OCT. 3. 2008 j : 43PM NAT10NAl ARCHiVES

NO. 1818 P 3/34

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA,

Plaintiff l

v.

Civil No,

DELTA FUNDING CORPORATION, and DELTA FIN&~CIAL CORPORATION
I '

Defenda.nts.

COMPLAINT

SIFTON',

l' ...

.GO; M.

The United States of America alleges;

1. This action is brought by the United States to enforce

the provisions of Title VIII of the Civil Rights Act of 1968, as

amended by the Fair Housing Amendments Ace of 19S8, 42 U.S.C.

§§ 3601-36l9 ("Fair Housing- Act"), and of the Equal Credit

Opportunity Act, 15 U.S.C. §§ 1691-1691f ("ECOA"). This action

is also brought on behalf of the Secretary of Housing and Urban

Development to enforce the Real Estate Settlement Procedures Act,
12 U. s. c. § 2607 ("RESPA"), and, aCting upon notification and
a~thorization to the Attorney Gener~l by the Federal Trade Commission, under Section 13(b) of the Federal Trade Commissio~

Act ("FTC Act"), 15 U.S.C. § S3 (b), and Section 108 (c) of the

Trutn in Lending Act (IITILAI'), 15 U.S,C. § 1607(c).

2. This court has jurisdiction of this action pursuant to

2 8 U. S . C. § § 1 3 ':31 , 13 3 7 (a) I and 13 4: 5; 4 2 U, S . C. § 3 6 14; 1 5 U. S . C .

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§§ 53(b), 1607«;), and 1691(h)i and 12 U.S.C. § 2614. Ven1.le is appropriate pursuant to 28 U,S.C §§ 1391(b) and (c) and 1392(a), as well as l5 U. S ,C. § 53 (b) .
3. Defendant, Delta Funding Corporation ("Delta Funding"), is a wholly owned subsidiary of defendant Delta Financial Corporation, a publicly held company traded on the New York Stock Exchange (except where otherwise noted, both defendants are collectively referred to as "Oelt:a"), Delta is incorporated under the laws of the State of Delaware, with itg principal place of business in Woodbury, New York,
4. From at least 1982 until the present, Delta's business has included regularly engaging in residential real estaterelated transaCtlons and regularly extending credit co persons. Delta's home mort9age loans are residential real estate-related transacLions wit:hin the meaning of the Fair Housing Act, 42 U,S.C. § 3505 and are federally related mortgage loans as defined in the Real Estate Settlement Procedures Act, 12 U.S.C. § 2602. Delta is a creditor as ~hat term is defined by section 702(e) of the Equal Credit Opportunity Act, 15 U.S.C. § 1692a(e}, and is, therefore, subject to the requirements of the Equal Credit Opporcunity Act and its implementing Regulation B, as amended, 12 C,F_R. Part 202, In etfect on or aft:er March 23, 1977. Further, Del~a Funding is a creditor as that term is defined by Section 103(f) of TILA, 15 u.S.C. § 1602(f), and Seccion 226.2(a) (17) of ics implerr.enting Regulation Z, 12 C,F.R. § 226.2 (a) (17), At all
times relevant to this complaint, Delta Funoing has maintained a
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substantial course of trade in or affecting COmmerce, as "commerce" is defined in Secti-on 4 of the PTC Act, 15 U.S.C-
§ 44.
5. Delta's broker5 are en~ities ~hat bring borrowers and Delta together for the borrower co obtain home mortgage loans. Delta solicits and receives applications for credit/ primarily through mortgage brokers who submit home mortgage loan applications from potential borrowers. Such broker Submissions are referrals under the R~al Estate Settlement Procedures Act and lts implemen~in9 regulations, 24 C.F.R. 3500.14(f).
6. The persons on whose behalf such credit applications are submitted are applicants as that term is defined by section 702(b) of the Equal Credit Opportunicy Act, lS U.s.C. §1691(b)
7. Delta underwrites each loan submitted to it by i:9 brokers; if it approves the application/ ~he loan is f~nded in Delta's name. The actions by Delta and ies brokers in the
origination and making at the mortgage loan constitute a
se~~lement servicE as defined by the Re~l Es~~te Settlement Procedures Act, 12 U.S.C. § 2602(3).
8. Delta1g lending operations are concentrated in New York State, particularly in Kings and Queens Counties, but are not limited thereto. In recent years/ Delta has been expanding its
home mortgage lending activities to other states. In 1~98, Delta
funded at least 8,561 loans. Almost half (4,170) were on homes
located in New YOrk S~ate/ and of chose, 2,~40 were in Kings and
Queens Counties. According to the 1990 Census, the majority of
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the residents of these Cwo COunti~s are African American or
Hispanic. Delta's mortgage lending operations in the two counties are concentrated in the minority residential areas.
9. In conducting its home mor~gage lending operations, Delta has chosen to serve the "subprime" or "B/c" mortga.ge loan market. As a subprime lender, Delta holdg itself out as willing to approve and fund loans co borrowers who have flawed credit histories and/or debt-co-income ratios that are higher than those deemed acceptable in the HA" or "conforming" mortgage market"
10. Within the subprime market, Delta further specializes in refinancing rather than purchase-money loans. In New York State and within the scate in Kings and Queena Counties, more than 75% of Delta's loans are refinancings. Many of Delta's subprime refinancings are fo~ homeowners who obtain loans that are secured by their homes and are uSed to payoff unsecured debts or to pay for home improvements. Approximately 20% of Delta's mortgage loans are high-rate or high~fee loans within the meaning of the Home Ownership and Equity Protection Act of 1994 (rrHOEPA"), which amended TILA by adding 8E!ction 129 of TlLA, 15 U.S.C, § 1639, and is implemented by, inter alia, Sections 226.3l and 226.32 of Regulation 2, 12 C.F.R. §§ 226.31 and 226.32. Among other things, HOEPA, which took effect on October 1, 1995, applies to high cost refinancing and hOIDe equity loans chat ar~ secured by the borrower's principal dwelling and where the total points and fees payable by the borrower at or before loan closing will exceed eight percent of the total loan amount,
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11. The Delta brokers' fess are paid in thre@ different ways, with all costs ultimately borne by the borrower: (a) through "up-front" charges, fees, or pOints, with points being a percentage of the loan amount paid to the broker (usually at loa~ closing from the proceeds of the loan): (b) through IIbaek-end" fees (also called "yield spread pn'lmiumsJl ), Whereby the borrower accepts an interest rate that is higher than Delta's par interest rate and Delta makes a oirect payment to the broker for securing the higher-than-par loan; and (cl through "miscellaneous II fees, which are usually paid out of loan proceeds. During the 19961998 period l almost all of Deltals borrowers in King's and Queens Counties incurred tront fees, ODe-third incurred both front and back :ees, and on@-tenth incurred all three kinds of fees.
12, Delta is responsible for che fees charged to borrowers
for its loans. It individually underwrote and funded each loa~ i~ approved each loan fee paid to a broker, and it aided its broker5 in obt~ining unearned fees described herein. With
respect to a substantial portion of the loans, Delta was awa~e thac little or no services were being performed in exchange for the broker Charges. Further, Delta knew that the total of the
broker compensation did not bear a reasonable rela~ion CD the level of the gOods and services that the brok~rs provided or
performed. In fact, Delta aicied its brokers in obtaining the unearned fees described herein by performing many of the servic~s for the brokers_

