IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA, Plaintiff,
v.
CV 96 2279
FLEET MORTGAGE CORP. Defendant.
________________________________
COMPLAINT
The United States of America alleges:
1. The United States brings this action to enforce the provisions of Title VIII of the Civil Rights Act of 1968 ("Fair Housing Act"), as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§ 3601-3619, and of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f.
2. This court has jurisdiction of this action pursuant to 28 U.S.C. § 1345, 42 U.S.C. § 3614, and 15 U.S.C. § 1691(h) and venue is appropriate pursuant to 28 U.S.C § 1391(c) and 1392(a).
3. Defendant, Fleet Mortgage Corp., is incorporated under the laws of the State of South Carolina, with its principal place of business in Columbia, South Carolina. Fleet Mortgage Corp. (hereinafter "Fleet" or "the lender") is the successor to Fleet Real Estate Funding Corporation, the name under which the defendant did business during the occurrence of the events described in this Complaint. Fleet is a subsidiary of Fleet Mortgage Group, Inc., which is in turn a subsidiary of Fleet Financial Group, Inc., with its principal place of business in Providence, Rhode Island. Fleet Financial Group, Inc., is a bank holding company, making it and all of its subsidiaries subject to the regulatory supervision of the Federal Reserve Board.
4. Fleet's business includes engaging in residential real estate-related transactions and regularly extending credit to persons. Fleet is a creditor as that term is defined by section 702(e) of the ECOA, 15 U.S.C. § 1692a(e), and is, therefore, subject to the requirements of the ECOA and its implementing Regulation B, as amended, 12 C.F.R. Part 202, in effect on or after March 23, 1977.
5. Fleet is organized on a regional basis. Its Mid-Atlantic Region includes branch offices in Westbury, New York, and in Woodbridge, New Jersey. During the time period that is the subject of this Complaint, these two branch offices had a higher volume of African-American and Hispanic mortgage loan applicants and borrowers than other offices in the lender's Mid-Atlantic region.
6. Fleet solicits applications for residential mortgage loans primarily through its employees (loan officers and managers) who work in the lender's branch offices. In conducting its home mortgage loan operations, Fleet provides daily rate sheets to its loan officers. Fleet uses the price sheets and related information to inform its loan officers of both the lender's minimum loan price that day for each loan product and the extent to which the loan officers can earn incentive commissions by persuading the borrower to agree to an above minimum loan price (hereinafter referred to as "overages") The policy and practice of allowing overages was instituted no later than January 1, 1993, and remained in effect until suspended by the lender in mid-1994.
7. During the time period described in the preceding paragraph, loan officers at Fleet's Westbury and Woodbridge offices also were given the discretion (usually with the branch manager's
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permission) to charge borrowers an amount that was less than the daily minimum price on the lender's rate sheet. This practice is referred to herein as granting "underages." 8. In 1994, the Federal Reserve Bank of Boston conducted an investigation of the lending practices of Fleet to evaluate its compliance with, among other laws, the Fair Housing Act and the Equal Credit Opportunity Act. Based on information gathered in its investigation, the Federal Reserve determined that in its Westbury and Woodbridge branches, Fleet may have engaged in a pattern or practice of discrimination on the basis of race and national origin in the loan prices charged to minority borrowers for residential mortgage loans. On September 7, 1995, Federal Reserve officials provided a summary of the agency's findings concerning Fleet's lending practices to the United States Department of Justice and thereafter supplied the Department with the underlying data supporting those summary findings. 9. The defendant and its employees in the Westbury and Woodbridge branches failed to implement the overages and underages pricing policies without regard to race or national origin. Beginning at the latest on January 1, 1993, and continuing until at least June 30, 1994, Fleet imposed overages on home mortgage loans more frequently (and granted underages less frequently) for African-American and Hispanic borrowers than it did for similarly situated white Anglo borrowers. By means of these differences in frequency of overages and underages, the lender charged African-American and Hispanic borrowers higher prices for home mortgage loans than it charged similarly situated white Anglo borrowers. 10. The difference in overage and underage frequency and the difference in price between the loans made to African-American and Hispanic borrowers and those made to similarly situated white Anglo borrowers could not have occurred by chance and cannot be explained by differences in the borrowers' loan qualifications or other factors unrelated to race or national origin. 11. Fleet has subjected African-American and Hispanic customers of its Westbury and Woodbridge branches to discriminatory treatment by intentionally subjecting them to terms and conditions for home mortgage loans that resulted in those customers paying more for their loans than similarly situated white Anglo Customers. 12. The defendant's policies and practices, as described in paragraphs 9 through 11, constituted:
a. A pattern or practice of resistance to the full enjoyment of rights secured by the Fair Housing Act, as amended, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f; and
b. A denial to a group of persons of rights granted by the Fair Housing Act, as amended, that raises an issue of general public importance.

