s legitimate business interests.

14

II. BACKGROUND

15

Plaza is a nationwide wholesale m ortgage lender headquartered in San Diego,

16 California. Plaza has offices in 15 cities a nd is licensed to conduct business in 48 states

17 and the Di strict of Columbia. Plaza also is licensed to make reverse mortgages in 44

18 states and is qualified to make FHA, FNMA, HUD, GNMA, US DA, and VA loans.

19 Plaza is subject to the enforcement authority of the Federal Trade Commission (“FTC”).

20 As of January 5, 2012, the Consum er Financial Protection Bureau (“CFPB”) als o has

21 supervisory authority over Plaza.

22

In early 2009, the FTC examined data reported under HMDA in 2006 and 2007 to

23 determine whether any wholesale lenders sh owed substantial rate spread disparities

24 between white and minority borrowers. Based on this initial targeting analysis, the FTC

25 identified Plaza as a lender with high dispar ities. In 2009, the FTC issued two civil

Y

26 investigative demands to Plaza, requesti ng loan data for 2006 to 2009 and information

N

&

P

27 regarding the lender’s pol icies and m ortgage business practices. In 2010, t he FTC

28 conducted four investigationa l hearings of Plaza offi cials and met with Plaza

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1 representatives on several occasions to discuss the investigation. In 2011, at the FTC’s

2 request, the Department of Justice took over the investigation and obtained loan data for

3 2010.

4

The United States’ Complaint alleges that from 2006 to 2010, Plaza’s policies and

5 practices established a two-step process fo r the pricing of wholesal e loans that it

6 originated. The first step was t o establish a base or par rate for a particular type of loan

7 for an applicant with specified credit characteristics. The Un ited States alleges that in

8 this step, Plaza accounted for num erous objective credit-related characterist ics of

9 applicants by setting a variety of prices fo r each of the different loa n products that

10 reflected its assessment of indi vidual applicant creditworthiness, as well as the cur rent

11 market rate of interest and the price it c ould obtain for t he sale of such a loan from

12 investors. Plaza communicated these prices through rate sheets that it issued to brokers

13 on a daily basis. The rate sheets spelle d out the “par” intere st rates based on a

14 borrower’s credit characterist ics and the yiel d spread premium s (“YSPs”) that Plaza

15 paid the broker when the loan application reque sted an interest rate that exceeded the

16 par rate. The Complaint alleges that Plaza made the credit decision and had the sole and

17 absolute discretion to approve or reject any application submitted by a broker.

18

The Complaint further alleges that Plaza’s second step of pricing wholesale loans

19 permitted mortgage brokers to exercise subjective, ungui ded discretion in setting the

20 amount of broker fees charged to individual borrowers, unrelated to an applicant’s credit

21 risk characteristics. Mortgage brokers w ho supplied Plaza with wholesale loans were

22 compensated in two ways: through direct fees paid by the borrower to the broker and/or

23 through YSPs. In setting the ter ms and c onditions for its loans, Plaza accounted for

24 individual borrowers’ differences in credit risk characteristics by se tting the prices

25 shown on its rate sheets for each loan product that included its assessment of applicant

Y

26 creditworthiness. The Co mplaint alleges that mortgage brokers’ devi ations from the

N

&

P

27 rate sheet prices wer e separate from and not controlled by t he credit risk adjust ments

28 already reflected in the rate sheet prices. The United States alleges that Plaza reviewed

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1 these total broker fees that brokers charged to borrowers in the loans Plaza funded. The

2 Complaint alleges that Plaza h ad written policies placing a ceiling on total broker fees

3 that changed several times from 2006 to 2010; however, Plaza did not strictly enforce its

4 shifting fee caps.

5

The United States contends that from 2006 through at least 2010, Plaza through

6 its brokers charged thousands of African-A merican and Hispanic wholesale borrowers 7 higher fees than white borrowe rs for hom e mortgage loans,1 not based on t heir

8 creditworthiness or other objective criteria re lated to borrower risk, but because of their

9 race or national origin. The Com plaint alleges that these disparities resulted from th e

10 implementation and the interaction of Pla za’s policies and practices that: (a) included

11 pricing terms based on the subjective an d unguided discretion of brokers in setting total

12 broker fees not based on borrower risk in the terms and condit ions of loans Plaza

13 originated after par rates had been establishe d by reference to credit risk characteristics;

14 (b) did not require mortgage brokers to justify or document the reasons for the amount

15 of total broker fees not base d on borrower risk; (c) failed to m onitor for or rem edy the

16 effects of racial and ethnic disparities in those broker fees; (d) permitted m ortgage

17 brokers to charge f ees in excess of Plaza’s st ated caps; and (e) faile d to monitor for or

18 remedy the effects of racial and ethnic dispar ities in those fees that exceeded Plaza’s

19 stated caps. The United States contends that these policies and practices were not

20 justified by business necessity or legitimate business intere sts. The Com plaint alleges

21 that as a result of Plaza’s pr actices, an African-American or Hispanic borrower paid, on

22 average, hundreds of dollars more for a Plaza loan, in violation of the FHA and ECOA.

23

III. POSITION OF PLAZA

24

Plaza denies all allegations and claims of a pattern or practice of discrimination in

25 violation of the FHA and the ECOA as set fo rth in the United States’ all egations. Plaza

Y

26

N

&

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27

1 For purposes of this Consent Order, and consis tent with the Ho me Mortgage Disclosure Act

28

(“HMDA”), the term “home mortgage loan” or “home loan” refers to loans originated for the purchase or refinance of owner-occupied, one-to-four family dwellings.

