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Case 1:12-cv-02502-KBF Document 27 Filed 08/27/12 Page 1 of 25

UNITED STATES DISTRICT COURT
 SOUTHERN DISTRICT OF NEW YORK

l/SDCSDNY
 DOCl/MENT

ELECTRONICALU·· FIU:D DOC#: DATE F~IL;-;E::7T~~.--=:--

UNITED STATES OF AMERICA, Plaintiff,
v.
GFI MORTGAGE BANKERS, INC., Defendant.

12 Civ. 02502 (KBF) (FM)

CONSENT ORDER WHEREAS on April 2, 2012, the United States filed its Complaint (the "Complaint") in this matter, alleging that the Defendant GFI Mortgage Bankers, Inc. ("OFI") has engaged in a pattern or practice of conduct in violation of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601-3619, by discriminating on the basis of race and national origin in the extension of residential credit and in the making of residential real estate-related loans; WHEREAS on June 1,2012, OFI filed a motion to dismiss the Complaint arguing that it has no legal liability for any ofthe conduct alleged in the Complaint, which motion remains sub judice with the Court; WHEREAS the United States filed a brief opposing GFl's motion to dismiss the Complaint and the parties initiated discovery on June 12,2012; WHEREAS on August 17, 2012, the Court entered an Order scheduling oral argument on the motion to dismiss that stated: "The Court is skeptical of [OFI's] argument that neither the

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Fair Housing Act nor the Equal Credit Opportunity Act permits disparate impact claims under Smith v. City of Jackson, 544 U.S. 228 (2005)"; and
WHEREAS the parties now jointly submit this Consent Order for the approval of and entry by the Court, to fully resolve the claims asserted in the Complaint;
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, and DECREED: JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1345,42 U.S.C. § 3614, and 15 U.S.C. § 1691e(h).
2. GFI is a mortgage bank with its principal place of business in New York City, New York, and is currently licensed to conduct business in five states. It has operated as a correspondent lender, with the number of first-lien, owner-occupied home mortgage loans it originated increasing from 974 in 2005 to 2,270 in 2009. From 2005 to date, most of its offices have been located in, and the majority of its mortgage loans have been originated in, New York and New Jersey.
3. Venue is appropriate pursuant to 28 U.S.C. § 1391, because GFI, the defendant in this action, conducts business in this district and its principal place of business is located in this district.
FACTUAL STIPULATIONS 4. OFI agrees, admits, and accepts responsibility for the following facts, as alleged in the Complaint:
a. In June of 2007, the United States Department of Housing and Urban Development ("HUD") began an investigation of OF! for possible discrimination in residential mortgage lending against African-American and Hispanic borrowers. In
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January of 2010, HUD concluded that there was sufficient evidence that discriminatory lending practices had occurred at OF! in 2005 and 2006 to refer the matter to the Department of Justice for appropriate action.
b. From 2005 through at least 2009, a statistical analysis of the available data shows that OFI charged higher note interest rates on loans it originated to qualified African-American and Hispanic borrowers than it did to non-Hispanic white borrowers. Measured on a yearly basis, those note interest rate disparities ranged between 19 and 41 basis points higher for African-American borrowers and between 20 and 23 basis points higher for Hispanic borrowers, when compared to similarly-situated non-Hispanic white borrowers.1 These interest rate disparities between non-Hispanic white borrowers on the one hand, and African-American and Hispanic borrowers on the other, are statistically significant, and they cannot be explained by objective credit characteristics ofthe borrowers or loan product features.
c. From 2005 through at least 2009, a statistical analysis of the available data shows that OFI charged higher fees on loans it originated to the average African American and Hispanic borrower than it did to the average non-Hispanic white borrower. On average, measured on a yearly basis, those fee disparities ranged between 73 and 105 basis points higher for African-American borrowers and between 27 and 56 basis points higher for Hispanic borrowers, when compared to non-Hispanic white borrowers. These fee disparities between non-Hispanic white borrowers on the one hand, and African American and Hispanic borrowers on the other, are statistically significant, and they
I A basis point is 111 00 of a percentage point, with 100 basis points equaling 1%.
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cannot be explained by objective credit characteristics of the borrowers or loan product

features.

d. From 2005 through at least 2009, OFI had policies and practices that

allowed its loan officers to make subjective and unguided pricing adjustments to home

mortgage loans that wel'e not based on a borrower's objective credit characteristics,

OFI's policies and practices permitted loan officers to exercise discretion, based on

factors other than a borrower's creditworthiness, to increase or decrease interest rates on

loans offered to any borrower from par or rate sheet prices, to assign fees to borrowers in

connection with loan originations, and to select loan products to offer borrowers.

e. From 2005 through at least 2009, GFI provided a financial incentive to its

loan officers to charge higher interest rates and fees to borrowers generally by including

as part of their compensation a share of any higher interest rates and fees the loan officers

could obtain from a borrower.

f.

From 2005 through at least 2009, OFI did not have fair lending training

and monitoring programs in place to prevent the pricing disparities described above.

INJUNCTIVE RELIEF

5. Unless otherwise stated herein, the remedial provisions of this Order shall be

implemented not later than sixty (60) days after the effective date of this Order. The effective

date of this Order is the date upon which it is approved and entered by the Court.

A. Fair Lending Policies and Procedures

6. GFI, including all of its officers, employees, agents, assignees, successors in

interest, and all those in active concert or participation with any of them, is hereby enjoined from

the adoption, performance, or implementation of any policy, practice, or act that results in