This pattern or practice and denial of rights occurred between January 1, 1993, at the latest, and June 30, 1994, at the earliest.

13. Specifically, the pattern or practice, as alleged herein, constituted:

.

discrimination on the basis of race or national origin in making available residential real estate-

related transactions in violation of Section 805 of the Fair Housing Act, 42 U.S.C. § 3605(a);

a.

discrimination on the basis of race or national origin in the terms, conditions, or privileges of the

provision of services or facilities in connection with the sale or rental of dwellings, in violation of Section

804(b) of the Fair Housing Act, 42 U.S.C. § 3604(b); and

b.

discrimination against applicants with respect to credit transactions, on the basis of race or

national origin, in violation of the Equal Credit opportunity Act, 15 U.S.C. § 1691(a)(1).

14. Persons who have been victims of Fleet's discriminatory policies and practices are aggrieved

persons as defined in 42 U.S.C. § 3602(i) and the ECOA, and have suffered damages as a result of

the defendant's conduct as described herein.

15. The discriminatory policies and practices of the defendant were intentional and willful, and were

implemented with deliberate disregard for the rights of African Americans or Hispanics.

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

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1. Declares that the policies and practices of the defendant between 1993 and 1994 constitute a violation of Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. § 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f;
2. Enjoins defendant, its agents, employees, successors, and all other persons in active concert or participation with them, from discriminating on account of race or national origin in any aspect of their home equity or mortgage lending activities;
3. Requires defendant to develop and submit to the Court for its approval a detailed plan that: (a) remedies the vestiges of defendant's discriminatory policies and practices; and (b) ensures that future African-American or Hispanic applicants will be treated in a nondiscriminatory manner that does not differ materially from the treatment afforded to white applicants;
4. Awards such damages as would fully compensate the victims of defendant's discriminatory policies and practices for the injuries caused by the defendant;
5. Awards punitive damages to the victims of defendant's discriminatory policies and practices; and 6. Assesses a civil penalty against the defendant, in order to vindicate the public interest.
The United States further prays for such additional relief as the interests of justice may require.
JANET RENO ATTORNEY GENERAL
DEVAL L. PATRICK ASSISTANT ATTORNEY GENERAL
PUAL F. HANCOCK Chief, Housing and Civil Enforcement Section
ALEXANDER C. ROSS (AR-2303) HOWARD R. GRIFFIN (HG-4825) Attorneys, Housing and Civil Enforcement Section Civil Rights Division U.S. Department of Justice P.O. Box 65998 Washington, D.C. 20035-5998 (202) 307-2896
ZACHARY W. CARTER UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK by SANFORD M. COHEN (SC-6601) Chief, Civil Rights Litigation 1 Pierrepont Plaza 16th Floor Brooklyn, NY 11201 (718) 254-6249
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 CLOSED
U.S. District Court Eastern District of New York, Brooklyn (Brooklyn) CIVIL DOCKET FOR CASE #: 1:96-cv-02279-ERK-ASC

United States v. Fleet Mortgage Corp. Assigned to: Chief Judge Edward R. Korman Referred to: Magistrate-Judge A. Simon Chrein Demand: $0 Cause: 42:405 Fair Housing Act

Date Filed: 05/07/1996 Date Terminated: 06/24/1996 Jury Demand: None Nature of Suit: 440 Civil Rights: Other Jurisdiction: U.S. Government Plaintiff

Plaintiff United States of America

represented by Alexander C. Ross U.S. Department of Justice Housing and Civil Enforcement Section Civil Rights Division P.O. Box 65998 Washington, DC 20035-5998 (202) 307-2896 LEAD ATTORNEY ATTORNEY TO BE NOTICED

Howard R. Griffin U.S. Department of Justice Housing and Civil Enforcement Section Civil Rights Division P.O. Box 65998 Washington, DC 20035-5998 (202) 307-2896 LEAD ATTORNEY ATTORNEY TO BE NOTICED

Sanford Marc Cohen United States Attorneys Office Civil Division 147 Pierrepont Plaza Brooklyn, NY 11201-4454 (718) 254-6249 Fax: 718-254-6321