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1 asserts that at all times it conducted its lending in compliance with the letter and spirit of

2 the fair lending laws and in a non-discri minatory manner. Plaza maintains that any of

3 the differences in pricing, a s alleged by the United States, were attributable to

4 legitimate, non-discriminatory factors.

5

The United States’ claim focuses on wholesale loans and arises from the fees that

6 independent mortgage brokers charged their customers. Pl aza asserts that these fees

7 were negotiated independently between the mortgage brokers and their clients. Plaza

8 believes that com petitive market conditions require it to allow i ndependent mortgage

9 brokers to negotiate their compensation dir ectly with their borrower-custom ers. Plaza

10 contends that it did not receive any co mpensation from brokers resu lting from fees that

11 its independent brokers charged borrowers. To the extent that brokers c harged

12 borrowers fees, that com pensation went sole ly to the broker as part of the price

13 negotiated directly between the broker and th e borrower. Therefore, Plaza asserts that

14 allowing mortgage brokers to set their own com pensation is justifiable by a legitimate

15 business purpose.

16

Furthermore, Plaza notes that it has not been advised by the United States that it

17 alleges that any Plaza employee discrimin ated intentionally on the basis of race or

18 national origin. Notwithstanding its disagree ment with the allegations of the United

19 States, Plaza has agreed to the entry of th is order to resol ve voluntarily the clai ms

20 asserted by the United States in order to avoid the costs, risks, and burdens of litigation.

21

Since 2010, Plaza has taken steps desi gned to lessen any broker compensation

22 disparities based on race or national origin. Plaza has revised its broker co mpensation

23 policy to co mply with the April 2011 am endments to Regulation Z. Plaza has

24 developed a nationwide lending program intended to a ccommodate traditionally

25 underserved communities and provide financial literacy training, hom e ownership

Y

26 instruction, and access to more affordable credit in the acquisition of housing. Plaza has

N

&

P

27 also initiated a company-wide fair lending training program that is a part of its ongoing

28

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1 compliance program as well as its new-hire orientation syllabus.2

2

IV. REMEDIAL ORDER

3 A. General Prohibitory Injunction

4

1. Plaza, including all of its officer s, employees, agents, representatives,

5 assignees, and all those in active concert or participation with any of t hem, is hereby

6 enjoined from engaging in any act or practi ce that discriminates on the basis of ra ce or

7 national origin in any aspect of a residential real estate-related transaction in violation of

8 the FHA, or in any aspect of a credit transaction in violation of ECOA. This prohibition

9 includes, but is not lim ited to: the adoptio n, performance, or im plementation of any

10 policy, practice, or act that results in ra ce or national origi n discrimination against

11 residential mortgagors in the assessment of mortgage broker fees.

12

2. This Order requires the lender to take actions to remedy its alleged

13 discrimination. Plaza retains the discretion to take any additional actions that it believes

14 are appropriate to achieve the goals of this Or der. The effect ive date of this Order will

15 be the date on which it is approved and entered by the Court.

16 B. Pricing Policies and Procedures

17

3. Plaza will have in place as part of a loan pricing policy, specific, race- and

18 national origin-neutral standards for the assess ment of broker fees on residential real-

19 estate related loans that Plaza underwrit es, originates, or funds t hat are designed to

20 avoid unlawful discrimination by the lender. The loan pricing policy will also require

21 that written documentation of su ch fees be maintai ned in each loan file and be a mong

22 the application documents submitted to Plaza. These requirements will be m ade part of

23 any broker agreement between a wholesale mortgage broker and Plaza.

24

4. Plaza’s loan pricing policies will require the lender to post and prominently

25 display in each location where applications for Plaza’s loans are recei ved a notice of

Y

26

N & P

27

2 In addition, since 2010, Plaza has hired a nationally recognized civil rights law firm to help implement and manage Plaza’s compliance program, and retained the services of a national non-profit

28

fair housing organization to both review Plaza’s policies and recommend initiatives designed to prevent discrimination.

Consent Order

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1 non-discrimination (a sample of which is attached as Exhibit A).

2

5. Plaza’s policy will require brokers to make the fo llowing disclosures to

3 applicants, to the extent not inconsistent with applicable law: (a) the full am ount of any

4 broker compensation and that such com pensation may or m ay not be negotiable

5 between the broker and borrowe r, and (b) a notice of non-discrim ination that provides

6 substantially the same information as is contained in Appendix A. Such disclosures will

7 be in writ ing, signed by the broker and the borrower (if the bor rower executes), and

8 submitted by the broker to be made part of the loan file by Plaza. This disclosure will

9 be made as early as practicable but not la ter than 48 hours prior t o the closing of the

10 loan.

11

6. Plaza’s loan pricing policies will re quire all whol esale mortgage brokers

12 from whom they accept wholesale residential mortgage applications to comply with the

13 requirements established in Paragraphs 3-5. Plaza’s policies will also re quire

14 designated employees, subject to the appr oval of the United States and under the

15 supervision of a designated manager of Plaza, to review applications received from

16 wholesale mortgage brokers for compliance with loan pricing policies. Any loan that is

17 not in com pliance with the pricing policy may not be funded. All reviews will be

18 documented and kept in the loan file.

19

7. During the term of this Order, Plaza may change its loan pricing policies as

20 set forth in Paragraphs 3-6 upon written advance notice to the United States, which will

21 have thirty (30) days from receipt of such notice to raise any objec tion to the proposed

22 change(s). If it raises any ob jection, the parties will confer to resolve their differences.

23 If they are unable to do so, either party may bring t he dispute to this Court for

24 resolution. Plaza will not implement the change(s) during such a dispute.