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discrimination on the basis of race or national origin in violation of the FHA or of the ECOA in the origination or pricing of residential mortgage loans. Nothing in this Order will require OFT to require loans to be originated or priced based upon the race or national origin of the borrower or prospective borrower.
7. Consistent with Regulation Z, 12 C.F.R. § 1026.36(d), OFI shall prohibit, for all loans secured by residential real estate originated in its name, its employees and agents from receiving, directly or indirectly, any form of compensation in an amount that is based on any of the terms or conditions of a loan secured by residential real estate, including the annual percentage rate of interest charged to the borrower or the amount by which it varies from the par rate. This prohibition shall not limit compensation that is based on the principal amount of a loan, provided the compensation is based on a fixed percentage of the principal; however, such compensation may be subject to a minimum or maximum dollar amount. This prohibition also shall not limit OFI from allowing a borrower to finance, at the option of the borrower, including through additional principal or higher interest rate, any origination fees or costs, so long as such fees or costs do not vary based on the terms of the loan (other than the amount of the principal) or the borrower's decision about whether to finance such fees or costs. No term of this Consent Order will be interpreted to prevent OF! employees and agents from receiving compensation allowed by 12 C.F.R. § l026.36(d) or to prevent OFI from complying with any federal statutory or regulatory requirement concerning employee compensation or loan pricing.
8. Subject to the approval of the United States as set forth in Paragraph 16, OF! shall adopt specific policies and procedures designed to avoid unlawful discrimination by OF! based on a borrower's race or national origin in the determination of interest rates, both note rate and annual percentage rate, on loans secured by residential real estate. To the same end, OF! shall
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also adopt a standard schedule of fees and costs it charges and retains for itself or pays to its employees or agents, based on either a fixed dollar amount or a percentage of the loan principal amount, including loan origination fees/points and discount fees/points. To the extent OFI allows discretion to its employees and agents in the setting of interest rates, fees, and costs on an individual loan, OFI must: (a) place a narrow objective limit on the amount of pricing discretion .. its loan officers (or employees functioning in a similar capacity) and agents have, measured in basis points for interest rates and either dollar amounts or basis points for fees; (b) in the event an applicant elects to pay discount points, document the specific interest rate reduction that results from the payment of such discount points; (c) in the event a loan officer proposes a loan with an interest rate that exceeds his/her discretion or fees that vary from the standard schedule, require himlher to provide written nondiscriminatory justification for the pricing deviation and require approval for the loan by a designated higher-level employee; and (d) maintain in individual loan files any rate sheet relied upon, the search parameters and criteria relied upon in obtaining loan product and pricing options from any automated underwriting system (including screen shots), and the reasons for any pricing deviations outside of the fixed limits. OFI shall also adopt policies and procedures that require its employees and agents, in the process of an applicant's selection of a loan product, to explain the benefits and consequences of each loan product discussed.
9. OFI shall require a manager at each of its branch offices, under the supervision of a designated senior official, to review and ensure compliance with the requirements of Paragraph 8, including the retention of all documents related to those requirements for the duration of this Order. OFI shall not approve any loan application, or finalize an origination of any loan, that is not submitted in compliance with these requirements.
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10. GFI shall post and prominently display in each location where it receives inperson loan applications a notice of nondiscrimination in the form of Appendix A.
11. For all loans secured by residential real estate originated in its name, GFI shall require its employees or agents to provide the following disclosure to applicants, to the extent not inconsistent with applicable law: (a) the par interest rate used to price the loan; (b) the full amount of all fees and costs GFI charges; (c) a statement whether the applicantlborrower can negotiate the interest rate, fees, or costs; and (d) a non-discrimination notice that provides substantially the same information as set out in Appendix A. Such disclosure shall be in writing, signed by the employee or agent and the applicant/borrower and retained by GFI in the loan file. This disclosure shall be made and executed as early as practicable in the loan application process. B. Fair Lending Monitoring Program
12. GFI shall develop a fair lending monitoring program designed to ensure compliance with this Order, the FHA, and the ECOA. The program shall be designed to monitor, no less frequently than quarterly, loans originated by GFI in its own name secured by residential real estate for potential unexplained disparities by a borrower's race or national origin in the pricing of its residential loan products. At a minimum, GFI shall monitor for disparities in note interest rates, annual percentage rates of interest, and any fees, however denominated, that GFI charges and retains for itself or pays to its employees. This monitoring shall include, but not be limited to, analyses designed to detect statistically significant unexplained disparities in the pricing of its residential loan products by race or national origin with respect to all loans secured by residential real estate GFI originates in its own name. This monitoring program shall review loan originations at the employee (when sufficient loan volume exists to obtain statistically significant results), branch, and company-wide levels, and shall be supervised by a designated
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senior OFI manager, who shall provide a comprehensive quarterly report to OFI's Board of Directors for review and approval not later than 60 days after the end of each quarter.
13. In the event that any such review discloses statistically significant (at the 95% confidence level) disparities at any level employee, branch or company-wide - OFI must promptly attempt to determine the reason(s) for those disparities and must promptly take corrective action to address significant disparities unrelated to objective borrower credit characteristics or loan features that were caused by a policy or practice of OFI, including one that allows pricing discretion to its loan officers, and not justified by a specified legitimate business necessity. Corrective action must include, but is not limited to, where warranted: (a) financial remediation for borrowers; (b) modifications to OFl's pricing policies and/or monitoring programs; (c) training, discipline, or termination of employees or agents; and (d) financial penalties to or additional restrictions on pricing discretion for a branch office or loan officer. OFI shall document any such corrective actions taken and provide the quarterly reviews and any documentation and analysis relating thereto to the United States on a quarterly basis. If the United States raises any objections to OFI's determinations or remedial actions, the parties shall confer to consider appropriate steps to address the concerns raised by the United States' review. If the parties are unable to come to an agreement regarding such objections, any party may bring the dispute to this Court for resolution. C. Fair Lending Training Program
14. No later than 60 days after OFT's new loan policies are approved by the United States or the Court, as provided in Paragraph 16, OFI must provide live (including by webinar or videoconferencing) equal credit opportunity training to its management officials, loan officers, and any other employees or agents who participate in the origination of loans secured by
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residential real estate ("covered employees"). This training shall be provided by an independent third party, selected by OFI subject to approval of the United States, with the costs to be paid by OF!. This training must provide to each participant: (a) a copy of this Order and the new loan policies adopted pursuant to it; (b) training on the terms of this Order, the new loan policies, the requirements of the FHA, the ECOA, and his or her responsibilities under each; and (c) an opportunity to ask questions of, and receive answers from, the instructor. During the term of this Order, OFI must provide this annual fair lending training to covered employees with respect to his or her responsibilities and obligations under the FHA, the ECOA, and this Order.
15. OFI must secure from each covered employee a signed statement acknowledging that he or she has received a copy of this Order and the loan policies and has completed the initial fair lending training. These statements must be substantially in the form of Appendix B (Acknowledgment) and Appendix C (Fair Lending Training). During the term of the Order, each new employee or agent whose responsibilities include those set forth in Paragraph 14 must be provided a copy of this Order and given an opportunity to have any questions answered, and must sign the acknowledgment form statement (Appendix B) no later than 10 days of beginning his or her employment in that position. D. Review of GFI's Revised Lending, Monitoring, and Training Policies