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13. Delca's brokers typically charged fees ranging from one
to 10 percent or more of th~ total amount borrowed. Delta's
borrowers, particularly those who were charged high fee amounts, seldom had the cash On hand with which to pay all of the brokers I
fees. Therefore, th~ borrowers] loan amo~nts were increased to
cover the high fees. The increased loan proceeds provided Delta
wi~h additional profit and with a mechanism through which co pay ics brokers. In doing so, Delta directly or indirec~ly gave a por~ion of the loan proceeds to its mortgage brokers to pay charges for which no or nom~nal services were rendered.
14. Delta also frequently gave its broker a portion of the broker fees in connection wich a mortgage loan in the form of a yield spread premium, when no or nominal serviCes were actually performed. In addition, such payments constituted the giving of
a thing of value in exchange for the referral of loan business. 15. Delta's payments to brokers, the pertormance of
services for the brokers by Delta for which the brokers received p~yment, and che Qpprcval and assistance given to brokers by
Delta that provided an opportuni~y to charge unearned fees,
constituted things of value in exchange for the brokers' referrals of loan business Co Delta.
16. Delta's brokers received their fees without regard to risk chat the borrower would default on the loan, and no part of the broker fees referred to herein related Co the credit risk presented by the borrower.

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17. Delt.a Funding has often approved loans without regard
t.o a borrower's abilit.y to repay when prudent underwriti~g criteria, such as debt~to-income ratios, residual income, and
repayment history. would have indic~ced that the borrower would likely have difficulcy repaying the loan. Delta Funding has approved loans where the borrower's d~bt payments would consume mOre than half of the borrower's total pre-tax income, and in
many instances would leave the borrower with less than adequate income for living expenses. In many inetances, Delta Fundlng has relied on unverified income of the borrower wiGh no reasonable basis for believing thae such income exiSGS and would support the loan. Del~a Funding also has approved mortgage loans that cause the borrower's monthly debt payments to increase, despite Delta Funding's knowledg~ of che borrower's past inability to mest th~ lower prior monthly payments. In many cases, ~here was no change in the borrower's circumstances Or
other evidence to suggest th~t the borrower would be able to meet
the newer and more onerous requirements. Delta's practice of approving loans wiGhout regard to borrower~( ability to repay has exposed bo~rowers to unwarranted risk of default and foreclosure.
18. A comparison of Delta's broker fees paid by 1,328 African American females and 262 white males in Kings and Queens
CoUnties during the 19~6-1998 period show that the mean broker
fee for African American females was 6.24% of the loan amount, whereas the broker fee for similarly situated white males was 4.64% of th€ loan amount. This means, for example, that for a
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loan in the $100,000 to $125,000 range, African American females paid over $1,500 more in broke~ fees than did white males. There is virtually no possibility thae ~his difference in ~he group means could have occurred by chance. In statistical te~ms, when
controlling for loan size, the probability that the difference
Occurred by chance is less than .0001. The difference in price
between che African American female borrowers WaS unrelated to
the qualifications of the borrowers or the risk to the lender.
19, Delta has subjected its African American female
borrowers to terms and conditions for home mor~gage loans that
resulted in those borrowers paying more for their loans than similarly situa~ed whi~e male borrowers.
20. Delta's policies and 9ractices, as alleged herein, constitute:
a. Discrimination on the basis of race and sex in
making available residential real estate-related transactions In violation of Section 805 of the Fair Housing Act, 42 U.S,C. § 360S(a) i and
b. Discrimina~ion against applicants with respect to credit transactions, on the basis of race and sex in
violation of the Equal Credit Opportunity Act, 15
U.S.C. § 1691 (a) (1) .
21. The defendants' policies and practices constitute: a. A pattern or practice of resistance to the full enjoyment of rights secured Py the Fair Housing Act, as amended, 42 U.S.C. §§ 3601-3619, and the Equal Credit
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OCT, 3. 2008 1:44PM NATfONAL ARCHIYES

NO. 1818

Opportunity Act, 15 U.S.C. §§ 1691-1691f; and b. A denial of rights granted by the Fair Housing Act, as amended, ~o a group of persons that raises an issu~ of general public impor~ance. 22 This pattern or practice and denial of rights OCcurred at least between January 1, 1996 and December 31, 1998. 23. Persons who have been victims of Delta's discriminatory policies and practices are aggrisved persons as defined in the Fair Housing Act and the Equal Credit opportunity Act, and have suffered damages as a result of the Delta's conduct as described hereiE.
24. Delta's discriminatory policies and practices were intentional and willful, and were implemented with deliberate disregard for the rights of Afr~can American WOmSn.
25. In the course of offering and extending credit to borrowers, Delta Funding has violated HOEPA by engaging in aaset-
based lending and including loan terms prohibited by HOBPA.
Specifically:
a. Delta FUnding has violated, and continues to violate, the requiremsnts of HOEPA and Regulation Z by engaging in a pattern or practice of extending such credit to a borrower based on the borrower'S collateral rather than considering the borrower's current and expected income, current obligations, and employment status to determine whether the borrower is able ~o make the scheduled payments to repay the obligation, in