25 C. Monitoring Program

Y

26

8. Within ninety (90) days of the Effective Date of this Order, Plaza will have

N

&

P

27 in place a monitoring program designed to en sure compliance with this Order. Th e

28 program will m onitor the lende r’s loans for potential dispa rities based on race and

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1 national origin. At a mini mum, Plaza will monitor the compensation received by its

2 wholesale mortgage brokers. The program also will require a sem i-annual review by

3 senior managers. Each sem i-annual review will include, but not be limited to, an

4 analysis designed to detect statistically signi ficant broker fee disp arities based on race

5 and national origin with respect to the lende r’s loan produc ts covered by this O rder.

6 The analysis will be conducted on an aggr egate basis for all of Plaza’s wholesale

7 mortgage brokers and on a br oker-by-broker basis in select ed geographic areas, to be

8 agreed upon by the parties in advance of each semi-annual analysis.

9

a. In the event that any such revi ew discloses statistically significant

10 broker fee disparities between African-Ameri can or Hispanic and white borrowers,

11 Plaza will attempt to determine the reason(s) for those disparities and will promptly take

12 corrective action to address disparities that ar e attributable to a policy or practice of

13 Plaza and not justified by a legitimat e business need. In deter mining whether to take

14 corrective action and what action to take, a va riety of different factors and analyses may

15 be considered, with the review and approva l of the United States, including analyses

16 done at an aggregate, metropolita n statistical area, or broker level. Such analyses will

17 be utilized as deem ed appropriate on a case-by- case basis. Nothing in this Decree will

18 mandate the use of any one type of analysis as dispositive of the corrective action to be

19 taken in all situations. Corrective acti on may include, as warranted, financial

20 remediation for borrowers, fu rther modifications to Plaza’ s pricing policies and/or

21 monitoring programs as appropriate, educati on, discipline, or term ination of broker

22 relationships, or any other action as deemed appropriate under the circumstances. Plaza

23 will document all such disparitie s, determinations, and actions taken and will provide a

24 summary of the sem i-annual reviews and any documentation and analysis relating

25 thereto to the United States on a semi-annual basis.

Y

26

b. In the event that any such revi ew discloses statistically significant

N

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27 disparities with respect to any particular broker’s compensation practices, Plaza will

28 require the broker t o explain the non-discriminatory reason(s) for those disparities. If

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1 there is no reasonable, non-race or nationa l origin-based explanation for the noted

2 disparities, Plaza will require the broker to take prompt corrective action to address the

3 disparities.

4

9. If the United States raises any objections to Pl aza’s determinations or

5 remedial actions, the parties will m eet and confer to consider appropriate steps to

6 address the concerns raised by the United St ates’ review. If the parties are unable to

7 come to an agreement regarding such objections, any party may bring the dispute to this

8 Court for resolution.

9 D. Notification to the United States and Right to Object

10

10. Plaza will provide a copy of the policies it utilizes to implement Paragraphs

11 3-6 of this Order and de scriptions of the m onitoring programs required under

12 Paragraphs 8-9 to the United States within nine ty (90) days of the E ffective Date of this

13 Order. The United States wi ll have thirty (30) days from receipt of the policies and

14 descriptions to raise any objections to them, and if it raises any, the parties will confer to

15 resolve their differences. In the event the parties are unable to do so, either part y may

16 bring the dispute to this Court for resolution.

17 E. Equal Credit Opportunity Training Program

18

11. Plaza currently provides comprehe nsive fair lending training to

19 management officials and employees. Within ninety (90) days of the Effective Dat e of

20 the Order, Plaza will provi de access to a c opy of this Order and the pol icies referenced

21 therein to its management officials and employees who participate in taking applications

22 for, originating, or pricing loans secured by residential real estate, including employees

23 who have signi ficant contact with or over sight of m ortgage brokers, and em ployees

24 responsible for conducting com pliance monitoring as provi ded in Pa ragraph 9 of t his

25 Order.

Y

26

12. Within 180 days of the Effective Date of the Order, and annually thereafter

N

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27 for the duration of the Order, Plaza will con tinue to provide equal credit opportunity

28 training to the managem ent officials and em ployees specified in Paragraph 11. Plaza

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1 will provide equal credit opportunity traini ng to each new management official or

2 employee whose responsibilities include those set forth in the preceding sentence within

3 ninety (90) days of beginning his or her employment in that position.

4

13. During the equal cr edit opportunity training, Plaza will provide to each

5 participant training on the term s of this Or der, the policies referenced therein, the

6 requirements of the FHA, the ECOA, an d his or her responsibilities under each. Should

7 the content of the training program require d by this Paragraph change, such changes

8 will be submitted to the United States for appr oval in advance of im plementation. Any

9 expenses associated with this training program will be borne by Plaza.

10

14. Plaza will secure from each official and employee specified in Paragraph

11 11 a signed statement acknowledging that he or she has received access to a copy of this

12 Order and the loan policies and has com pleted the initia l equal credit opportunity

13 training. The signature of t he acknowledgement may be either manual or electronic.

14 These statements will be substantially in the form of Appendix B (Ack nowledgment)

15 and Appendix C (Equal Credit Opportunity Trai ning). Duri ng the term of this Order,

16 each new employee or agent with substantive responsibility relating to the lender’s loan

17 programs covered by this Or der will be provided access to a copy of this Order and

18 given an opportunity to have any questions answered, and will sign the acknowledgment

19 form statement (Appendix B) within ten (10) days of beginning his or her em ployment

20 in that position.

21 F. Community Enrichment Program

22

15. Plaza currently operates a Co mmunity Enrichment Program that is

23 designed to address the lack of affordable housing and lending products in minority and

24 underserved communities in selected geographi c areas nationwide. Plaza will continue

25 to operate the Community Enrichment Program for the entire duration of the Order.