V. Defendant Fleet Mortgage Corp.

Email: Sanford.Cohen@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
represented by Robert S. Bennett Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, DC 20005 (202)371-7000 LEAD ATTORNEY ATTORNEY TO BE NOTICED

Date Filed 05/07/1996 05/07/1996 05/13/1996
06/07/1996 06/12/1996 06/24/1996

#

Docket Text

1 COMPLAINT filed and no summons(es) issued for Fleet Mortgage Corp. (Learned, Michele) (Entered: 05/08/1996)

2 ANSWER to Complaint by Fleet Mortgage Corp. (Jean (Entered: 05/09/1996)

3 STIPULATION AND ORDER of Settlement each party to this litigation will bear its own costs and attorney's fees. ( signed by Judge Edward R. Korman dated 5/7/96 ) (Jean (Entered: 05/13/1996)

4 ORDER, set status conference for 10:30 8/19/96 before Magistrate A. S. Chrein ( signed by Magistrate A. S. Chrein ) (Jean (Entered: 06/07/1996)

5 LETTER dated 5/25/96 from Stephanie Singletary to Judge Korman regarding the settlement details as to the 600 customers that were overcharged. (Jean (Entered: 06/12/1996)

Case closed (Jean (Entered: 06/24/1996)

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 United States v. Fleet Mortgage Company (E.D.N.Y.) On May 6, 1996, the United States filed a complaint against Fleet Mortgage Company claimed that the company charged African American and Hispanic borrowers higher prices for home mortgage loans than whites. Under the agreement, which was filed along with the complaint and entered on June 7, 1996, the company agreed to pay damages of $3,800,000 to 599 victims of discrimination and to contribute $200,000 to a fair lending outreach campaign.
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 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA, Plaintiff,

v.

CV 96 2279

FLEET MORTGAGE CORP. Defendant.

__________________________________

SETTLEMENT AGREEMENT

I.

INTRODUCTION

The parties, acting by and through their counsel, jointly enter into and file this Settlement Agreement in order to fully and finally resolve the lawsuit filed contemporaneously herewith by the United States against Fleet Mortgage Corp. ("FMC" or the "lender") alleging violations of the Fair Housing Act, 42 U.S.C. §§ 3601-3619 and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f, which allegations FMC denies.

A.

The Claims Made By The United States.

1. The United States alleges that from August 1, 1993, through June 30, 1994, FMC's

predecessor, Fleet Real Estate Funding Corp. ("FREF") engaged in discriminatory

treatment of African-American and Hispanic borrowers at its branch offices in

Woodbridge, New Jersey, and Westbury, New York, by charging them higher

prices in the form of greater "overages" and fewer "underages" on home mortgage

loans than it charged white borrowers. An overage occurs when a loan closes with

higher points than are required on the price sheet for the applicable loan product

or when a premium interest rate is obtained and then retained by the lender. An

underage occurs when the loan officer obtains fewer points than the price sheet

baseline. (1) These higher prices were not based on differences in risk or other

neutral factors such as local market conditions.

2. During the period in question, overages were used by FREF to allow regional

branches to adjust loan prices to local market conditions and as an incentive to

loan officers to originate more profitable loans. FREF furnished its branches with

daily, national price sheets that established baseline prices (in the form of

interest and/or points) for the various loan products offered. The prices on these

sheets were not ordinarily made public. Loan officers had an incentive to obtain

overages because part of the increased loan value was paid to the officer in the

form of a commission enhancement.

3. In 1994 and 1995 the staff of the Federal Reserve Bank of Boston and of the

Federal Reserve Board (collectively, "the Federal Reserve") analyzed FREF loan

file data and loan officer compensation records in the mid-Atlantic region for

loans closed in the period August through December 1993. The Federal Reserve

conducted a statistical analysis and conducted an on site inspection, including

interviews with FREE loan officers and borrowers and concluded that there were

statistically significant racial and ethnic disparities in the frequency of overages

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B. II.
. A.