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violatior. of Section 129(h) of TILA, 15 U.S.C. § 1639(h) I and Section 226_32(e) (1) of Regulation 2,
12 C.F.R. § 226.32(e) (l)i
b. Delta Funding in numerous instances has violated, and continues to violate, the requirements of HOEPA and Regulation Z by including a prohibited "prepayment penalty" provision, in violation of Sect,j,on 129(c) of TILA, 15 U.S.c. § lo39(c), and Section 226.32(d) (6) of Regulation Z, 1.2 C.F.R. § 226.32 (d) (6) " and c. Delta Funding in numerous instances has violated, and continues to violate, the requirements of HOEPA and Regulation Z by including a prohibited "increased interesc rate after default D provision, in violation of Section 129(d) of TILA, 15 U.S.C. § 1639(d), and Section 226.32(d) (4) of Regulation Z, 1.2 C.F.R.
§ 226,32(d) (4).
26. Delta's policies and practices, as alleged herein, const':'tute:
a. The giving of a kickbac~ Or thing of value for the referral of settlement service business involving a federally related mortgage lOan in violation of Section 8(a> of che Real Escate Secclement Procedures Act, 12 U.S.C. § 2607(a); and b. The giving of a portion or percencage of a settlement service charge involving a federally related mortgage loan oth@r than for services actually
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performed in violacion of Sect.ion (8) (.oj of t.he Real Escace Settlement Procedures Act, 12 U.S,C. § 2607(b; 27, Delta's violations of RES~A, HOEPA and TILA have
injured its borrowers and, absent injunctive and other relief entered by this court, are likely to continue to injure borrowers and harm the public interest.
WHEREFORE, the United Staces prays Lhat the court enter an ORDER that;
A. Declares that the policies and practices of the defendants between 1996 and 1998 conscitute a violation of the
Fair Housing Act, 42 U.S.C. §§ 3601-3619, the Equal Credit Opportunity Ace, 15 U.S,C. §§ 1691-1691fj the Real Estate Settlement Procedures Act, 12 U,S,C. § 2607; and the Truth in Lending Act, 15 U.S.C, §§ 1601-1666j (including the Home Ownershlp and Equity Protection Act, 15 U.S.C. § 1639).
B, Enjoins defendants, their agents, employees, SuCCessors,
and all o~her persons in active conc~rt or participation with
them, from discriminating on account of race, color, or sex in any aspe~t of their home mortgage lending activities; from viola~iog the Real Estace Settlement Procedures Act, including but not limited to the anti-kickback and unearned fees provisions
of the Act; and from violating any provision of the Home
Ownership and EqUity Protection Act, Truth in Lending Act, and Regulation Z, including but not limited to engaglng in assetbased lending and including loan terms prohibited by HOEPA,
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c. Requires defendants to develop and au~mit to plaintiff
and the court for approval a detailecl plan that! (1) remedies the vestiges of defendant~1 discriminatory policies and practices; (2) ensures that all future borrowers will be treated in a
nondiscriminatory manneri and (3) ensures that all chings of value and all payments made co defendants! brokers by borrOwe~s and defendants are in exchange for actual services provided; ar~f in total l reasonably related to the goods and services providedi
and are not for the referral of settlement business to ciefendancs,
D. Awards such damages as would fully compensate the
victims o{ defendants' discriminatory policies and praccices for the injuries caused by the defendants;
E. ,t:..wards punitivt! damages to the victims of defendants I discriminatory policies and practices;
F. Awards ancillary equitable relief in the form of restitution to the victims of defendants! unlawful policies and practices,- and

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G. Assesses a civ~l penalty against the defendancs, ~o order to vindi~ate rhe public interest.
The Uni~ed States further prays for such additional relief as che incerests of justice may require.

LORETTA E. LYNCH
OPjUNITED STATES ATTORNEY
FOR THE EASTERN DISTRICT
Y~R~
~ a.UJI~
~TEPP2R (MT7529) Assist.ant U.S. 2Ut.orney Civil Rights Litigatioc 1 PIERREPONT PLAZA, 16Til Brooklyn, New York 11201
OF COUNSEL Peter S. Race Assistant General Counsel Kenneth Markison Assistant General Counsel
u.s. Department of Housing and Urban Development
DEBRA A. VALENTINE General Counsel
Rolando Berrelez Michelle Chua AttorneyS' Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, D.C. 20580

ATTORNEY GENERAL
Chief, Housing and Civil Enforcement Section
ALEXANDER C. ROSS Special Litigation Counsel VALERIE O'BRIAN Attorney, Hous~ng and Civil
Enforcement Section CiVil Rights Division U.S. Department of Justice P.O. Box 65998 WashingLon, D.C. 20035-5998
(202) 514-4713

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COMPLAINT

LORETTAE. U'NCII
United Stide-s A/1omcy. AI tllmo::y f.,.- Uniled :ita los
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OCT. 3. 2008 1:45PM ~JATlONAL ARCHIVES

NO.1818 ,J.17/34

 
 OCT. 3. 2008 1: 46 PM NATIONAL ARCHIVES ~
P?[,V tJ am

NO. 1818 F'. 18/34

fN THE UNITED STATES DISTRlCT COURT
FOR THE EASTERN DISTRICT OF NEW YORK

UNITED STATES OF AMERJCA,
Plaintiff,

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DELTA FUNDING CORPORATION, and

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DELTA FrNANCIAL CORPORATION

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Defendants.

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SETTLEMENT AGREEMENT AND ORDER

The United States of America. through the United States Deprutment of Justice and on behalf of the Secretary of Housing and Urban Development and the Federal Trade Commission, and Delta Funding Corporation ("Delta Funding") and Delta Financial Corporation (except where otherwise noted~ both defendants are collectively referred to as "Delta" or "the lender") have agreed to enter into this Settlement Agreement simultaneously with the filing of the United States of America's Complaint (the "Complaint") alleging that Delta has violated the FaIr Housing Act (42 USc. §§ 3601~3619)("FHA"), the Equal Credit Opportunity Act (15 U.S.C. §§ 1691-1691 f) and its implementing Regulation B (12 C.F.R. Part 202) (collectively, "ECOA"), the
Home Ownership and Equity Protection Act of 1994 (15 U.S.c. § ]639) and its implementing
Regulation Z (12 C,F.R. §§ 226.31 • 226.32) (collectively, "HOEPA"), and the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 - 261 7) and its implementing Regulation X (24 C.F.R. Part 3500) (eollectively, "RESPA"), all as amended. This Settlement Agreement resolVes fully all claims in the United States' Complaint.

DC·3S)673.10

OC 1. 3. 2[I as 1:46 PM NATIONAL ARCHIVES

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I. INTRODUCTION
This case is brought by the United States to vindicate the rights of persons whom the
United States claims were injured by alleged violations of the fair lending, fair housing and
consumer protection laws and regulations, as set forth above. The Complaint alleges that Delta is engaged in the business of making subprime home mortgage loans; that a large part of its business is concentrated in the minority residential areas of Kings and Queens Counties, New York; that the majority of its loans are refinancing loans for the purpose of debt consolidation; that the majority of its borrowers in these counties are presenred to Delta by mortgage brokers; that brokers submitting loans to Delta charge up to 10% of the loan amount as a "broker fee," unless state law provides for a lower amount; and that, during the period January 1996 through December 1998, approximately 17~5 percent of Delta's loans in Kings and Queens Counties, New York were high fee loans covered by HOEFA,
The United States alleges that Delta violated BCOA and FHA by approving and funding
loans with disparate broker fees that resulted in African American female borrowers being
charged more on average than white mule boI"towcrs were charged and that the higher prices charged to African American femalcs were not based on differences in ri9k of repayment. The United States does not claim that Delta discriminated in charging borrowers disparate fees lhat were set by Delta, but rather in acceding to the discretionary prices [hat were charged by
mortgage brokers ror the loans made by Oella~
The United States alleges that Delta violated RESPA because it contends that in certain
cases the fees received by mortgage brokers were not for service!) actually performed or were higher than an amount reasonably related to the value of goods and facilities provided and services performed, and, as such, constituted illegal payments for the referral of mortgage loan bu::;ine:ss Or unearned fees,
The United Slales alleges that Delta Funding violared HOEPA because it contends lhm Della made certain loans based on borrower!>' equity in their hOmes rather than the borrowers'
ability to repay the obiigation, and included prohibited prepayment and increased interest rate default provisions in certain HOEPA loan documents.