Y

26

16. Through the program, Plaza offers the Fannie Mae Comm unity Home

N

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P

27 Buyers Affordable Lending product as well as standard FHA, VA an d USDA lending

28 products to meet the financing needs of qualified applicants in co mmunities that m ay

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1 not otherwise have access to prime mortgage lending programs and interest rates. The

2 program provides qualified residents in designated minority and underserved areas loan

3 products with interest rates, terms, and/or other subsidies that are more advantageous to

4 the applicant than Plaza’s normal products. Under this program, Plaza offers one or

5 more of the following: an interest rate be low that which Plaza would normally charge,

6 down payment or closing cost grants or assistance, or other financial aid.

7

17. Within thirty (30) days of entry of this Order, the parties will c onfer on the

8 precise financial benefits Pl aza will provide to qualifie d borrowers under the program

9 for the duration of the Order. The parties will also confer on the specific geographic

10 areas where the program will continue to operate and any other relevant program

11 requirements, including the targeted ma rketing that Plaza will provide in each

12 designated area. In t he event that the parties are unable to agree upon t he terms of the

13 program, either party may bring the dispute to this Court for resolution.

14

18. For the duration of this Orde r, Plaza will retain the discretion to offer

15 multiple forms of financial assistance to qualif ied applicants on an individual basis as it

16 deems appropriate under the fact ual circumstances of a particular application so l ong as

17 the maximum total financial assistance provided by Plaza on a covered transaction does

18 not exceed $15,000. Plaza will apply the av ailable funds in a manner that maxim izes

19 the likelihood that it will originate a loan to a qualified applicant, consistent with

20 applicable underwriting guidelines, invest or guidelines, and sa fety and soundness

21 standards. Plaza also will ha ve discretion to provide the loan subsidy among its single-

22 family residential loan products.

23

19. Plaza may expend additional funds in connection with the program ,

24 including funds related to ho mebuyer education, counseling, and sponsorship of trade

25 events and conferences. Any hom ebuyer education or counseling associated with the

Y

26 program must be conducted by a HUD-approved counseling agency. Plaza may define

N

&

P

27 additional procedures and requirem ents for homebuyer education and counseling,

28 subject to approval by the United States.

Consent Order

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1

20. No provision of this Order, including the Community Enrichment Program,

2 requires Plaza to make any unsafe or unsound loan or to m ake a loan to a person who is

3 not qualified for the loan based on lawful, nondiscriminatory terms. Nor does any

4 provision of this Order require Plaza to a lter its standards for underwriting mortgage

5 loans. The bank’s underwriti ng standards a pplied to applicants that qualify for the

6 Community Enrichment Progra m will be no le ss favorable than the standards tha t are

7 applied to all other applicants. At the same time, no provision of this Order imposes an

8 obligation on Plaza to apply underwriting sta ndards to applicants that qualify for the

9 program that are more favorable than the standards otherwise applied by the lender. No

10 provision of this Order will require Plaza to o ffer a benefit t o a borrower, or a f orm of

11 financial assistance, that violates any l aw, regulation, rule, or st andard imposed by any

12 federal agency, including the Department of Housing and Urban Development (HUD).

13

21. During the ter m of this Order, Plaza will provide semi-annual progress

14 reports to the United States summarizing its actions taken during t he previous si x

15 months to im plement the Community Enrichment Progra m, including the num ber of

16 loans originated under the program, the amount of subsidies provided, and a description

17 of any marketing, consumer education, or outreach related to the program.

18

22. During the term of this Order, Pl aza will assess the effecti veness of the

19 Community Enrichment Program in achiev ing its goals and will recommend to the

20 United States any changes it reasonably be lieves are necessary and appropria te to

21 increase the program’s effectiveness.

22

23. The United States has the sole discre tion to determine whether Plaza is in

23 material compliance with Paragraphs 15-22 of this Order. If at any time during the term

24 of this Order the United States has reason to believe that Plaza is not materially

25 complying with these paragraphs, it will notify Plaza and the parties will m eet and

Y

26 confer for the purpose of mut ually agreeing upon a course of action to effect Plaza’s

N

&

P

27 compliance with the Community Enrichment Program. In the event that the United

28 States and Plaza are unable to agree upon a cour se of action to eff ect Plaza’s material

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1 compliance, the United States has the discreti on to present the matter to the court or to

2 rescind this Consent Order and seek supplem ental relief or reinstate its Com plaint. In

3 the event that the United States opts to resc ind this Consent Order under the term s of

4 this paragraph, Plaza expressly agrees not to count tim e during which this Consent

5 Order is in place, or use the terms or existence of this Consent Order, to plead, argue, or

6 otherwise raise any defenses under theories of claim preclusion, issue preclusion, statute

7 of limitations, estoppel, laches, or sim ilar theories. If the United States deter mines that

8 Plaza has materially complied with Paragra phs 15-22 of this Order, it will provide a

9 certification to Plaza no later than sixty (60) days after Plaza’s subm ission of its t hird

10 annual report pursuant to Paragraph 39.

11

V. SATISFACTION OF UNITED STATES’ CLAIMS FOR

12

MONETARY RELIEF

13

24. Plaza will deposit in an interest-bearing escrow account the total sum of $3

14 million to compensate for monetary damages that aggrieved persons may have suffered

15 as a result of the all eged violations of t he FHA and ECOA with re spect to residential

16 mortgage loans (the “Settlement Fund”). Title to this acc ount will be in the name of

17 “Plaza Home Mortgage, Inc. f or the benefit of aggrieved persons pursuant to Order of

18 the Court in Civil Action No. 3:13-cv-0 2327-H (RBB)”. Plaza will provide written

19 verification of the deposit to the United States within fifteen (15) days of the Effectiv e

20 Date of this Order. Any interest that a ccrues will become part of the Settlem ent Fund

21 and be utilized and disposed of as set forth herein.

