Source: https://www.justice.gov/crt/housing-and-civil-enforcement-cases-documents-527
Timestamp: 2018-05-20 11:57:27
Document Index: 708120371

Matched Legal Cases: ['§ 1345', '§ 3614', '§ 1691', '§ 1391', '§ 3605', '§ 3604', '§ 3604', '§ 1691', '§ 1691', '§ 3601', '§ 1691', '§ 3601', '§ 3602', '§ 3614']

THE NORTHERN TRUST COMPANY;
FOREST N.A.; NORTHERN TRUST
BANK/O'HARE N.A.; and
NORTHERN TRUST BANK/DUPAGE,
This court has jurisdiction of this action pursuant to 28 U.S.C. § 1345, 42 U.S.C. § 3614(a), and 15 U.S.C. § 1691e(h); venue is appropriate pursuant to 28 U.S.C §§ 1391(c) and 1392(a).
Defendant The Northern Trust Company is the main Northern Trust bank in Illinois, with its principal place of business in Chicago, Illinois.
Defendant Northern Trust Bank/Lake Forest N.A. has its principal place of business in Lake Forest, Illinois. It has three branch offices.
Defendant Northern Trust Bank/O'Hare N.A. has its principal place of business in Chicago, Illinois. It has three branch offices.
Defendant Northern Trust Bank/DuPage has its principal place of business in Oakbrook Terrace, Illinois. It has two branch offices.
The defendants are subject to federal laws governing fair lending, including the Fair Housing Act and the Equal Credit Opportunity Act. Each of the above-listed defendants engages in residential real estate-related transactions and is a creditor within the meaning of the Equal Credit Opportunity Act.
At least since January 1992, defendant The Northern Trust Company has exercised direct and indirect control over the marketing, origination, processing, and underwriting of mortgage loans at the defendant banks listed in Paragraphs 4 through 6 (collectively "defendant subsidiary banks") through, among other things:
The underwriting of loans by defendant The Northern Trust Company for the defendant subsidiary banks;
The promulgation, dissemination, and enforcement of uniform underwriting standards for the defendant subsidiary banks;
The promulgation, issuance, implementation, and oversight of standardized loan products for the defendant subsidiary banks;
The promulgation, issuance, and circulation of bulletins and standardized policy and procedure manuals for use by the defendant subsidiary banks;
The training, supervision, and power to recommend suspension of underwriters at the defendant subsidiary banks; and
The coordination and control of the procedures used for origination, processing, underwriting, and closing of mortgage loans followed by the defendant subsidiary banks.
Beginning in January 1990, as required by the Home Mortgage Disclosure Act ("HMDA"), defendants The Northern Trust Company, Northern Trust Bank/Lake Forest N.A., Northern Trust Bank/O'Hare N.A., and Northern Trust Bank/DuPage maintained Loan Application Registers ("LARs") on which the lenders' employees recorded information about each home loan application, including the applicants' income and race (or ethnicity), the loan amount, the type of loan, whether the subject property was to be owner-occupied, and the action taken by the bank on the application. The banks kept the LAR data in computerized form, in preparation both for the filing of annual HMDA reports to their federal bank regulatory agency and for internal reports that were circulated periodically to the banks' managers and employees. On the basis of the LAR/HMDA reports, management of The Northern Trust Company knew that the defendant banks had been denying the home mortgage loan applications of African-American and Hispanic applicants at substantially higher rates than the applications of white applicants.
More specifically, the HMDA reports for The Northern Trust Company showed that:
in 1990 The Northern Trust Company's denial rates for applications for conventional purchase, owner-occupied loans were 13 of 22 (or 59.09%) for African-Americans; 3 of 10 (or 30.00%) for Hispanics; and 18 of 278 (or 6.47%) for whites;
in 1991 these denial rates were 27 of 63 (or 42.86%) for African-Americans; 10 of 29 (or 34.48%) for Hispanics; and 24 of 442 (or 5.43%) for whites;
in 1992 these denial rates were 35 of 103 (or 33.98%) for African-Americans; 14 of 71 (or 19.72%) for Hispanics; and 19 of 737 (or 2.58%) for whites;
in 1993 these denial rates were 21 of 128 (or 16.41%) for African-Americans; 7 of 92 (or 7.61%) for Hispanics; and 18 of 898 (or 2.00%) for whites; and
during the period 1990-1993, The Northern Trust Company's denial rates for applications for home refinancing loans were 20 of 106 (or 18.87%) for African-Americans; 15 of 77 (or 19.48%) for Hispanics; and 107 of 2935 (or 3.65%) for whites.