and underages as to certain home mortgage loans originated by FREF in the two branches. The Federal Reserve reported its findings to FREF in April 1994. Shortly thereafter, FREF voluntarily discontinued the practice of permitting overages company-wide, pending resolution of the issues raised by the Federal Reserve's analysis. In September 1995, the Federal Reserve transmitted its concerns about the fair lending impact of FREF's pricing practices at the two branches in the August-December 1993 period to the Department of Justice. 4. the Department of Justice thereafter conducted its own analysis of data on loans originated at the two branches during the August-December 1993 period and found that minority borrowers were charged higher prices than were nonminority borrowers. The Defense Asserted By Fleet
FMC has undertaken its own statistical analysis of its overages practices in the relevant period. Based on that analysis, FMC does not believe there is any pattern of unlawful lending discrimination by FREF. While the overall variances in loan pricing at the two branches during the period in question favored non-minority borrowers, some of the variation within loan products favored minorities. In addition, some of the loans that closed with overages and that were included in the government's analysis were originated through special New York State or federally subsidized loan programs that benefitted minority borrowers.
RESOLUTION OF THE DISPUTE
The parties have agreed that, in order to avoid costly litigation, this controversy should be settled without an evidentiary hearing, trial or other adjudication on the merits, and that entry of this Order should not be construed as an admission by FMC of any of the allegations made by the United States.
Now therefore, on the basis of the foregoing representations of the United States and FMC, it is hereby ORDERED, ADJUDGED, and DECREED as follows:
General Injunctive Provision
FMC, its officers and employees, and any successor entity, are enjoined from engaging in any act or practice that discriminates on the basis of race or national origin in the provision of home mortgages, or in the provision of services or facilities in connection with any such transactions; and from imposing on the basis of race or national origin different terms or conditions for the availability of home mortgage loans. Fair Housing Act, 42 U.S.C. §§ 3604 and 3605; Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1).
Record-Keening Requirements
For a period of three years from the date of the filing of this Settlement Agreement with the Court, FMC will retain all loan application materials submitted to the Westbury or Woodbridge branches for home mortgage loans and all documents and notices pertaining to loan pricing in the Mid-Atlantic Region. During this period, the lender will also retain for each approved loan, (2) complete loan price records including term, interest rate, and discount points charged to the borrower. Upon reasonable notice, FMC shall make available for inspection and copying by the United States during the three-year term of this Settlement Agreement the information set forth above.

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B.

Monitoring

FMC has developed a monitoring and compliance system to ensure uniform application of pricing criteria by FMC's loan originators. The monitoring program is attached hereto at Exhibit A. This monitoring program will permit detailed and ongoing monitoring of mortgage origination pricing practices. FMC will monitor overages to ensure that its practices regarding overages do not result in disparate impact or treatment. The monitoring will include regular analyses of overages by race and other prohibited characteristics. FMC has developed and implemented a new mandatory training program for all retail loan officers and branch managers. The United States believes that FMC has already undertaken meaningful remedial measures and that additional affirmative requirements are therefore unnecessary.

C.

Compensatory Relief

FMC will place Four Million Dollars ($4,000,000) into a Fleet Mortgage Corp. Settlement Agreement Fund (the "Settlement Fund"). The primary purpose of the Settlement Fund is to compensate those African-American and Hispanic borrowers identified by the Department whose FREF loans closed between August 1, 1993 and June 1, 1994, and who paid more for their loan than did the average non-minority borrower. Approximately $200,000 from the Settlement Fund shall be used for community outreach and education efforts related to home mortgage loans. The Settlement Fund shall be distributed as follows:

1. There will be only one compensation amount per loan. The Settlement Fund will

not be distributed in a pro rata manner. Rather, the amount of compensation

paid to each Settlement Fund recipient will range between $2,000 and $15,000

depending on the magnitude of the overage paid by such persons in excess of the

average overage paid by non-minority borrowers during the relevant time period.

Each borrower eligible for settlement funds shall execute a Release in the form

attached hereto at Exhibit B as a condition to receipt of such funds.

2. The Department and FMC agree that FMC will distribute the community

outreach and education portion of the Settlement Fund to non-profit

organizations engaged in efforts related to home mortgage loans.

III.

RETENTION OF JURISDICTION

This Court will retain jurisdiction of this action for three years from the filing of this Settlement Agreement for the purpose of enforcing the Settlement Agreement. The parties will endeavor in good faith to resolve informally any differences regarding interpretation and compliance with this Settlement Agreement prior to bringing such matters to the Court for resolution.

IV.

COSTS

Each party to this litigation will bear its own costs and attorneys' fees.

Approved this __[7th]___ day of __[May]_____, 1996.