22

25. Within thirty (30) days of the E ffective Date of this Order, Plaza will

23 identify a proposed Settlement Administrator (“Administrator”). Within thirty (30) days

24 of obtaining the United States’ consent to th e selected Administrator, Plaza will execute

25 a contract with the Adm inistrator to conduct the activities set forth in the following

Y

26 paragraphs. Plaza will obtain the United Stat es’ consent to the contract prior to its

N

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27 execution. Plaza will bear all reasonable costs and expenses of the Adm inistrator. The

28 Administrator’s contract will require it to wo rk cooperatively with the United States in

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1 the conduct of its activities, including reporti ng regularly and providing all reasonably

2 requested information to the United States. Plaza will allow the Administrator access to

3 relevant mortgage loan file s and borrower contact inform ation for the purposes of

4 accomplishing its duties under the Order. The contract will require the Administrator to

5 comply with all confidentiality and privacy restrictions applicable to the party who

6 supplies the information and data to the Administrator.

7

26. In the event the United States has reason to believe that the Ad ministrator

8 is not materially co mplying with the term s of its contract with Plaza, th e United States

9 and Plaza will m eet and confer for the purpo se of mutually agreeing upon a course o f

10 action to effect the Ad ministrator’s material compliance with its contract. In the ev ent

11 that the United States and Plaza are unable to agree upon a course of action to effect the

12 Administrator’s material compliance with its contract, the parties may present the matter

13 to the court.

14

27. Within thirty (30) days of t he Effective Date of this Order, the United

15 States will request any inform ation it believes will assist in identifying aggrieved

16 persons and determining any damages. Plaza will, within thir ty (30) days of receipt of

17 such request, supply, to the extent that it is within the lender’s control, such information

18 as requested. Requested data may be supplie d as a supplement to the database already

19 provided to the United States by t he lender in the course of t he United States’ inquiry.

20 To the extent that the inform ation is not within Plaza’s cont rol, the lender will, within

21 thirty (30) days of receipt of such request, supply any data in its control that identifies

22 other parties that may have that the information.

23

28. The United States will, upon reasona ble notice, be allowed access to the

24 lender’s records and files to verify the accuracy of the da ta provided and to otherwis e

25 identify persons entitled to the payments from the Settlement Fund.

Y

26

29. Within ninety (90) days of the Effe ctive Date of this Order, the United

N

&

P

27 States will provide to the Adm inistrator a list of aggrieved persons and an initial

28 estimate of the am ount each borrower will receive from the Settlement Fund. The

Consent Order

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1 United States will base these initial estimates on the loan fees and costs of the individual

2 loans. Pursuant to its contract, the Ad ministrator will m ake its be st efforts, using all

3 reasonable methods regularly used by co mpanies that adm inister litigation and

4 government enforcement settlement funds, to locate each identified aggrieved person

5 and obtain such information as the United St ates reasonably considers necessary from

6 each. Th e Administrator’s contract will re quire the Ad ministrator to co mplete this

7 responsibility within a period of four (4 ) months from the date the United States

8 provided the list, subject to an extension of time as provide d by Paragraph 40. The

9 Administrator’s contract will require it to establish cost-free m eans for the allegedly

10 aggrieved persons to contact it, such as email and a toll-free telephone number, and will

11 require it to provide all wr itten materials to aggrieved persons in both English and

12 Spanish.

13

30. The United States will specify th e final am ount each aggrieved person

14 located by the Adm inistrator will receive from the initial am ount deposited into the

15 Settlement Fund no later than sixty (60) days afte r the Administrator’s deadline for

16 locating aggrieved persons has passed. The United States will provide the

17 compensation list to the Ad ministrator. No individual may request a review by the

18 Court or t he Administrator of the final pa yment amounts. The parties agree that the

19 total amount of the Settlement Fund will not be altered based on the number of allegedly

20 aggrieved persons who confirm their iden tity and willingness to release individual

21 discrimination claims pursuant to Paragraph 31.

22

31. The Administrator will send rele ases, as set forth in Appendix D

23 (“Release”), to each aggrieved person prior to their receipt of their pay ment. After

24 receipt of executed Releases, the Administrator will promptly deliver payments to those

25 persons in the amounts determined by the Unite d States as describe d in Paragraph 30.

Y

26 The Administrator’s identification and payment responsibility may be implemented on a

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27 rolling basis with approval from the United States.

28

32. The Administrator’s contract will re quire the Adm inistrator to set forth

Consent Order

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1 reasonable deadlines, subject to approval of th e United States, so that compensation is

2 distributed and checks are presented for payment or become void prior to the date that is

3 twenty-four (24) months from the date th e Administrator begins t o locate aggrieved

4 persons pursuant to Paragraph 29.

5

33. Payments from the Settlement Fund to allegedly aggrieved persons will be

6 subject to the following conditions:

7

(a) No aggrieved person will be pa id any am ount from the Settlem ent

8 Fund until he or she has executed and delivered to the Administrator a written release of

9 all claims, legal or equitable, t hat he or she might have against the released persons and

10 entities regarding the claim s asserted by the United States in this lawsuit, so long as

11 such claims accrued prior to the entry of this Order; and

12

(b) The total amount paid by Plaza collectively to the aggrieved persons

13 will not exceed the amount of the Settlement Fund, including accrued interest.