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The allegations of the Complaint concern the period January 1996 through December 1998, during which Delta made more than 5,000 home mortgage loans to borrowers in Kings and Queens Counties, New York. Delta conducts its home mortgage lending business in more than 20 states other than New York, but almost half of its lending is In that state.
Delta denies all allegations in rhe United States' Complaint and that any of its action1:i have constituted violations of the ECOA, FHA, RESPA, HOEPA or any other fair housing, fair
rn lending or consumer protection law. particular. De:lta disputes the validity of the statistical
analyses the United States relied upon as the principal basis for its ECOA and FHA claims, because Delta's own analyses did not reveal statistically significant differences in the prices paid by borrowers in protected classes. Delta further maintains that the United States' theorie~ of
liability regarding loans brought (0 it by mortgage brokers are legally insupponable, because, inter alia, they seek to hold a lender respon.sible for the conduct of independent third partie.';>.
Delta disputes the United Slates' RESPA claims, and maintains that the broker compensation at issue in the Complaint was reasonably related to the value of the goods, facilities and services provided by brokers in similar transactions in similar markets.
Delta also dispute,:> the United States' HOEPA claims, and contends (hat it underwrites all of its loans, including loans covered by r-fOEPA, based on the borrower's ability to repay, and docs not contract for Or charge prohibited prepayment pe[lClitie.s Or default interest on HOEPA
loans.
Although Delta disputes each of the United States' allegations, it is nevertheless
committed to furthering the spirit of fair lending and other consumer credit laws by going beyond what Delta believes is reqUired under upplicable law to remedy the violations alleged in tbe
Complaint.
II. RESOLUTION OF THE DISPUTE The parties have agreed that in order to avoid costly litigation, this controversy should be
resolved voluntarily, and that the tenns of this Settlement Agreement shall govern Delta's
practices in all geographic: areas in which Delta makes loans. The parties have aiso a.greed that
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there should be no evidentiary hearing, trial or other adjudication on the merits, and that entl)' of this Settlemem Agreement is not to be construed as an admission by Delta of the validity of the claims asserted against it.

Now therefore, on the basis of the foregoing representations of the United States and Delta, Delta, iiS officials, and employees, ~s well as their successors, collectively referred to as "Delta", are hereby ORDERED as follows:

III. GENERAL PROVISIONS
A, Delta is prohibited from engaging in any act or practice that discriminates on the basis of sex. race, Or color in the pricing of mortgage loans as prohibiled by FHA and ECOA, including but not limited to approving and funding loans for which minorities and females pay more than similarly situated whites or males.

B. Delta is prohibited from violating Section 8 of RESPA and Section 3500.14 of its implementing regulations, and agrees to conduct its dealings with mortgage loan brokers in a manner consistent with HUD's Statement of Policy 1999-1 Regarding Lender Payments to
Mortgage Brokers (64 Fed. Reg. 10080, March t, 1999).

c.

Delta Funding is further prohibited from violating HOEPA (15 U.Sc. § 1639),

and Sections 226.31 and 226.32 of Regulation Z, t 2 C.F, R, §§ 226.31 and 226.32, by:

1. engaging in a pattern or practice of extending credit to borrowers based on tht! borrowers' collateral rather than considering the borrowers' current or expected income, debt or employment status to determine whether the borrowers are able to make the scheduled payments 10 repay the
obligations. in violation of Section 129(h) of HOEPA, IS u,s.c. §
1639(h), and Section 226.32(e)(l) of Regulation Z, 12 c'F,R, § 226.32(e)( I );

2. including in a J-lOEPA mortgage loan a prohibited prepayment penalty
provision, in violation of Section 129(c) of HOEPA, 15 U.s.C. § 1639(c), and Section 226.32(d)(6) of Regulation Z, 12 c'F,R. § 226.32(d)(6); and

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3. including in a HOEPA loan a defaull provision calling for increased interest rate after default, in violation of Section 129(d) of HOEPA, 15 U.S.C, § 1639(d), and Section 226.32(d)(4) of Regulation Z, 12 C.F.R. § 226,32(d)(4).

IV, REQUIRED POL1C1ES AND PRACTICES CONCERNING DELTA'S BUSINESS DEALINGS WiTH MORTGAGE BROIffiRS
A. Compliance With This Settlement Agreement

To promote the objectives of ECOA, FHA, RESPA AND HOEPA in connection with its wholesale lending operations, Delta shull conduct its business with mongage brokers as follows:

1. With respect to fair lending, Delta shall:

a.

adhere to the l~HA and ECOA in all aspects of the credit

process including pricing of mongage loans;

b. reject the broker's proposal Or make a counteroffer when it believes the broker's proposed compensation and costs are not permitted under the fair lending laws; and

c. maintain loan underwriting standards designed to ensure that loan applicants will be placed at the correct credit risk level on a non-discriminatory basis.

2_ With respect to real estate settlement procedures, and consistent with HUD's Statement of Policy 1999-1 Delta shall:

a. ooly fund loans where it reasonably believes the compensation to the mortgage broker is made in exchange for services actually performed and goods and facilities actually furnished by the broker and the broker's total compensation is reasonably related to the services performed and the goods and facilities provided by the broker;
b. operate on the understanding that (i) payments to mortgage brokers by Delta for referral of business are not permissible and (it) referral fees are not payments for goods, facilities or services;

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OCT. 3. 20G8 1: 47PM NATIONAL ARCHIVES

NO. 1818 P. 23/34

c,

where necessary to a.rrive at an overall mortgage broker

compensation that is reasonably related to the services

performed or the goods and facilities provided by the

mortgage broker. reduce or eliminate its yield spread

premiums or other back-end fees, propose a reduction in the

mortgage broker' 5 front-end charges or take other action.