16. OF! must provide a copy of the fair lending policies and the fair lending monitoring policies it proposes to the United States no later than 60 days from the effective date of this Order. The United States must raise any objections to the policies no later than 45 days from receipt of them. If the United States raises any objections, the parties must confer to resolve their differences. In the event they are unable to do so, either party may bring the dispute to this Court for resolution.
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E. Staff 17. Within 60 days of the effective date of this Order, OFI shall employ or designate a
current senior-level employee to serve as a Director of Compliance (or similar title), whose primary responsibilities shall include, but shall not be limited to, overseeing its compliance with the FHA, ECOA, and the provisions of this Order. The Director of Compliance shall be a member ofOFI's senior management. The Director shall oversee the development and implementation of mandatory fair lending training of all lending branch personnel with significant involvement in residential lending (both existing and new employees), be responsible for development and implementation ofOFI's fair lending monitoring program, participate in the creation offair lending policies and practices, be responsible for addressing all fair lending complaints individuals direct to or about OFI, and report directly to OFI's Board of Directors on these subject matters at least quarterly. OFI shall notify the Department of Justice and provide it an opportunity to review the qualifications of this individual in advance.
MONETARY RELIEF 18. In full satisfaction of the United States' claims for monetary damages for aggrieved persons and for a civil penalty, OFI shall pay a total of $3,555,000 in accordance with the schedule set forth below:
a. One payment of$1,305,000 within thirty days of the effective date of this Order; b. One payment of $562,500 within one year and thirty days of the effective date of this Order; and c. Six payments of$281,250 every six months beginning one year, six months and thirty days after the effective date of this Order. These payments shall be allocated as follows: $3.5 million is designated as monetary damages for aggrieved persons, and $55,000 shall be a civil penalty to the United States to vindicate the
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public interest. These payments, together with the costs of fair lending training and administration of the Settlement Fund described in Paragraphs 21-27, constitute the only payments to be made by OFI in settlement of this action, except as provided in Paragraph 29, and no interest shall be charged on the remaining balance as long as each payment has been made in full as scheduled. In the event that OF! fails to make any payment referenced above in full and on time, interest at the statutory rate shall be charged on the entire remaining balance until the final payment is made.
19. OF! shall deposit each payment, up to $3,500,000, in an interest-bearing escrow account (the "Settlement Fund"), title to which shall specify that it is "for the benefit of allegedly
aggrieved persons pursuant to Order of the Court in United States v. GFI Mortgage Bankers, Inc." OFI shall provide written verification of each deposit to the United States within 5 days of
each deposit. Any interest that accrues on the account shall become part of the Settlement Fund and be utilized and disposed of as set forth herein.
20. On the final payment date fixed by Paragraph 18, OFI shall pay a total of $55,000 to the United States as a civil penalty pursuant to 42 U.S.C. § 3614(d)(l)(C) to vindicate the public interest. The payment shall be in the form of an electronic funds transfer pursuant to written instructions to be provided by the United States.
ADMINISTRATION OF SETTLEMENT FUND 21. Within 30 days of entry of the Order, OFI shall identify to the United States a proposed Settlement Administrator ("Administrator"). Within 30 days of obtaining the United States' consent to the selected Administrator, OF! shall execute a contract with the Administrator to conduct the activities set forth in Paragraphs 21-27 and requiring the Administrator to comply with the provisions of this Order as applicable to the Administrator. OFI shall obtain the United
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States' consent to the contract prior to its execution. OFI shall bear all reasonable costs and expenses of the Administrator. The Administrator's contract shall require it to work cooperatively with the United States in the conduct of its activities, including reporting regularly and providing all reasonably requested information to the United States. OFI shall allow the Administrator access to relevant mortgage loan files and borrower contact information for the purposes of accomplishing its duties under the Order. The contract shall require the Administrator to comply with all confidentiality and privacy restrictions applicable to the party who supplies the information and data to the Administrator.
22. In the event the United States has reason to believe that the Administrator is not materially complying with the terms of its contract with OFI, the United States and OFI shall meet and confer for the purpose of mutually agreeing upon a course of action to effect the Administrator's material compliance with its contract. In the event that the United States and OFI are unable to agree upon a course of action to effect the Administrator's material compliance with its contract, the parties may present the matter to the Court.
23. The United States shall provide a list of allegedly aggrieved persons to the Administrator within 60 days of execution of its contract with OFI. Pursuant to its contract, the Administrator shall make its best efforts, using all reasonable methods regularly used by companies that administer litigation and government enforcement settlement funds, to locate each identified allegedly aggrieved person and obtain such information as the United States reasonably considers necessary from each. The Administrator's contract shall require the Administrator to complete this responsibility within a period of 4 months from the date the United States provides this list, subject to an extension of time as provided by Paragraph 26. The
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Administrator's contract shall require it to establish cost-free means for allegedly aggrieved persons to contact it, such as email and a toll-free telephone number.
24. The United States shall specify the amount each allegedly aggrieved person located by the Administrator pursuant to Paragraph 23 shall receive from the initial amount deposited into Settlement Fund no later than 60 days after the Administrator's deadline for locating allegedly aggrieved persons has passed. The United States shall provide the compensation list to the Administrator. Within thirty days of each subsequent deposit into the Settlement Fund, the United States shall provide a list to the Administrator for the disbursement of those funds.
25. The Administrator shall send releases, as set forth in Appendix 0 ("Release"), to allegedly aggrieved persons prior to their receipt of their initial payment. After receipt of executed Releases, the Administrator shall promptly deliver initial payments to those persons in the amounts determined by the United States as described in Paragraph 24. No release shall be required to receive subsequent payments from the Settlement Fund. The Administrator's identification and payment responsibility may be implemented on a rolling basis with approval from the United States. The Administrator's contract shall require the Administrator to set reasonable deadlines, subject to approval of the United States, for distribution of compensation to aggrieved persons after each deposit into the Settlement Fund and for each check to be presented for payment or become void. The Administrator's contract shall also require the Administrator to keep updated records on the mailing address of each allegedly aggrieved person until the final payments from the Settlement Fund are made and make its best efforts, using all reasonable methods regularly used by companies that administer litigation and government
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enforcement settlement funds, to locate each identified allegedly aggrieved person for whom it loses contact after making the initial or any subsequent payment.
26. Payments from the Settlement Fund to allegedly aggrieved persons shall be subject to the following conditions, provided that the details in administration of the Settlement Fund set forth in Paragraphs 23-25, including time deadlines, can be modified by agreement of the parties and without further Court approval:
a. No allegedly aggrieved person shaH be paid any amount from the Settlement Fund until he or she has executed and delivered to the Administrator a Release; and b. The total amount paid by GFI collectively to the allegedly aggrieved persons shall not exceed the amount of the Settlement Fund, including accrued interest and excluding payment of the civil penalty to the United States. 27. All money not distributed to allegedly aggrieved persons from the Settlement Fund, including accrued interest, or paid to the United States as a civil penalty, shall be distributed to qualified organization(s) that provide services including credit and housing counseling (including assistance in obtaining loan modification and preventing foreclosure), legal representation of borrowers seeking to obtain a loan modification or to prevent foreclosure, financial literacy, and other related programs targeted at African-American and Hispanic potential and former homeowners in communities where GFI has had the highest volume of lending to African-American or Hispanic borrowers during the past seven years. Recipient(s) of such funds must not be related to GFI or its parent or any affiliated companies, nor may any executive of any recipient organization be related to any GFI executives or directors. GFI will consult with and obtain the consent of the United States in selecting recipient(s) of these funds