14

34. Any moneys not distributed from the Settlement Fund, including accrued

15 interest, within two (2) years of the date the initial notifications are sent to persons

16 deemed to be aggrieved by the United St

ates will be distributed to qualified

17 organization(s) that provide services including credit and housing counseling (incl uding

18 assistance in obta ining loan modification and preventing fore closure), legal

19 representation of borrowers seeking to obt ain a loan mo dification or to prevent

20 foreclosure, financial literacy , and other related educational pr ograms targeted at

21 African-American and Hispanic potential a nd former borrowers in communities where

22 the Complaint alleges significant discrimination occurred against African-American and

23 Hispanic borrowers. Recipien t(s) of such funds must not be related to Plaza or any

24 entity owned by Plaza. Before selecting the qualified organization(s), Plaza will obtain

25 a proposal from the organization(s) on how th e funds will be used consistent with the

Y

26 above-stated purpose, submit such proposal to t he United States, and consult with and

N

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27 obtain the non-objection of the United States. The United States and Plaza may request

28 modification of the proposal before approvi ng the organization(s). The parties will

Consent Order

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1 thereafter seek approval from the Court to distribute the remaining funds to the qualified

2 organization(s). Plaza will require each r ecipient to subm it to Plaza and the United

3 States a detailed report on how funds are utilized within one (1) year after the funds are

4 distributed, and every year thereafter until the funds are exhausted.

5

35. Plaza will not be entitled to a set-off, or any other reduction, of the am ount

6 of payments to aggrieved persons because of any debts owed by the identified persons.

7 Plaza also will not re fuse to make a pay ment based on a releas e of legal clai ms or loan

8 modification previously signed by any such aggrieved persons.

9

36. During the period of this Order, Pl aza will maintain a co mplaint resolution

10 program to address consum er complaints alleging discrimination regarding loans

11 originated by Plaza. Documentation regard ing this com plaint resolution program,

12 including documentation of individual com plaints and resolutions, if any, will be made

13 available to the United States on a sem i-annual basis and included in the report s

14 referenced in Paragraph 38. A person will not be deemed ineligible for the com plaint

15 resolution program on the basi s of having executed the rele ase described in Paragraph

16 33(a), but there is no requirement under this Order that an y complaint necessarily be

17 resolved for or against the lender.

18

VI. EVALUATING AND MONITORING COMPLIANCE

19

37. For the duration of this Order, Plaza will retain all records relating to its

20 obligations hereunder as well as its compliance activities as set forth herein. The United

21 States will have the right to review and copy such records upon request.

22

38. In addition to the reporti ng requirements set forth in Paragraphs 8(a), 21,

23 and 36, Plaza will submit a report to the United States within six months of the effective

24 date of this Order regarding its progress in establishing and impl ementing each of the

25 remedial items specified in this Order. A secon d report will be filed on the first

Y

26 anniversary of this Order. Thereafter, Plaza will submit a report annually for the term of

N

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27 the Order describing the actions taken in co mpliance with the provisions of the Order.

28 The report will include an objective asses sment of the extent to which each quantifiable

Consent Order

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1 obligation was met, an explanation of w hy any particular com ponent fell short of

2 meeting the goal for that ye ar, and any recommendations for addi tional actions to

3 achieve the goals of this Order. If appli cable, Plaza will attach to the annual reports

4 representative copies of training material and disseminated pursuant to this Order.

5

VII. ADMINISTRATION

6

39. The Order will terminate after the submission of Plaza’s third annual report

7 to the United States, provided that Plaza has materially complied with Paragraphs 15-22

8 of this Order, as set forth in Paragraph 23. If the United States determines that Plaza has

9 not materially complied with Paragraphs 15-22, t he United States must present good

10 cause to the Court for extendi ng the term of this Order or rescinding this Order and

11 reinstating its com plaint ninety (90) days before Pl aza submits its third annual re port

12 pursuant to Paragraph 38.

13

40. Any time limits for performance fixed by this Order ma y be extended by

14 mutual written agreement of the parties. Additionally, deta ils related to ad ministration

15 of the Settlement Fund as set forth i n Paragraphs 25-32 can be m odified by agreement

16 of the parties and without furt her Court appr oval. Other m odifications to this O rder

17 may be made only upon approval of the Court, by m otion by either party. The parties

18 recognize that there may be ch anges in relevant and material factual circum stances

19 during the term of this Order that m ay impact the acco mplishment of its goals. Th e

20 parties agree to work cooperatively to disc uss and attempt to agree upon any propose d

21 modifications to this Order resulting therefrom.

22

41. In the event that any disputes arise about the interpretation of or

23 compliance with the term s of this Order, the parties will endeavor in good faith to

24 resolve any such di spute between them selves before bringing it to this Court for

25 resolution. The parties agree that if it eith er reasonably beli eves that the other party

Y

26 failed to com ply with any obligation unde r this Order, it will provide written notice

N

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27 thereof and allow a period of at least thirty (30) days to discuss a voluntarily resolution

28 of the alleged violation before presenting the matter to this Court. In the event of either

Consent Order

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1 a failure by Plaza to perform in a timely manne r any act required by this Order or an act

2 by Plaza, in violation of any provision hereof, the United States may move this Court to

3 impose any remedy authorized by law or equity, including attorneys’ fees and costs.

4

42. Nothing in this Order will excu se the lender’s co mpliance with any

5 currently or subsequently effective provisi on of law or order of a regulator wit h

6 authority over Plaza that imposes additional obligations on the lender.