Delta shall decline to fund the loan if the overall mortgage

broker compensation is not reasonably related to the

services performed or the goods and facilities provided by

the mortgage broker;

d.

refrain from providing, in exchange for the referral of

business, those settlement services for which the mortgage

brokers are receiving compensation; and

e.

modify all iL~ existing agreements with mortgage brokers

within 60 days of the date of this Settlement Agreement to

contain, and ensure that all future agreements with

mortgage brokers contain, a provision that the mortgage

brokers will make Limely disclosures to borrowers

concerning the broker's services and compensation, to the

extent required by state law, and, within 60 days of the date

of this Settlement Agreement, Delta shall provide further

disclosure, in the form of Attachment A hereto (the "Broker

Information Disclosure") to each borrower from whom

Delta receives a loan application. Delta shall provide the

Broker Information Disclosure no later than three business

days after the loan application is received by Delta.

3.

With respect to loans covered by HOBPA proposed by brokers, Delta

shall:

a.

reject the broker's proposal when it believes the broker's

proffered documentation of the borrower's income lS

insufficient to support tile Elmount of income claimed;

b.

maintain loan underwriting standards designed to ensure

that extensions of cr!!dit are based on the borrower's

repayment ability including the borrower's current and

expected income, current obligations, and employment; and

c.

maintain loan underwriting procedures designed to ensure

that any borrower's income will be verified and

documented to establish a reasonable basis to believe such

income exists.

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OCT. 3.2008 1:47PM NATIONAL ARCHIVES

NO, 1818 P 24/34

B. Agreement

Notice to Mortgaee Brokers Concerning Compliance With this Settlement

I.

Within 60 days of the date of this Settlement Agreement, Delta shall notify

each mortgage broker with which it does business of the compliance

reqUirements set forth in paragraph IV.A, and shall revise the materials it

provides to all brokers to include the following statements:

a. 'The Fair Housing Act and the Equal Credit Opportunity Act apply to all aspects of the credit process including the pricing of mortgage loans;"
b. "It is unlawful to make differing initial price quotations on the basis of the loan applicant's race, national origin, sex, or age;"
c. "The Real Estale Settlement P"wcedures Act prohibits compensation to a mortgage broker unless the compensation is in exchange for services actually performed and goods aod facilities actually furnished by the broker, and the mortgage brok~r's total compensation is reasonably related to the value of the services performed and the goods and facilities [umished by the broker;" and
d. "The Home Ownership and Equity Protection Act of 1994 prohibits the making of non·purchase money mortgage loans that have total points and fees that exceed eight percent of the total loan amount without regard to the borrower's ability to repay. Accordingly, all loans subject to HOEPA must be supported by credible documenta1ioll that the borrower is able to repay the loan.
2. In addition, Delta shall offet all wholesale brokers with whom it does
mortgage loan business the opportunity to undergo training similar to the
training described in Section VIr.

V. MONETARY COMPENSATION On September 17, 1999, the Superinlendent of Banks of New York State ("NYSBD") and
Delta entered into a Remediation Agreement resolving NYSBO's allegations that its examination of Delta's lending practices revealed violations of the FHA, ECOA, RESPA and HOEPA and

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OCT. 3. 2008 1: 47 PM NAT[ONAL ARCHIVES.

NO.le18 P.25/34

Section 296-a of the New York Executive Law. The settlement includes a $7,250,000.00 "Remediation Fund" by Delta and an "Amelioration Fund" consisting of 525,000 unregistered shares of Common stock ("Stock") of Delta Financial Corporation. The "Remediation Fund" and the proceeds from the sale of the Stock in the "Amelioration Fund" shall be used to compensate
borrowers idemified by the NYSBD and the federal agencies.
One of the purposes of the Remediation Fund is to compensate New York State horrowers, including residents of minority areas and African American females identified by the Department of Justice and the NYSBD, who obtained home mortgage loans from Delta between October 1, 1995 and September 17, 1999 and who allegedly paid more for their loans than the average borrower who was a resident of non-minority areas or the average non-minority borrower, and New York State borrowers with respect to whom the NYSBD alleges Delta violated HOEPA or RESP A. Compensation will be in the form of reductions 10 monthly mortgage payments on a going fOCVJard basis as set forth in the September 17, 1999 Remediation Agreement executed by the NYSBD and Delta.
The "Amelioration Fund" will be used to provide monetary restitution to borrowers who were allegedly harmed by Delta's alleged fair lending, RESPA, and/or HOEPA violations. as identified by the Department of Justice and the NYSBD. Restitution must be paid to all eligible New York State borrowers before restitution is made to borrowers outside New York State. Any borrower to whom compensation is awarded from the Remediation Fund or Amelioration Fund shall be required. prior to receiving any such compensation, to sign a general rdease.
VI. MONITORING AND COMPLIANCE SYSTEM A. Within forty-five days of the date of this Settlement Agreement, Della shall
submit to the federal agencies l'or review and approval a new monitoring and compliance system designed to ensure uniform applicalion of underwriting criteria and appropriate payment of mortgage broker fees. If the federal agencies do nOl otherwise notify Delta in writing within forty-five days after their receipt of the new monitoring and compliance system, it shall be deemed approved.
B. The monitoring and compliance system shall include:
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OCT. 3. 2008 1: 47 PM NATIONAL ARCHIVES

NO, 1818 P. 26/31'.

1. Development and implementation of policies and guidelines designed to ensure that the underwriting of mortgage loans is made in compliance with law. Such guidelines shall be incorporated into Delta's lending policy;
2. Development and implementation of a system designed to accurately record data related to the charging of broker fees on mortgage loans underwritten, closed and funded by Delta, including the dollar and percentage amount of the broker fee charged, the amount and type of loan, documentation of any pricing exceptions, information about the borrower
as required by the Home Mortgage Disclosure Act ("HMDA"), the name
of the loan officer, and the name of the mortgage broker;
3. Development and implementation of a comprehensive system designed to permit detailed periodic monitoring of mOrtgage origination pricing practices to ensure that flexible pricing does not result in discrimination and thal mortgage broker compensation is in exchange for and is reasonably rdated to the services, goods, and facililies provided by the broker.
4. The development and implementation of a system designed to identify all borrowers whose loans are subject to the requirements of HOEPA and
pennit detailed and ongoing monitoring () r file documentation that such
borrower!> are able to repay their loans
5. The designation of managers, including senior-level managers, to serve as compliance officers and to monitor compliance with the foregoing compliance system; and
6. The development and implementalion of a disciplinary policy for employees who violate the required policies atld practices described in this Settlement Agreement

OC T, 3. 20:) 8 1: 48PM NATIONAL ARCHIVES

NO, 1818 P,27/34

VII, EDUCATION OF OELT A EMPLOYEES A. Within forty-five days from the effective date of this Settlement Agreement, Delta
shall amend its existing Fair Lending Training Program to include the elements set forth below, and shall submit the amended training program ("Amended Training Program") to the federal agencies for review and approvaL If the federal agencies do not otherwise notify Delta in writing within forty-five days after their receipt of the Amended Training Program, it shall be deemed approved. Such Amended Training Program shall include:

1. A detailed discussion of the purpose of, and the prohibitions contained in HOEPA, ECOA, FHA, and RESPA;

2, A detailed discussion of liability for violations of HOEPA, ECOA, FHA, and RESPA;

3. A certification form to be cOIDpleted by each ofllcer and employee
attending the training program; and

4,

A schedule pursuant to which the training program and supplemental

training programs will be offered_

B. Within sixty days following the approval of the Amended Training Program by
the federal agencies, all Delta officers and employees whose job responsibilities include contact with consumers or mortgage brokers concerning mortgage loan applications, the pricing of mortgage loans or the monitoring of mortgage pricing shall attend lhe Amended Training Program.