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and the amount to be distributed to each, and the parties shall obtain the Court's approval prior to distribution of any remainder of the Settlement Fund's assets. OFI shall require each recipient to submit to OFI and the United States a detailed report on how funds are utilized within one year after the funds are distributed.
28. OFI shall not be entitled to a set-off or any other reduction of the amount of payments to aggrieved persons because of any debts owed by such persons. OFI shall also not refuse to make a payment based on release of legal claims or loan modification previously signed by an aggrieved person.
GFI FINANCIAL ASSURANCES 29. OFI understands that the United States has agreed to the multi-year payment of restitution based solely on sworn financial disclosure statements and other financial information that OFI provided to the United States on October 28,2011, and on subsequent dates ("Financial Statements"), and the United States has relied on the accuracy and completeness of those Financial Statements in entering into this Order. OFI warrants that it did not own or have an interest in any asset(s) that was not disclosed in the Financial Statements, and that it made no knowing misrepresentations in, or in connection with, the Financial Statements. In the event the United States comes to believe in good faith that OFI made knowing misrepresentations relating to asset(s) or the monetary value of asset(s) in which OFl had an interest at the time of the Financial Statements that would increase the estimated net worth of OFl set f0l1h in the Financial Statements by two hundred and fifty thousand dollars ($250,000) or more, OFI shall be required, upon a determination by the Court that OF! made such knowing misrepresentations, to pay within 60 days of the Court's determination (a) whatever additional funds OFI continues to owe under this Consent Order. and (b) liquidated damages of $500.000.
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30. Within thirty days of the effective date of this Order, and to the extent consistent with OFI's existing obligations to its warehouse lenders, OFI will provide the United States with security interests in all of OFI's unencumbered physical assets and cash in unencumbered bank accounts up to the amount then owed under paragraphs 18(b) and (c). The United States will file a UCC statement, in the form specified by the appropriate authority in the state where the property is located, reflecting these security interests in the amount of the payments owed under paragraphs 18(b) and (c). Upon further payments by OFI as contemplated under paragraphs 18(b) and (c), the United States will terminate the existing UCC statement and refile an updated UCC statement updated to reflect the amount then outstanding.
COMPLIANCE MONITORING 31. For the duration of this Order, GFI shall retain all records relating to its obligations hereunder as well as its compliance activities as set forth herein. The United States shall have the right to review and copy such records upon request and after reasonable notice, including loan files and electronic data for loans secured by residential real estate made during the duration of the Order. 32. OFI shall provide the United States the data on its lending that is submitted to the Federal Financial Institutions Examination Council ("FFIEC") pursuant to the Home Mortgage Disclosure Act and the Community Reinvestment Act. The data will be provided in the same format in which it is presented to the FFIEC, within 30 days of its submission to the FFIEC each year, for the duration of the Order, including the record layout. 33. In addition to the submission of any other plans or reports specified in this Order, GFI shall submit semi-annual reports to the United States on its progress in completing the requirements of this Order. Each such report shall provide a complete account of OFl's actions to comply with each requirement of this Order during the previous 6 months, an objective
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assessment of the extent to which each quantifiable obligation was met, an explanation of why any particular component fell short of meeting its goal for the previous 6 months, and any recommendations for additional actions to achieve the goals of the Order. GFI shall submit its first report no later than 180 days after the Effective Date of the Order, and every 180 days thereafter for so long as the Order is in effect.
34. All material required by this Order to be sent to counsel for the United States must be sent by commercial overnight delivery service addressed as follows: (1) Chief, Housing and Civil Enforcement Section, Civil Rights Division, U.S. Department of Justice, 1800 G Street NW, Suite 7002, Washington, DC 20006, Attn: OJ 188-51-10, or by facsimile to 202-514-1116; and (2) Chief, Civil Rights Unit, U.S. Attorney's Office for the Southern District of New York, 86 Chambers Street, 3rd Floor, New York, New York 10007; or (3) as otherwise directed by the United States.
DURATION OF THIS ORDER
35. Unless otherwise extended, this Order shall remain in effect for four years and six months after its entry. The Court shall retain jurisdiction for the duration of this Order to enforce the terms of this Order, after which time the case shall be dismissed with prejudice. Notwithstanding the foregoing, this Order may be extended further upon motion of the United States to the Court, for good cause shown.
36. Any time limits for peliormance fixed by the Order may be extended by mutual written agreement of the parties. Except as provided by Paragraph 26, other modifications to this Order may be made only upon approval of the Court, upon motion by either party.
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MISCELLANEOUS PROVISIONS
 37. This Order shall be binding on GFI, including all its officers, employees, agents, assignees, and successors in interest, and all those in active concert or participation with any of them in the origination or pricing of mortgage loans. In the event GFI seeks to transfer or assign all or part of its operations, and the successor or assign intends on carrying on the same or similar use, as a condition of sale, GFI shall obtain the written accession of the successor or assign to any obligations remaining under the Order for its remaining term. 38. Nothing in this Order shall excuse GFI from compliance with any currently or subsequently effective provision of law or order of a regulator with authority over GFI that imposes additional obligations on GFI. 39. In the event that any disputes arise about the interpretation of or compliance with the terms of this Order, the parties shall endeavor in good faith to resolve any such dispute between themselves before bringing it to this Court for resolution. If the United States believes that GFI has violated any provision of this Order, it will provide GFI written notice thereof and allow 30 days to resolve the alleged violation before presenting the matter to this Court. In the event of either a failure by GFI to perform in a timely manner any act required by this Order or an act by GFI in violation of any provision hereof, the United States may move this Court to impose any remedy authorized by law or equity. 40. GFI's compliance with the terms of this Order shall fully and finaHy resolve all claims by the United States Attorney General and the United States Secretary of Housing and Urban Development related to GFl's discriminatory conduct in violation of the FHA and ECOA as alleged in the Complaint in the origination of loans between January 1, 2005, and December 31, 2009, including all claims for equitable relief and monetary damages and penalties. The
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Order does not release claims for practices not addressed in the Complaint's allegations, including claims that may be held or are currently under investigation by any federal agency, or any claims that may be pursued or actions that may be taken by any executive agency established by 12 U.S.C. § 5491 or the appropriate Federal Banking Agency, as defined in 12 U.S.C. § 1813(q), against GFI, any of its affiliated entities, and/or any institution-affiliated party of GFI, as defined in 12 U.S.C. § I813(u), pursuant to 12 U.S.C. § 1818 or any other statute or regulation. This Order does not resolve and does not release claims other than claims for discrimination.
41. The parties agree that, as of the date of entry of this Order, litigation is not "reasonably foreseeable" concerning the matters described in the Order. To the extent that either party previously implemented a litigation hold to preserve documents, electronically stored information, or things related to the matters described in the Order, the party is no longer required to maintain such a litigation hold.
42. Each party to this Order shall bear its own costs and attorneys' fees associated with this litigation.
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43. The individuals signing this Order on behalf of OFl represent and warrant that they are authorized to execute this Order. The United States' signatories represent that they are signing this Order in their official capacities and are authorized to execute this Order.