7

43. The parties agree that, as of the date of the entry of this Order, litigation is

8 not “reasonably foreseeable” concerning the matters described above. To the extent that

9 either party previously im plemented a litigation hold to preserve docu ments,

10 electronically stored information (ESI), or things related to the matters described above,

11 the party is no longer required to maintain such litigation hold. Nothing in this

12 paragraph relieves either party of any other obligations imposed by this Order.

13

44. Subject to the conditions of Paragraphs 23 and 39, Plaza’s compliance with

14 the terms of this Order will fully and finally resolve all claim s of the United States

15 relating to the alleged violation of the fair lending laws by means of di scriminating on

16 the basis of race and national origin, as alleged in the Complaint in this action, including

17 all claims for equitable relief and monetary damages and penalties. Each party to this

18 Consent Order will bear its own costs and attorney’s fees associated with this litigation.

19

45. The Court will retain jurisdiction for the duration of this Consent Order to

20 enforce the term s of the Order, after wh ich time the case will be dism issed with

21 prejudice.

22

IT IS SO ORDERED

23 DATED: October 1, 2013

24

25

Y

26

N

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27

________________________________

MARILYN

L. HUFF, DISTRICT JUDGE

UNITED

STATES DISTRICT COURT

28

Consent Order

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1

APPENDIX A

2

We do Business in Accordance with

3

Federal Fair Lending Laws

4

5

UNDER THE EQUAL CREDIT OPPORTUNITY

6

ACT, IT IS ILLEGAL TO DISCRIMINATE IN ANY

7

CREDIT TRANSACTION:

8

On the basis of race, color, national origin, religion,

9

sex, marital status, or age;

10

11

Because income is from public assistance; or

12

13

Because a right has been exercised under the Federal

14

Consumer Credit Protection Laws.

15

IF YOU BELIEVE YOU HAVE BEEN

16

DISCRIMINATED AGAINST, YOU SHOULD SEND

17

A COMPLAINT TO ONE OF THE FOLLOWING:

18

19

U.S. Department of Justice

Civil Rights Division

P.O.

20 Housing and Civil Enforcement

Section

21 Washington, DC 20530

1-800-896-7743

www.cons

22 http://www.usdoj.gov/crt/housing

Consumer Financial Protection Bureau
Box 4503
Iowa City, Iowa 52244
(855) 411-CFPB (2372) (855) 729-CFPB (2372) (TTY/TDD)
umerfinance.gov

23

24

25

Y

26

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27

Federal Trade Commission Washington, DC 20580 (202) 326-2222 https://www.ftccomplaintassistant.gov/

28

Consent Order

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1

APPENDIX B

2

3

Officer and Employee Acknowledgement

4

5

I acknowledge that on ______ __________, I was provided copies of the Consent

6 Order entered by the Court in United States v. Plaza Home Mortga ge, Inc. (S.D. Cal.),

7 and the loan policies developed pursua nt thereto. I have read and understand these

8 documents and have had m y questions about these docum ents answered. I believe I

9 understand my legal responsibilities and will comply with those responsibilities.

10

11

__________________________________ Signature

12

13

__________________________________ Print Name

14

15

__________________________________ Job Title

16

17

__________________________________ Date

18

19

20

21

22

23

24

25

Y

26

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27

28

Consent Order

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1

APPENDIX C

2

3

Officer and Employee Training Certification

4

5

I certify that on __________________, I rece ived training with respect to m y

6 responsibilities under the Consent Order entere d by the Court in United States v. Plaza

7 Home Mortgage, Inc. (S.D. Ca l.), and the federal fair le nding laws. I have had the

8 opportunity to have my questions about them answered. I believe I understand my legal

9 responsibilities not to discriminate under the federal fair lending laws, including the Fair

10 Housing Act and Equal Credit Opportunity

Act, and will com ply with those

11 responsibilities.

12

__________________________________

13

Signature

14

__________________________________

15

Print Name

16

__________________________________

17

Job Title

18

__________________________________

19

Date

20

21

22

23

24

25

Y

26

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27

28

Consent Order

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1

APPENDIX D

2

3

Release

4

5

In consideration for the parties’ agreem ent to the term s of the Consent Order

6 entered in United States v. Plaza Ho me Mortgage, Inc. (S.D. Cal.), and the payment to

7 me of $__________, pursuant t o the Consent Order and effective upon t hat payment, I

8 hereby release and forever disc harge all claims, rights, remedies, and recoveries related

9 to the facts of credit discrim ination in the origination of resi dential mortgage loans a t

10 issue in the litigation referenc ed above, and release and fo rever discharge all claim s,

11 rights, remedies, and recoveries arising from credit discrim ination alleged in that

12 litigation in connection with th e origination of m y loan(s), known and unknown, up to

13 and including the date of execution of this release.

14

I understand that this releases those cl aims, rights, remedies and recoveries

15 against Plaza Ho me Mortgage, Inc., and agai nst any and all related entities, parents,

16 predecessors, successors, subsidiaries, and affiliates, and against any and all of their past

17 and present directors, officers, agents, managers, supervisors, shareholders, and

18 employees and their heirs, executors, administrators, successors in interest, or assigns.

19

20

Executed this ___ day of _______, ____.