C. All ncw Delta officers and employees whose job responsibilities inclllde contact
or with consumers or mortgage brokers concerning mortgage loan applications, the pricing
mortgage loans or the monitoring of mortgage pricing shall attend the Amended Training Program within forty-five days ofthcir employment with Delta,
D. All Delta officers and employees attending the Amended Training Program ~hall execute a certification form stating that the individual ha.s anended the Amended Training

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OCT. 3. 2008 1: 48PM NATIONAL ARCHIVES

NO. 1818 P. 28/3L

Program, that the individual understands Delta'::; policies regarding non~discrimination in the origination and underwriting of mortgage loans, that the individual understands Della's disciplinary policies with respect to originating and unde.-w.-iting mortgage loans and compliance with HOEPA, ECOA, FHA, and RESPA, and that the individual understands [hat failure to comply with such laws may subject Ihe individual and/or Delta to san~[jons.
E. Delta shall comply with the training provisions described above ill ail states 111 which it does business; provided. however, that in states other than New York, Delta shall not be required to provide {raining in con.nection with laws that apply only in New York.
VIII. RECORDKEEPING AND REPORTING REQUIREMENTS A. For a period of three years from the date of this Settlement Agreement, Delta
agrees to retain all loan application files submitted for mortgage loans, all loan-related documents and notices relevant to any pricing decisions, and all documents related to compliance and monitoring as set forth in Section VI, above. During chis period. upon reasonable notice from the Civil Rights Division of the United States Department of Justice ("001"), Delta shall make individual mortgage loan application files and related records available for inspection or copying by the DOJ.
B. Delta agrees that it will periodically review its lending operations for compliance with the RESPA, FHA and ECOA.
C. For a petiod of three years from the date of this Settlement Agreement, Delta shall report: its compliance with this Settlement Agreement to the DO] semi-annually, beginning with the period ending September 30, 2000, wirhin forty-five days after the end of each half~yeal' period. I Each such report shaH include:

All no\i,~s. corrc5pond¢J1C~, t<lport•. or documents rC'lvired 10 be proviLlt.:<i 10 t:ht: Un.itcd St2n~s shall be mail~tI [0 the

following ad.;lrf$':

.

Chid, Hou~il1g ;).od Civil Enforcement Section
Ciyil Righls Diyision
U.S. D,:pilnrtulllt of Justic.:
r.o. Box 65998
WIl~hin!llOrl. D.C. 20035

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1:48 PM NATIONAL ARCHIVES

NO. 1818 P. 29/34

I. A report on Delta's fair lending pricing requirements; and

2.

A description of corrective actions taken by Delta to comply with this

Settlement Agreement.

IX. ADMINISTRATION OF SETTLEMENT AGREEMENT; MISCELLANEOUS

k

The Court shall retain jurisdiction for the purpose of enforcing the terms of this

Settlement Agreement for a period of three years from the date it is entered by the Court, m

which time this Settlement Agreement shall temlinate. The Settlement Agreement shall be binding on Delta and any of irs employees, representatives, officers, heirs, assign~, subsidiaries,

or successors in interest.

B. The parties to this Settlement Agreement shall endeavor in good faith to resolve informally any differences regarding interpretation of and compliance with this Settlement Agreement prior to bringing such matters to the Court for resolution. Funherrnore, the United States shall not bring any matter involving compliance with this Agreement to the Court for resolution unle~s it reasonably believes that Delta has materially violated the provisions of this Settlement Ag(eement. This Settlement Agreement may be modified by written consent of Delta (;l.nd lhe federal agencies. Any Stich modification may be sobmitted to the COUl1 for approval, and shall be deemed effective immediately upon execution by the parties until such time, if any, that the Court indicates a lack of such approval.
C. For purposes of measuring time periods, the "date ot" this Settlement Agreement shall be deemed to be the date orits entry by the Court

D. Each party to this Settlement AgreemenL will bear its own costs.

E. This Settlement Agreement, when fully executed and performed by Delta lO the reasonable satisfaction of the rederal agencies, will resolve all the issues between Delta and its affiliates (including, without limitation, Delta Financial Corporation), and (he Uniled States respecting the subject matter of the United States' Complaint.

!1

OCT. 3.2008 1: 48 PM NATIONAL ARCHIVES

NO. 1818 P.30/34

F. The entry into this Settlement Agreement shall not be deemed or construed to be
an admission of, or evidence of, any violation of any statute, law Or regulation Or of any liability Or wrongdoin~ Or of the truth of any of the claims or allegations of the United States, and may not be used against Delta in any other action or proceeding. The United States acknowledges and agrees that Delta's good faith compliance with the terms and conditions of this Settlement Agreement shall not be considered by the Unites Stales as a violation of any federal or sta.te law prohibiting discrimination.

G. Any requiremem, responsibility, or obligation imposed on Delta by this Agreement which is based upon statute, regulation, or Statement of Policy shall bind Delta only to tht! extent that the applicable portion of that authority remains in force and effect.

H. This Agreement may be executed in multiple counterparts, each of which shall be deemed a duplicate original.

l.

Nothing in this Agreement is intended to confer or limir any right, remedy,

obligation or liability upon any person or entity other lhan the parties hereto and their respective

successors.