SO ORDERED, this

dT

Ie. day

of

~ ,2012.

Hon. Katherine B. Forrest United States District Judge

The undersigned hereby apply for and consent to the entry of this Order:

For Plaintiff United States of America:

PREET BHARARA United States Attorney Southern District of New York
DAVID J. KENNEDY \ JEAN-DAVID BARNEA Assistant United States Attorneys 86 Chambers Street, Third Floor New York, New York 10007 Phone: (212) 637-2733/2679 Fax: (212) 637-0033

THOMAS E. PEREZ Assistant Attorney General Civil Rights Division STEVEN H. ROSENBAUM Chief Civil Rights Division Housing and Civil Enforcement Section JON M. SEWARD Deputy Chief Civil Rights Division Housing and Civil Enforcement Section
<2
Trial Attorneys United States Department of Justice Civil Rights Division Housing and Civil Enforcement Section 950 PelUlsylvnnia Ave., N.W. - NWB Washington, D.C. 20530 Phone: (202) 514-4713 Fax: (202) 514-1116

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For Defendant GFI Mortgage Bankers, Inc.: ANDREW L. SANDLER KIRK D. JENSEN (pro hac vice) ANDREW R. LOUIS (pro hac vice) BuckleySandler LLP 125024111 Street NW, Suite 700
ashin n DC 20037 P ne: 02) 349-8000 Fa (20 349-8080
\ \
AB~MEISNER
Executive Vice President OFI Mortgage Bankers. Inc.
21

Case 1:12-cv-02502-KBF Document 27 Filed 08/27/12 Page 22 of 25
APPENDIX A
We do Business in Accordance with Federal Fair
 Lending Laws

UNDER THE FAIR HOUSING ACT AND THE EQUAL CREDIT OPPORTUNITY ACT, IT IS ILLEGAL TO DISCRIMINATE IN ANY CREDIT TRANSACTION:
On the basis of race, color, national origin, religion, sex, familial status, handicap, marital status, or age;
Because income is front public assistance; or
Because a right has been exercised under the Federal Consunler Credit Protection Laws.
IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD CALL:
United States Department of Justice Civil Rights Div.: 1-800-896-7743 or United States Attorney's Office Civil Rights Div.: 212-637-0840 or U.S. Department of Housing and Urban Development: 1-800-669-9777 or Consumer Financial Protection Bureau: 1-855-411-2372
22

Case 1:12-cv-02502-KBF Document 27 Filed 08/27/12 Page 23 of 25
Appendix B I hereby acknowledge that I have received and read a copy of the Consent Order entered in United States v. OFI Mortgage Bankers. Inc., and the current loan policies of OFI Mortgage Bankers, Inc. I have had the opportunity to ask questions and obtain answers to them and I understand my fair lending obligations under the Order and those policies.
[Signature] [Print Name] [Job Title] [Date]
23

Case 1:12-cv-02502-KBF Document 27 Filed 08/27/12 Page 24 of 25
Appendix C I hereby acknowledge that on _ _ _ _ _ _ _ _ _ _ _,' I attended the fair lending training program provided to OFr employees and agents by _ _ _ _ _ _ _ _ _ _ __ During the training, I received information about my fair lending obligations under the terms of the Consent Order entered by the court in United States v. OF! Mortgage Bankers, Inc., OFI's current lending policies, and relevant federal, state, and local laws. I had the opportunity to ask questions and to receive answers to them. I understand my fair lending obligations under that Order, OFI's lending policies, and those laws.
[Signature] [Print Name] [Job Title] [Date]
24

Case 1:12-cv-02502-KBF Document 27 Filed 08/27/12 Page 25 of 25
APPENDIXD
 Release

In consideration for the parties' agreement to the terms of the Consent Order entered in United States v. GFI Mortgage Bankers. Inc., (S.D.N.Y.), and GFI's payment to me of ~______, pursuant to the Consent Order, I hereby release and forever discharge all claims, accruing prior to the entry of the Consent Order, related to the allegations of housing and credit discrimination in the origination of loans secured by residential real estate at issue in the litigation referenced above that I may have against GFI, all related entities, parents, predecessors, successors, subsidiaries, and affiliates, and all of their past and present directors, officers, agents, managers, supervisors, shareholders, and employees and their heirs, executors, administrators, successors, or assigns. I understand that the total payment amount stated above will be paid to me from the Settlement Fund established pursuant to the Consent Order on the following schedule:
[insert payment schedule for borrower]
Executed this _ _ day of _ _ _ _ _ _ _, 2013.
Signature Print Name
Address
25

 Case 1:12-cv-02502-KBF Document 1

Filed 04/02/12 Page 1 of 13
ov

JUDGB FORREST

UNITED STATES' DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA, Plaintiff,
v.
GFI MORTGAGE BANKERS, INC., Defendant.

ECFCASE JURy TRIAL DEMANDED

The United States of America (the "United States") files this Complaint, alleging as follows:
INTRODUCTION 1. This action is brought by the United States to enforce the provisions ofthe Fair Housing Act, 42 U.S.C. §§ 3601-3619 ("FHA"), and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-169lf("ECOA"). 2. From 2005 through at least 2009, defendant GFI Mortgage Bankers, Inc. ("GFI") engaged in a pattern or practice of discrimination on the basis ofrace and national origin by' charging African-American and Hispanic borrowers higher interest rates and fees on home mortgage loansl compared to the rates and fees GFI charged to similarly-situated non-Hispanic white borrowers ("white borrowers"). In hundreds ofinstances, an African-American or Hispanic borrower with a similar credit and risk profile as a white borrower, entering into the same
I For purposes of this Complaint, and consistent with the Home Mortgage Disclosure Act ("HMDA"), the term "home mortgage loan" or "home loan" refers to loans originated for the purchase or refmance of owner-occupied, one-to-four family dwellings.