21

22

23

24

25

Y

26

N

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27

__________________________________ Signature
__________________________________ Print Name
__________________________________ Address

28

Consent Order

23
Case No.: 13cv2327-H(RBB)

 
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CM/ECF - casd
U.S. District Court Southern District of California (San Diego) CIVIL DOCKET FOR CASE #: 3:13-cv-02327-H-RBB

CLOSED

United States of America v. Plaza Home Mortgage, Inc. Assigned to: Judge Marilyn L. Huff Referred to: Magistrate Judge Ruben B. Brooks Cause: 42:3601 Fair Housing Act

Date Filed: 09/26/2013 Date Terminated: 05/12/2014 Jury Demand: Plaintiff Nature of Suit: 443 Civil Rights: Accommodations Jurisdiction: U.S. Government Plaintiff

Plaintiff United States of America

represented by Joseph Patrick Price , JR U S Attorneys Ofﬁce Southern District of California Civil Division 880 Front Street Room 6293 San Diego, CA 92101 (619)546-7642 Fax: (619)546-7751 Email: Joseph.Price@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

Douglas Keehn U S Attorneys Ofﬁce Southern District of California 880 Front Street Room 6293 San Diego, CA 92101-8893 (619) 546-7573 Email: douglas.keehn@usdoj.gov ATTORNEY TO BE NOTICED

Dylan M. Aste United States Attorney's Ofﬁce 880 Front Street San Diego, CA 92101 (619) 546-7621 Fax: (619) 546-7754 Email: Dylan.Aste@usdoj.gov ATTORNEY TO BE NOTICED

V. Defendant Plaza Home Mortgage, Inc.

represented by John D Alessio Procopio Cory Hargreaves & Savitch

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525 B Street Suite 2200 San Diego, CA 92101 (619)238-1900 Fax: (619)235-0398 Email: john.alessio@procopio.com ATTORNEY TO BE NOTICED

Date Filed 09/26/2013
09/26/2013 09/26/2013 09/26/2013 09/26/2013 09/27/2013 09/27/2013
10/01/2013 03/31/2016 04/06/2016 09/28/2016 09/29/2016

# Docket Text
1 COMPLAINT with Jury Demand against Plaza Home Mortgage, Inc., Fee Waived, ﬁled by United States of America. (Attachments: # 1 Civil Case Cover Sheet).
The new case number is 3:13-cv-2327-H-RBB. Judge Marilyn L. Huff and Magistrate Judge Ruben B. Brooks are assigned to the case. (Price, Joseph)(dls)(av1). (Entered: 09/26/2013)
2 Summons Issued. Counsel receiving this notice electronically should print this summons and serve it in accordance with Rule 4, Fed.R.Civ.P and LR 4.1. (dls) (av1). (Entered: 09/26/2013)
3 SUMMONS Returned Executed by United States of America. Plaza Home Mortgage, Inc. served. (Price, Joseph) (ag). (Entered: 09/26/2013)
4 Joint MOTION for Order (Consent Order) by United States of America. (Price, Joseph) (ag). Modiﬁed on 10/28/2013 to term motion, motion was ruled on by order no. 8 (ag). (Entered: 09/26/2013)
5 NOTICE of Appearance by John D Alessio on behalf of Plaza Home Mortgage, Inc. (Attachments: # 1 Proof of Service)(Alessio, John)Attorney John D Alessio added to party Plaza Home Mortgage, Inc.(pty:dft) (ag). (Entered: 09/26/2013)
6 NOTICE of Hearing: The Court sets a Telephonic Status Conference for 9/27/2013 03:30 PM before Judge Marilyn L. Huff. (no document attached) (smy) (Entered: 09/27/2013)
7 Minute Entry for proceedings held before Judge Marilyn L. Huff: Telephonic Status Conference held on 9/27/2013. The Court will review the ﬁlings and the proposed consent order in this case. Furthermore, the Court will issue the written consent order in due course. (Court Reporter/ECR Lynnette Lawrence). (Plaintiff Attorney Coty R. Montag; Joseph Patrick Price, Jr.). (Defendant Attorney Lynde Selden, II; John D. Alessio). (no document attached) (smy) (Entered: 09/27/2013)
8 ORDER Entering Consent Order Between United States of America and Plaza Home Mortgage, Inc. Signed by Judge Marilyn L. Huff on 10/01/2013.(ag) (av1). (Entered: 10/01/2013)
9 Joint MOTION for Disbursement of Funds (ref. proposed order eﬁle) by United States of America. (Attachments: # 1 Proof of Service)(Keehn, Douglas)Attorney Douglas Keehn added to party United States of America(pty:pla) (nbp) (Entered: 03/31/2016)
10 ORDER Granting 9 Joint Motion for Disbursement of Funds. Signed by Judge Marilyn L. Huff on 04/06/2016. (ag) (Entered: 04/06/2016)
11 Joint MOTION for Order Extending Consent Order by United States of America. (Attachments: # 1 Proof of Service)(Keehn, Douglas) (ag). (Entered: 09/28/2016)
12 ORDER Granting 11 Joint Motion for Extension of Time. The Consent Order will not

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terminate on 11/1/2016. Signed by Judge Marilyn L. Huff on 9/29/2016. (ag) (Entered: 09/29/2016)
13 Joint MOTION for Order Extending Consent Order by United States of America. (Attachments: # 1 Proof of Service)(Aste, Dylan)Attorney Dylan M. Aste added to party United States of America(pty:pla) (ag). (Entered: 10/28/2016)
14 ORDER Granting 13 Joint Motion for Extension of Time. The Consent Order will now terminate on 12/1/2016. Signed by Judge Marilyn L. Huff on 10/31/2016. (ag) (Entered: 10/31/2016)
15 Joint MOTION to Dismiss Case without Prejudice by United States of America. (Attachments: # 1 Proof of Service)(Keehn, Douglas) (ag) (Entered: 11/29/2016)
16 ORDER Granting 15 Joint Motion for Dismissal and Directing the Clerk to Close the Case. The Consent Order will terminate on December 1, 2016 and the case will be dismissed without prejudice. Signed by Judge Marilyn L. Huff on 11/29/2016.(ag) (Entered: 11/29/2016)

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