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OCT. 3.2(:08 1:48PM NATIONAL ARCHIVES

NO.1818 P.31134

The undersigned apply i For the United States:

,d consent to the entry of this Order:
JANET RENO ATTORNEY GENERA.L

BILL LANN LEE
ACTING ASSISTANT A"fTORNEY GENERAL

MARLA TEPPER (MT7529) Assistant U.S. Attomey 1 PiERREPONT PLAZA, 16!h Floor Brooklyn, NY 11201
GArL W. LASTER General Counsel
cJ:cscz.~
PETER S. R.A.CE Assistant General Counsel KENNETH MARKISON
Assistant General Counsel U.S. Department of Housing
and Urban Development

Attorneys Housing and Civil Enforcement Section Civil Rights Division U.S. Department of Justice P.O. Box 65998 Washington, DC 20035
For Della Funding Corporation and Delta Financial Corporation'

<1'~u~ C/M.(A DAV[D MEDrNE Associate Director for Financial Practices M[CHELL£ CHUA Attorney Federal Trade Commission 600 Pennsylvania Avenue, N.W. Washington, DC 20580

MELANIE L HIBB MH~0154) EUGENE R. LICKER (EL-0334) Kirkpatrick & Lockhart LLP
1800 Massachusetts t\venue, N. W, Washington, DC 20036-1 goO (202) 778-9000

14

OCT. 3.2008 1:49PM NATIONAL ARCHlVES

NO. 1818 ,p. 32/34
ATTACHMENT A

DELTA FUNDING CORPORATION 1000 WQODBURY ROAD WQODBURY, NY 11797 800-225-5335

BROKER INFORMATION DISCLOSURE

Date:

File:

Deat Customer:

The purpose of this disclosure is to provide you with an estimate of the fee you will be paying to
your Mortgage Broker in connection with your loan. This disclosure does not include all fees you will pay tor this loan. For that information please refer to the Good Faith Estimate of :;enlement costs that you already have or ~oon will receive, and the HUO-l form that will be given to you al closing. The HUD-l will show the final charges for broker and other fees,

Please rcad this information carefully so that you make an informed choice. You are entitled to a copy of this disclosure. Signing this disclosure docs not obligate you to obtain the mortgage loan described below, nor does it constitute a mortgage loan approval.
We have received your application for a mortgage loan from _ _...!CN~a~m~co..:oo:.!f"..M~o~rt<l:Og!!la!:l;..:;e,-,B:.:.r~o~k,"",ev-r).

1) The Mortgage Broker is expected to charge a total of $

fot' arranging a

mortgage loan of $

at a proposed interesl rate of_%.

This amount is made of:

a) $_ _ _ _ paid by you to the Broker as a percentage of the loan; and

$

in additional amounts paid by you to the Broker as nOled on the

Good Faith Estimate. These amounts will be paid from the proceeds of your loan

and/or directly out of your pocket; and

b)

$

paid to the Broker by Delta Funding Corp. which increases your

interest rate on the loan:

IF ANY PORTION OF THE BROKER FEE DESCRIBED ABOVE IS PAiD FROM THE PROCEEDS OF THE LOAN, YOU WILL BE OBLlGATED TO REPA Y THIS AMOUNT WITH INTEREST OVER THE TI2RM OF THE LOAN,
If you would rather pay a lower interest rate on your loan, yOLl may be able to pay higher upfmnt
fees. rf you pay less upfror'lt, you may pay a higher interest rate. If you have any questions about
the different options available to you, your mortgage broker and/or Delta will he glad to discuss
them with you.

OCT. 3. 2[108 1:49PM NATIONAL ARCHIVES

NO.1818 ,P.33/34

2) The Broker's Fce described above is payable only if the loan is approved and ~ccepted by you.
Please sign and return one copy in the enclosed envelope. Keep the other copy for your files.

(S[GNATURE)

(DATE)

i\fADAM:

PLEASE TAKE NOTICE tbal (ht "'Luli" ,0,11 he.

~ ~1:.-ni4!rl fer !;:euICTt~cn~ an.J 5i8J1:li1~ure to th~ Cler'"

~

of l1le Unile<l Sble~ DL.trict Cooi1 itt his ofli~c ~I the

ocr,

'-.

IHHTED STATES OISTIUCT COURT U.S. Co",1ho""e, 225

~

~

C~dm~n 1'1= &l ... EASTERN mSTRler 0<' NEW YORK

0_
BfOOkJ)'n, New York, 011 the

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Da~"'t Brooklyn New Yorl<., _ _ _ _ _ _ _ _ _ _ _--',19_

Unite.:! Slales Attom<y, Atlooney rQr._ _ _ _ _ _ _ _ __

c;~; 1Act;on

No C\'

UNlTRDSTATES mSTRKT COlIRT E.""'ern Dirui~ of 1-01..,.- York
UNITED STATI':S, PI.intifl';
- a!}!iru;l -
DELTA Fl.INOiNG CORPORATJON AND DELT)\ fIN A.J'lCIAL CORPORAnON.
Odmdall1s.

_ A'~f"' _ _ _ _ _ _ _ __

MAOAl\1:

PLEASE TAKE NOTICE tftall1lo wil11in is a
(/)

UJ
:>-

\ru. <"1')' of

dilly UllIt:I<>Ill~in

= ~

on 1he __dayof_ _ _ _ _ _ _ _ _ _~

=::
~

_ _ _....J.iIJ d>e offi~ of lhc CI erk of

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the Eastern D~ll'icf or Neo.\' Yorlc,

=<oC
o

'. Brooklyn, Nt!W York

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _~,19 _ _
f--

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Uniled :'.'Lat"" AUomey,

_ A"ameyr~, _ _ _ _ _ _ _ _ __

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=co

.4..r[orney [or _ _ _ _ _ _ _ _ _ _ _ _ __

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"o'-"

SETILDIENT IlGREEMR:'I"r "!'ID ORDER

LORETTA £. LYNCH
t.:'nile-d s•••", AtlomlW.
Atlomey for enil...:! S~ Office and f'os! Office Addrcss. One Pic:m:pon1 Plaza. 16" Floor
Erookl}11, New York 112rt] By: MARLA TEPPER, AUSA (713)254.6155

Duo!! service or. ropy oflh~ v;;lloiIl._ _ __ _ _ _ _ _ ~ hereby ./I.dmi[le~.

Dated:

,!9_ __

,'Il1omey fOf_ _ _ _ _ _ __

CIVIL RIGHTS LITIGATION

 
 Case: 1:00-cv-1872 As of: 09/26/2012 07:56 PM EDT 1 of 1
U.S. District Court Eastern District of New York (Brooklyn) CIVIL DOCKET FOR CASE #: 1:00−cv−01872−CPS−MDG

CLOSED

United States of v. Delta Funding Corpor, et al Assigned to: Judge Charles P. Sifton Referred to: Magistrate Judge Marilyn D. Go Demand: $0 Case in other court: EDNY, 99−cv−4951 Cause: 42:1981 Housing Discrimination
Plaintiff
United States of America

Date Filed: 03/30/2000 Date Terminated: 04/10/2000 Jury Demand: None Nature of Suit: 443 Civil Rights: Accomodations Jurisdiction: U.S. Government Plaintiff
represented by Marla Anne Tepper United States Attorneys Office Eastern District of New York One Pierrepont Plaza, 16th Floor Brooklyn, NY 11215 (718) 254−6155 Fax: (718) 254−6180 Email: marla.tepper@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