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 2 of 13
type ofhome mortgage loan with GFI, paid higher interest rates and fees because ofhis or her race or national origin.
JURISDICTION AND VENUE 3. This Court has jurisdiction over this action pursuant to 28 U.S.C. § l345, 42 U.S.C. §. 3614, and 15 U.S.C. § 1691e(h). 4. Venue is appropriate pursuant to 28 U.S.C. § l391, because GFI, the defendant in this action, conducts business in this district and its principal place of business is located in this district.
PARTIES 5. GFI is a mortgage banker licensed to do business in seven states, including New York and New Jersey, and operates twelve of its thirteen branch offices in New York and New Jersey. GFl's principal place of business is in New York, New York. 6. GFI is an affiliate of GFI Capital Resources Group, Inc., a diversified real estate and insurance company with its principal place of business in New York, New York. 7. From'2005 to 2009, the number of home mortgage loans issued by GFI increased from 974 in 2005 to 2,270 in 2009. From 2005 to 2009, GFl's revenue from its home mortgage loan services increased from approximately $305 million in 2005 to approximately $768 million in 2009. 8. From 2005 to 2009, GFI employed approximately 250 to 300 loan officers and loan processors. Most of these employees were based in New York and New Jersey. From 2005 to 2009, GFI made a total of approximately 300 home loans in New York and New Jersey to African-American borrowers and 440 home loans in New York and New Jersey to Hispanic borrowers.
2

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 3 of 13
9. GFI is subject to federal laws governing fair lending, including the FHA and the ECOA and the regulations promulgated under each of those laws. The FHA and the ECOA
prohibit financial institutions from discriminating on the basis of, inter alia, race or national origin
in their home mortgage lending practices. Charging higher prices for home mortgage loans on the basis of race or national origin,.inc1uding charging higher fees and annual percentage rates of interest, is one ofthe discriminatory lending practices prohibited by the FHA and the ECOA.
10. GFI is a "creditor" within the meaning of the ECOA, 15 U.S.C. § 1691a(e), and engages in "residential real estate-related transactions" within the meaning of the FHA, 42 U.S.C. § 3605. GFI also is subject to the Home Mortgage Disclosure Act ("HMDA"), 12 U.S.C. § 2803,
and its implementing regulations, 12 C.F.R. § 203.1 et seq., which require mortgage lenders to
maintain data on the race and national origin of each borrower, among other things. 11. Since June 2007, GFI has been the subject of a federal fair lending investigation by
the U.S. Department of Housing and Urban Development ("HUD") for possible discrimination in home mortgage lending against African-American and Hispanic borrowers. In January of 20 10, HUD concluded that there was a sufficient basis to warrant a pattern or practice referral for lending discrimination to the Department of Justice ("DOJ") and referred its investigation of GFI to DOl
FACTUAL ALLEGATIONS A. GFI Cbarges African-American Borrowers More than Similarly.Situated
White Borrowers 12. From 2005 through at least 2009, GFI charged higher interest rates and fees for home mortgage loans to African-American borrowers than it charged to similarly-situated white borrowers. The higher interest rates and fees were not based on objective criteria related to credit risk or loan characteristics, but instead, were based on race. The disparities in interest rates and fees between African-American borrowers and similarly-situated white borrowers are statistically
3

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 4 of 13
significant. 13. For example, GFI charged African-American borrowers interest note rates that
were, on average, 41 basis points2 higher in 2005, 19 basis points higher in 2007, and 25 basis points higher in 2008, than the interest rates it charged to similarly-situated white borrowers for home loans, after accounting for all factors related to the borrowers' credit risk and loan characteristics. The interest rate disparities mean that an African-American borrower securing a home loan of $369,000, which is the average home loan amount that GFI originated to minority borrowers in the period from 2005 ,to 2009, paid, on average, approximately $701 to $1,513 more in interest annually, depending on the year of the loan, than a similarly-situated white borrower during 'each year that he or she remained in the loan.
14. Furthermore, GFI charged African-American borrowers fees on their home loans that were, on average, 102 basis points higher in 2005,87 basis points higher in 2006, 105 basis poillts higher in 2007, 102 basis points higher in 2008, and 73 basis points higher in 2009, than the fees it charged to similarly-situated white borrowers. The fee disparities mean that an African-American borrower securing a home loan amount of $369,000 paid, on average, approximately $2,694 to $3,875 more in fees than a similarly-situated white borrower, depending on the year of the loan.
15. From 2005 through 2009, GFI made a total of approximately 300 home loans to African-American borrowers. In each of these years, there were statistically significant pricing disparities between African-American and white borrowers. African-American borrowers who remain in these loans will continue to pay additional interest in each monthly mortgage payment until the loan is refmanced or paid off, for as many as 30 years from the origination date of the
2 One basis point represents one one-hundredth of a percentage point (0.01 %). 4

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 5 of 13
loan. For example, African"Am~rican borrowers who took out home mortgages in 2007 paid an average of $7,512 more in interest rate and fees than similarly"situated white borrowers over the first four years of their home loan. Oyer the life ofthe loans, assuming they are held until maturity, African-American borrowers who took out home loans in 2007 will pay, on average, approximately $26,535 more than similarly-situated white borrowers, for reasons unrelated to their credit risk and loan characteristics and because of their race.
16. The statistically significant disparities between African-American and similarly-situated white borrowers in the cost of40me loans are a result of GFI's home-loan pricing policy. From 2005 through at least 2009, GFI allowed and encouraged its loan officers in New York and New Jersey to malce subjective and unguided pricing adjustments that were not based on a borrower's risk in pricmg loans, and charging fees, as well as allowed or encouraged loan officers in New York and New Jersey to,malce SUbjective and unguided decisions, that were not based on a borrower's risk in selecting loan products. GFI knew that its loan officers were pricing loans in a manner that was unrelated to a borrower's creditworthiness, resulting in thousands of dollars in overcharges for African American borrowers based on their race.
17. GFI's loan officers used Optimal Blue, a web-based mortgage pricing software program customized for GFI's products and pricing strategy, to select loan products, price loans, and set fees. GFI allowed its loan officers to manipulate the search parameters and criteria in order to generate a wide range of pricing options for home loans. GFI. also allowed its loan officers to select a loan price and product type within the range generated by Optimal Blue. GFI knew that its loan officers were pricing loans within this range based on factors unrelated to credit risk. GFI allowed its loan officers to mark up interest rates generated by Optimal Blue and to impose additional fees after a loan product and interest rate were chosen.
5

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 6 of 13
18. From 2005 through at least 2009, GFI provided strong fmancial incentives to its loan officers to price their loan products as high as possible, consistently resulting in higher-priced loans for African-American borrowers. GFI compensates each of its loan officers by paying him or her a substantial percentage of the profits he or she generates for GFI on each loan. The .percentage of profits for each loan officer depends on, and increases for, those loan officers originating higher-priced loans and greater profits.
19. From 2005 through at least 2009, GFI failed to supervise, train, or monitor adequately its loan officers to ensure that they were pricing loans in a non-discriminatory manner. GFI did not provide written guidance to loan officers or put in place fair lending policies or practices to prevent or assess whether loan officers were pricing loans in a non-discriminatory manner.
20. From at' least 2005, GFI lmew or had information about an applicant's race prior to setting loan prices or fees. GFI lmew or had reason to lmow that African-American borrowers were paying higher prices than similarly qualified white borrowers.
21. GFI lmew in June 2007 that HUD had opened a federal fair lending investigation of GFI's home mortgage pricing practices. Despite this lmowledge, GFI continued to allow loan officers to price loans based on factors unrelated to credit risk and loan characteristics, provided strong fmancial incentives to loan officers to overcharge, and failed to supervise, train or impose any fair lending controls to ensure that loan officers acted in a non-discriminatory manner.
22. GFI's pricing policies and practices, as described herein had a disparate impact on African-American borrowers compared to similarly-situated white borrowers, and are not justified by business necessity or legitimate business interests.
6