At the three smaller, suburban affiliates, Northern Trust Bank/Lake Forest N.A., Northern Trust Bank/O'Hare N.A., and Northern Trust Bank/DuPage, the number of minority applicants has been small, in light of the racial composition of the residential areas those banks serve. However, these three defendant affiliates have discriminated with respect to minority applicants in the same or similar ways as The Northern Trust Bank.
From at least January 1992 through the present, Northern Trust has processed applications for residential mortgage loans in the following manner:
Employees called "originators," "loan officers," or "processors" have been responsible for gathering relevant information regarding a mortgage loan application from the applicant. Such information has included all paperwork necessary to document an applicant's income, debts, and other qualifying information. These employees are also responsible for obtaining an appraisal of the property, and any verifications that may be necessary from the applicant's employer or other third parties.
When an applicant requests a loan that would have a loan-to-value ratio of greater than 80%, Northern Trust requires the applicant to obtain private mortgage insurance (PMI). The loan officer, originator, or processor is responsible for sending the application to the PMI company for a decision.
Upon gathering the initial documentation from the applicant, and prior to ordering an appraisal or verifying information from third parties, the originator or loan officer, in consultation with his or her supervisor, may decide to reject an application without further processing. In addition, if an application is rejected by the PMI companies, the application is rejected without submission of the file for underwriting.
After all information has been gathered, if the file has not been rejected by the loan officers or originators, it is forwarded to an "underwriter" for analysis and a decision as to whether to accept or reject the application. The underwriter may, on occasion, send the file back to the originator or processor for additional documentation.
The loan officers, originators, and processors responsible for gathering all relevant information needed to qualify an applicant operate with little direct supervision and exercise significant discretion in determining what documentation is necessary. These employees have not been trained in Northern Trust's underwriting standards.
Until November 1993, no one at Northern Trust reviewed decisions by underwriters to deny an application, to ensure that all qualifying information had been obtained and properly evaluated.
Northern Trust's loan officers, originators, processors, and underwriters have made special efforts to qualify and approve white applicants for mortgage loans. These efforts on behalf of white applicants have included:
computing income using an average for a period extending back longer than two years when the applicant's income has been declining;
crediting an applicant's income when the applicant has been on a new job for one year or less;
crediting bonus or overtime income even when there is no documentation or other evidence indicating it is likely to continue into the future;
obtaining and accepting applicants' explanations for adverse items on their credit reports;
accepting applicants whose debt ratios well exceed the bank's guideline limits;
omitting from the overall debt ratios any monthly debt with ten or fewer monthly payments remaining, or occasionally more than ten months remaining;
counselling applicants to "pay down" monthly debts so that ten or fewer payments are remaining so that the debt need not be counted as explained in the preceding subparagraph;
calculating other monthly debt using the actual minimum payment, when available, rather than 5% of the outstanding balance;
calculating income on the basis of a new raise, not yet in effect, rather than on the basis of present salary;
eliciting from the applicant and crediting any possible "offsetting" qualifications that may compensate for any deficiencies in the required qualifying information; and
when private mortgage insurance (PMI) is required for a loan of greater than 80% loan-to-value ratio, making efforts to persuade the PMI company to approve loans with high debt ratios or other potential bases for denial, and then relying on the PMI company's approval as a grounds for Northern Trust's approval.
Northern Trust has failed to ensure that the above-described policy of assistance to enable white applicants to maximize their qualifications is equally given to African-American and Hispanic applicants. Northern Trust has failed to train and supervise its employees adequately to ensure that all loan officers, originators, processors, and underwriters understand the flexibility that should be available to all applicants, without regard to race or national origin, in qualifying for a mortgage loan.