V. Defendant Delta Funding Corporation
Defendant Delta Financial Corporation

Date Filed 03/30/2000 04/10/2000
04/10/2000

# Docket Text
1 COMPLAINT filed and no summons(es) issued for Delta Funding Corpor, Delta Financial Corp (Chow, Alice) (Entered: 04/03/2000)
2 SETTLEMENT AGREEMENT AND ORDER dated 4/5/00. See document for complete details. ( Signed by Senior Judge Charles P. Sifton, on 4/5/00) (Guzzi, Roseann) (Entered: 04/10/2000)
Case closed. *Notified Magistrate Go. (Guzzi, Roseann) (Entered: 04/10/2000)

 
 FOR IMMEDIATE RELEASE
CR
THURSDAY, MARCH 30, 2000
(202) 6116-2777
WWW.USDOJ.GOV
TDD (202) 514-1888
DELTA FUNDING CORPORATION SETTLES U.S.
CHARGES OR FAIR LENDING AND CONSUMER LAW
WASHINGTON, D.C. -- Delta Funding Corporation, a consumer finance company, today agreed to change its lending policies and to compensate African American female borrowers who were charged higher mortgage broker fees than similarly situated white borrowers. The agreement was announced today by the Department of Justice, the United States Attorney for the Eastern District of New York, the Department of Housing and Urban Development, and the Federal Trade Commission.
In a complaint, filed together with the agreement in U.S. District Court in Brooklyn, the government alleged that the subprime mortgage lender violated fair lending and consumer protection laws by charging higher mortgage broker fees to African American females than similarly situated white males, paying kickbacks to brokers to induce them to refer loan applicants to Delta, and approving loans without regard to the borrower's ability to repay. The government alleges that Delta's actions put borrowers thousands of dollars in debt and exposed them to unwarranted risk of default or foreclosure.
Today's suit against Delta, which operates mainly in minority areas of Brooklyn and Queens, is the first suit brought by the federal government that combines allegations of fair lending and consumer protection violations by the same lender.
The Justice Department Allegations
The Justice Department and the U.S. Attorney in Brooklyn focused their investigation on allegations that Delta engaged in a practice of charging higher prices to African American females for home mortgage loans than for white males with similar credit in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). It reviewed Delta's lending practice in Brooklyn and Queens, where the company makes about 25 percent of its loans annually, primarily in minority neighborhoods.

The complaint alleged that from January 1996, though December 1998, Delta intentionally charged African American females higher loan prices than similarly situated white males by underwriting and funding home mortgages -- mostly refinancing loans-- for which the broker fees were substantially higher for African American females than for similarly situated white males. The complaint alleges that Delta offered a variety of inducements to brokers to do business with Delta. These inducements seldom benefit consumers, but result in higher fees and points to Delta.
"Today's suit sends a clear message that the United States government will not tolerate discriminatory or illegal lending practices," said Acting Assistant Attorney General for Civil Rights Bill Lann Lee. "Federal enforcement agencies are committed to working side by side to fight lending discrimination and consumer fraud across the nation. Residents of minority neighborhoods should no longer be denied the opportunity to obtain credit on fair terms at fair prices."
"Home ownership is an integral part of the American Dream," said Loretta Lynch, U.S. Attorney in Brooklyn. "Lending decisions should be based on the qualifications of the borrower and not in any way on race, or gender."
HUD Allegations
The complaint also included claims brought on behalf of HUD alleging that Delta was aware that its brokers were charging fees that were not commensurate with the services provided by the broker. The complaint alleged that Delta aided its brokers in obtaining unearned fees by performing many of the services for them, in violation of the Real Estate Settlement Procedures Act (RESPA), the Fair Housing Act, the Equal Credit Opportunity Act (ECOS) and the Home Ownership and Equity Act (HOEPA).
"The dream of homeownership should not be encumbered by unfair and excessive mortgage loan costs," said Secretary of Housing and Urban Development Andrew Cuomo. "Lenders and mortgage brokers are put on notice by this settlement agreement that HUD and the Federal government are prepared to fight for borrowers who are being victimized by predatory mortgage lending practices."
RESPA highlights of the Settlement Agreement are:
Delta will provide, to every borrower from whom it receives a mortgage loan application, a new Broker Information Disclosure form that informs the borrower about fees paid to the mortgage broker, both by Delta and by the borrower.
In its relationships with mortgage brokers, Delta is required to establish policies and business practices that would conform to HUD's Statement of Policy on mortgage broker fees and ensure that mortgage broker fees for Delta loans are appropriate.
If Delta does not believe that the mortgage broker's compensation is reasonably related to services, goods, and facilities provided by the mortgage broker, Delta will reduce any lender-paid fee to the mortgage broker, seek the mortgage broker's agreement to reduce its borrower-paid fee, or decline to fund the loan.
FTC Allegations
Finally, the complaint also included claims brought on behalf of the FTC,

alleging that Delta engaged in equity-based lending without considering the borrower's ability to repay the loan, in violation of the Home Ownership and Equity Protection Act of 1994 (HOEPA). A number of the victims identified by the Justice Department were African American widows living in Brooklyn who had little or no outstanding mortgage debt and who were persuaded to obtain high-priced refinance loans they could not afford. Delta's high cost loans also contained prepayment penalty provisions, in violation of HOEPA.
Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection, commended both the Justice Department and the Department of Housing and Urban Development for their efforts targeting Delta's abusive lending practices. "Not only did Delta put these consumers into loans that they couldn't afford," she said, "but the company also charged some borrowers even more because of their sex or race. That's just intolerable."
Today's settlement
Under today's settlement, Delta is prohibited from engaging in any lending practice that discriminate on the basis of sex, race, or color in pricing of mortgage loans. Delta has also agreed to change the way it deals with mortgage brokers.
Delta will reject a broker's proposal when the associated costs and fees are not permitted under fair lending law.
Delta will maintain loan underwriting standards to ensure that loans are based on the borrower's ability to pay.
Delta is enjoined from violating RESPA, as well as the Fair Housing Act, HOEPA, and ECOA in the pricing and funding of mortgage loans and in its dealings with mortgage brokers.
Delta will provide new training to its employees on the requirements of RESPA, the Fair Housing Act, ECOA, and HOEPA, and will offer similar training to all mortgage brokers with whom is does business.
The agreement also will establish a monitoring and compliance system, and recordkeeping and reporting requirements.
Last September, Delta entered into a remediation agreement with the New York State Banking Department (NYSBD), which resolved allegations by the Department that Delta violated New York's fair lending and consumer protection laws. Under the agreement, Delta is required to establish a $7.25 million "Remediation Fund" and an "Amelioration Fund" valued at approximately $5 million. The funds are to be used to compensate borrowers identified by NYSBD and the federal agencies.
Under today's agreement, individuals identified by the Justice Department to have been victims of the federal violations may be eligible to receive compensation from the funds established under the September agreement.
The agreement still must be approved by the U.S. District Court.
###
00-154