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 7 of 13
B. GFI Charges Hispanic Borrowers More than Similarly~Situated White Borrowers
23. From 2005 through at least 2009, GFI charged higher interest rates and fees for home mortgage loans to Hispanic borrowers than to similarly-situated white borrowers. The higher interest rates and fees were not based on objective criteria related to credit risk or to loan characteristics, but instead, were based on national origin. The disparities in interest rates and fees between Hispanic borrowers and similarly~situated white borrowers are statistically significant.
24. In 2006 and 2007, GFI charged Hispanic borrowers interest rates that were, on average, 20 and 23 basis points higher, respectively, than the interest rates GFI charged to similarly-situated white borrowers for home loans, after accounting for all factors related to a borrower's credit risk and loan characteristics. The interest rate disparities mean that a Hispanic borrower securing a home loan of $369,000 paid, on average, ~pproximately $738 to $849 more in interest annually, depending on the year of the loan, than a similarly-situated white borrower during each year that he or she remained in the loan.
25. Furthermore, GFI charged Hispanic borrowers fees on their home loans that were, on average, 42 basis points higher in 2005, 56 basis points higher in 2006, 51 basis points higher in 2007,24 basis points higher in 2008, and 27 basis points higher in 2009, than the fees it charged to similarly-situated white borrowers. These fee disparities mean that a Hispanic borrower who took out a $369,000 home loan paid, on average, approximately $886 to $2,066 more in fees, depending on the year of the loan, than a similarly-situated white borrower.
26. Between 2005 and 2009, GFI made a total of approximately 440 loans to Hispanic borrowers. In each of these years, there were statistically significant pricing disparities betWeen Hispanic and similarly-situated white borrowers. Hispanic borrowers who remain in these loans
7

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 8 of 13
will continue to pay additi~nal interest in each monthly mortgage payment until the loan is refinanced or is paid off, as many as 30 years from the origination date of the loan. For example, Hispanic borrowers who took out home loans in 2007 paid an average of $5,593 more in interest rate and fees than similarly-situated white borrowers over the first four years oftheir home loans. Over the life ofthese loans, assuming they are held until maturity, Hispanic borrowers will pay, on average, approximately $23,878 more than sirirllarly-situated white t:>orrowers for reasons unrelated to credit risk or loan characteristics and because of their national origin.
27. The statistically significant disparities between Hispanic and similarly-situated white borrowers in the cost of home loans are a result of GFI' s home-loan pricing policy. From 2005 through at least 2009, OFI allowed and encouraged its loan officers in New York and New Jersey to malce SUbjective and unguided pricing adjustments that were not based on a borrower's risk in pricing loans, and charging fees, as well as allowed or encouraged loan officers in New York and New Jersey to make subjective and unguided decisions, that were not based on a borrower's risk in selecting loan products. GFI knew that its loan officers were pricing loans in a manner that. was unrelated to a borrower's creditworthiness, resulting in thous.ands of dollars in 9vercharges for Hispanic borrowers based on their national origin.
28. GFI's loan officers used Optimal Blue, a web-based mortgage pricing software program customized for GFI's products and pricing strategy, to select loan products, price loans, and set fees. GFI allowed its loan officers to manipulate the search parameters and criteria in order to generate a wide range of pricing options for home loans. GFI also allowed loan officers to select a loan price and product type within the range generated by Optimal Blue. GFI knew that its loan officers were pricing loans within this range based on factors unrelated to credit risk. GFI allowed its loan officers to mark up interest rates generated by Optimal Blue and to impose
8

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 9 of 13
additional fees after a loan product and interest rate were chosen. 29. From 2005 through at least 2009, GFI provided strong financial incentives to its
loan officers to price their loan products as high as possible, consistently resulting in higher-priced loans for Hispanic borrowers. GFI compensates each of its loan officers by paying him or her a substantial percentage of the profits he or she generates for GFI on each loan. The percentage of profits for each loan officer depends on, and increases for, those loan officers ,originating higher-priced loans and greater profits.
30. From 2005 to at least 2009, GFI failed to supervise, train, or monitor adequately its loan officers to ensure that they were pricing loans in a non-discriminatory manner. GFI did not provide written guidance to loan. officers or put in place fair lending policies or practices to prevent or assess whether loan officers were pricing loans in a non-discriminatory manner.
31. From at least 2005, GFI lmew and had information about an applicant's national origin prior to pricing loans and setting fees. GFI lmew or had reason to know that Hispanic borrowers were paying higher prices than similarly qualified white borrowers.
32. GFI lmew in.June 2007 that HUD had opened a federal fair lending investigation of GFI's home mortgage pricing practices. Despite this lmowledge, GFI continued to allow loan officers to price loans based on factors unrelated to credit risk and loan characteristics, provided strong financial incentives to loan officers to overcharge, and failed to supervise, train or impose any fair lending controls to ensure that loan officers acted in a non-discriminatory manner.
33. GFI's pricing policies and practices as described herein had a disparate impact on Hispanic borrowers compared to similarly-situated white borrowers, and are not justified by business necessity or legitimate business interests.
I
9

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 10 of 13
CLAIMS FOR RELIEF 34. The United States respectfully re-alleges and incorporates paragraphs 1 through 33 of the Complaint by reference. 35. GFl's actions, policies and practices, as alleged herein, constitute:
a. Discrirnfuation on the basis of race or national origin in the terms, conditions, or privileges of the provision of services in connection with sale of a dwelling, in violation ofthe Fair Housing Act, 42 U.S.C. § 3604(b); b. Discrimination on the basis of race or national origin in making available, or in the terms or conditions of, residential real estate-related transactions, in violation of the Fair Housing Act, 42 U.S.C. § 3605(a); and c. 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)(I). 36. GFl's actions, policies and practices, as alleged herein, constitute: a. A pattern or practice of resistance to the full enjoyment of rights secured by the Fair Housing Act, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-169lf; and b. A denial of rights granted by the Fair Housing Act to a group ofpersons that raises an issue of general public importance. 37. Persons who have been victims ofGFI's discriminatory actions, policies and practices are aggrieved persons as defined in the Fair, Housing Act, 42 U.S.C. § 3602(i), and aggrieved applicants as defmed in the Equal Credit Opportunity Act, 15 U.S.C. § 1691e, and have suffered injury and damages as a result of GFI's violation of both the Fair Housing Act and the
10