African-American and Hispanic applicants have rarely received the high level of assistance from Northern Trust employees described above. This disparate level of assistance to minority applicants has included:
Failing to follow-up on information provided by the applicant, including:
failing to obtain documentation of income such as bonus, overtime, or commission income, or secondary income sources such as rents, alimony, or child support payments;
failing to seek or obtain from the applicant explanations for adverse items on credit reports, and denying applications solely on the basis of "in-file" credit reports;
failing to advise applicants how to lower their other monthly debt (for example, by refinancing short-term automobile loans) to reduce their overall debt ratios;
failing to ascertain any possible "offsetting" qualifications that might have compensated for any deficiencies in the required qualifying information;
failing to inquire about or follow up regarding known sources of funds for closing other than bank accounts listed on the application, such as sale of assets or assistance from relatives;
Failing to analyze or credit properly the information provided by African-American and Hispanic applicants, including:
failing to count documented bonus and/or overtime income when calculating debt ratios;
counting in the overall debt ratio installment debts with ten or fewer months remaining;
failing to calculate other monthly debt using the actual minimum payment, when available, rather than 5% of the outstanding balance;
refusing to request and properly evaluate explanations for adverse items on the applicant's credit report;
failing to compute income using an average for a period extending back longer than two years when the applicant's income has been declining;
computing an applicant's income using a two year average, rather than current income, when the applicant's income has been increasing;
When private mortgage insurance (PMI) is required for a loan of greater than 80% loan-to-value ratio, failing to provide all the applicant's qualifying information to the PMI company, and then relying on the PMI company's rejection to deny the application; and
Deeming collateral to be unsuitable because of conditions, such as disrepair, that were already reflected in the property's appraised value.
As a result of the manner in which the policies and practices described in paragraphs 10 through 15 were implemented, African-American and Hispanic applicants who sought home mortgage loans from the defendants from January 1992 through December 1993 were:
provided with lesser opportunities than were white applicants to document their qualifying information; and
subjected to more stringent standards than were white applicants, either by the failure of the lender's underwriters to consider their offsetting or compensating qualifying information to the extent that such information was considered for white applicants, or by the underwriters' subjecting them to higher underwriting standards than those applied to white applicants.
The manner in which the defendants' policies and practices were implemented, as described in paragraphs 10 through 15 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);
the making unavailable or the denial of dwellings to persons, because of race or national origin, in violation of Section 804(a) of the Fair Housing Act, 42 U.S.C. § 3604(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
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) and Section 202.4 of Regulation B.
The discriminatory practices of defendants as described in this Complaint were implemented with disregard for the rights of African-American and Hispanic persons.
During the period from January 1992 to December 1993, the defendants engaged in a pattern or practice of discrimination in home mortgage lending, in violation of the Fair Housing Act and the Equal Credit Opportunity Act, by:
requiring a higher level of documentation of African-American and Hispanic applicants' qualifying information than they required of white applicants;
failing to make an effort to obtain documentation of African-American and Hispanic applicants' qualifying information comparable to the efforts made to obtain documentation of the qualifying information of white applicants;
failing to obtain qualifying information from African-American and Hispanic applicants that would compensate for apparent disqualifying information;
failing to approve loans for qualified African-American and Hispanic applicants under the same underwriting standards that were applied to qualified white applicants; and
failing to approve loans for African-American and Hispanic applicants whose qualifications, as documented in the defendants' loan files, did not meet all of their underwriting standards but nevertheless met standards that were equal to or greater than those applied to similarly situated white applicants.
During the period from January 1992 through December 1993, the defendants engaged in a pattern or practice of discrimination against minority applicants with respect to credit transactions, in violation of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1).
The implementation of the defendants' policies and practices as described in this Complaint, constitutes:
a pattern or practice of resistance to the full enjoyment of rights secured by the 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; and
a denial to a group of persons of rights granted by 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, that raises an issue of general public importance.
Persons who were the victims of defendants' 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 defendants' conduct as described herein.
Declares that the totality of the policies and practices of the defendants constitutes a violation of the Fair Housing Act and the Equal Credit Opportunity Act;
enjoins defendants, their agents, employees, and 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 mortgage lending activities;
requires defendants to develop and submit to the Court for its approval a detailed plan that: (a) remedies the vestiges of defendants' discriminatory policies and practices; and (b) ensures that future African-American and Hispanic mortgage loan applicants will be treated in a nondiscriminatory manner that does not differ from the treatment afforded to white applicants;
awards such damages or redress as would fully compensate each person aggrieved by the defendants' discriminatory housing practices for the injuries that they have suffered as a result of the defendants' discriminatory conduct;
awards each person aggrieved by defendants' discriminatory housing practices punitive damages because of the intentional and willful nature of the defendants' conduct; and
assesses civil penalties against defendants, pursuant to 42 U.S.C. § 3614(d)(1)(C), in order to vindicate the public interest.