UNITED STATES DISTRICT JUDGE

FOR THE UNITED STATES:

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JANET RENO ATTORNEY GENERAL
DEVAL L. PATRICK ASSISTANT ATTORNEY GENERAL
PAUL F. HANCOCK (PH-1099) Chief, Housing and Civil Enforcement Section Civil Rights Division U.S. Department of Justice
ALEXANDER C. ROSS (AR-2303) HOWARD GRIFFIN (HG-4825) Attorneys, Housing and Civil Enforcement Section Civil Rights Division U.S. Department of Justice Post Office Box 65998 ZACHARY W. CARTER UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK by Assistant U.S. Attorney SANFORD M. COHEN (SC-6601) Chief, Civil Rights Litigation One Pierrepont Plaza 16th Floor Brooklyn, New York 11201 (718) 254-6249
FOR FLEET MORTGAGE CORP.
C. GEOFFREY WEIRICH ERIC JON TAYLOR (ET-6659) PAUL, HASTINGS, JANOFSKY & WALKER Suite 2400 600 Peachtree Street, N.E. Atlanta, GA 30308 ROBERT S. BENNETT (RB-5854) WILLIAM J. SWEET (WE-5155) ANDREW L. SANDLER (AS-1908) SKADDEN, ARPS, SLATE, MEAGHER & FLOM 1440 New York Avenue, N.W. Washington, DC 20005
1. Underages are only permitted in certain circumstances, such as to secure or maintain market share, and the officer is not penalized for an authorized underage.
2. The term "approved loan" includes all loans that were approved by the lender and either accepted or rejected by the applicant.
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 FOR IMMEDIATE RELEASE TUESDAY, MAY 7, 1996

CR (202) 616-2765 TDD (202) 514-1888

FLEET SUBSIDIARY TO PAY $4 MILLION TO SETTLE CLAIMS THAT BLACKS AND HISPANICS WERE CHARGED HIGHER LOAN PRICES THAN WHITES

WASHINGTON, D.C. -- A mortgage company subsidiary of Fleet Financial Group will pay $4 million for allegedly charging African Americans and Hispanics higher prices for home mortgage loans than comparably qualified whites, under an agreement reached today with the Justice Department.
In a complaint, filed today together with the agreement in U.S. District Court in Brooklyn, the Justice Department alleged that two branches of the Fleet Mortgage Corp. engaged in a pattern of discrimination in the pricing of home mortgage loans. It claimed that the two branches, situated in Westbury, New York, and Woodbridge, New Jersey, violated the Fair Housing Act and the Equal Credit Opportunity Act.
"Loans should be based on risk, not race," said Assistant Attorney General for Civil Rights Deval L. Patrick. "By changing their practices, Fleet has stepped forward and done the right thing."
Under today's agreement, Fleet will establish a $3.8 million fund to compensate approximately 600 victims; spend $200,000 for community outreach; implement a new monitoring and oversight system; and continue recently adopted policies to ensure fair pricing without regard to race or national origin.
The Justice Department began reviewing the lending practices of the mortgage company in September 1995, after an investigation by the Federal Reserve Bank of Boston and the Federal Reserve Board in Washington noted similar problems.
The suit claimed the mortgage company charged African Americans and Hispanics higher interest rates or up-front fees -often called "overages" -- for home mortgage loans than similarlysituated white borrowers.
Patrick said that an "overage" generally refers to the price paid by the borrower in excess of any minimum price set by a financial institution. He said that loan officers of many companies have the discretion to charge rates and fees higher than the minimum; any amount obtained above the minimum price is an "overage". Loan officers typically receive some or all of the excess price that they charge. It is not commonly known that such mortgage prices are negotiable.
The suit claimed that from January 1993 through June 1994 the mortgage company gave its loan officers at the two branches the discretion to charge its customers higher prices, which provided extra monetary commission to the loan officers who hiked the prices. It also claimed the company gave the loan officers discretion to charge borrowers an amount that was less than the minimum price. This practice is referred to as granting "underages."
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The company, based in Columbia, South Carolina, allegedly imposed overages more often and granted underages less often on home mortgage loans made to African American and Hispanic borrowers than it did on loans to similarly qualified white borrowers.
Patrick noted that the disparities in the pricing did not occur by chance and could not be explained by difference in the borrowers' loan qualifications or other factors unrelated to race or national origin. Overages and underages, as used by Fleet, were not related to risk.
Under the settlement, which was approved today by the court, the bank will compensate those minority borrowers who the parties agree paid higher rates for loans between August 1993 and June 1994. Victims will be compensated up to $15,000 each, depending on the amount of the overage paid.
Last October the Justice Department sued the Huntington Mortgage Company in Columbus, Ohio, for using a similar scheme to charge African Americans higher prices for home mortgage loans in the Cleveland area.
In addition to Huntington and Fleet, the Justice Department has filed eight other suits against lenders that allegedly engaged in discrimination. A suit filed last month against a Nebraska bank accused of charging higher rates to Native Americans is pending. Every other suit has settled.
# # # 96-211
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