- - -C-a-se-1-:-12--c_v-..0....2._.5__.0..2. -KBF Document 1 Filed 04/02/12 Page 11 of 13
Equal Credit Opportunity Act. 38. GFI's pattern or practice of discrimination has been intentional and willful, and has
been implemented with recldess disregard for the rights of African~American and Hispanic borrowers.
REQUEST FOR RELIEF
WHEREFORE, the United States requests that the Court enter a JUDGMENT that: 39. Declares that the policies and practices of GFI constitute violations of the Fair Housing Act, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-169lf; 40. Enjoins GFI, its agents, employees, and successors, and all other persons in active concert or participation with it, from:
a. Discriminating on the basis of race or national origin against any person in making available, or in the terms or conditions of, a residential real estate-related transaction; b. Discriminating on the basis of race or national origin in the terms, conditions, or privileges of the provision of services in connection with the sale of dwellings; c. Discriminating on the basis of race or national origin against any person with respect to any aspect of a credit transaction; d. Failing or refusing to take such affirmative steps as may be necessary to restore, as nearly as practicable, the victims of GFI' s unlawful conduct to the position they would have been in but for the discriminatory conduct; and e. Failing or refusing to take such actions as may be necessary to prevent the
11

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 12 of 13 recurrence of any such discriminatory conduct in the futUre.
41. ,Awards monetary damages to all the victims ofGFI's discriminatory policies and practices for the injuries caused by GFI, pursuant to 42 U.S.C. § 3614(d)(1)(B) and 15 U.S.C. § 1691e(h); and
42. Assesses a civil penalty against GFI in an amount authorized by 42 U.S.C. § 3614(d)(I)(C), in order to vindicate the public interest.
43. The United States further requests' such additional relief as the interests ofjustice may require.
12

Case 1:12-cv-02502-KBF Document 1 Filed 04/02/12 Page 13 of 13

The United States respectfully demands trial by jury.

Dated:

y/ashington, D.C.
March '30 , 2012

Dated:

ERIC H. HOLDER, Jr.

Attorney General

CL ~ <A...-

THOMAS E. PEREZ l

Assistant Attorney General

Civil Rights Division

STEVEN H. ROSENBAUM

Chief

JON M~ SEWARD

Deputy Chief

SAMEENA SHINA MAJEED

Trial Attorney

.

Housing and Civil Enforcement Section

Civil Rights Division

U.S. Department of Justice

950 PelIDsylvania Ave., N.W.

Washington, D.C. 20530

Phone: (202) 305-1311

Fax: (202) 514-1116

PREET BHARARA

United States Attorney

South

ew York

By:
AID.. JE -DAVID B.l'"l...L'U.·'.L>. Assistant United States Attorneys 86 Chambers Street, Third Floor New York, NY 10007 Phone: (212) 637-2733/2679 Fax: (212) 637-0033 David.Kennedy2@usdoj.gov . Jean-David.Barnea@usdoj.gov

13

 Case 1:12-cv-02502-KBF Document 26 Filed 08/23/12 Page 1 of 1
U.S. Department of Justice
United States Attorney Southern District ofNew York

86 Chamber& Street New York; New York 10007

August 23, 2012

BY HAND AND ELECTRONIC MAIL The Hon. Katherine B. Forrest United States District Judge United States District Court 500 Pearl Street New York, NY 10007
Re:
Dear Judge Forrest:

USDCSDNY DOCUMENT ELECTRONICALLY FILED
DDAOTCE#:F
-IL-E-D-[:§-»=./--h',7.?..:..:
5"T/-+/-r.2~
United States v. GFI Mortgage Bankers, 12 Civ. 2502 (KBF)

This Office, together with the Justice Department's Civil Rights Division, represents the United States (the "Government") in the above-referenced case. On behalf of the Government and GFI, we write to respectfully advise the Court that the parties have settled this matter.

Please find attached for the Court's review and approval a proposed Consent Order fully resolving this action. A copy is also being sent to the Orders and Judgments Clerk. As a conference in this matter is scheduled for August 27,2012, the parties would appreciate the guidance ofthe Court as to whether appearances will be necessary in light of the proposed resolution of this matter.

The parties greatly appreciate the attention that the Court has given this matter.

Respectfully,

PREET BHARARA United States Attorney

SO OaDEREO:

By: \s\ David J. Kennedy DAVID J. KENNEDY JEAN-DAVID BARNEA Assistant United States Attorneys Telephone: (212) 637-2733, 2679 Fax: (212) 637-0033 E-mail: david.kennedy2@usdoj.gov

cc: Kirk Jensen, Esq., for GFI Mortgage Bankers (by email) Andrew Louis, Esq., for GFI Mortgage Bankers (by email)

 U.S. District Court Southern District of New York (Foley Square) CIVIL DOCKET FOR CASE #: 1:12−cv−02502−KBF

CLOSED,ECF

United States Of America v. GFI Mortgage Bankers, Inc. Assigned to: Judge Katherine B. Forrest Cause: 42:3601 Fair Housing Act
Plaintiff

Date Filed: 04/02/2012 Date Terminated: 08/23/2012 Jury Demand: Plaintiff Nature of Suit: 443 Civil Rights: Accommodations Jurisdiction: U.S. Government Plaintiff

United States Of America

represented by David J Kennedy U.S. Attorney's Office, SDNY (Chambers Street) 86 Chambers Street New York, NY 10007 (212) 637−2200 Fax: (212) 637−2730 Email: david.kennedy2@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

Burtis Marshall Dougherty U.S. Department of Justice, Civil Rights Division 950 Pennsylvania Avenue, Nw −− Nwb Washington, DC 20530 (202)−514−4737 Fax: (202)−514−1116 Email: burtis.m.dougherty@usdoj.gov ATTORNEY TO BE NOTICED

Jean−David Barnea U.S. Attorney's Office, SDNY (Chambers Street) 86 Chambers Street New York, NY 10007 (212) 637−2679 Fax: (212) 637−2717 Email: jean−david.barnea@usdoj.gov ATTORNEY TO BE NOTICED

Sameena Shina Majeed Doj, Civil Rights Division, Housing and Civil Enforcement Se 1800 G Street, Nw, Ste. 7002 DC, DC 20006 (202)−305−1311 Fax: (202)−514−1116 Email: sameena.majeed@usdoj.gov ATTORNEY TO BE NOTICED

V. Defendant GFI Mortgage Bankers, Inc.

represented by Andrew R. Louis BuckleySandler LLP 1250 @4th Street, NW, Suite 700 Washington, DC 20037 202−349−8000

Fax: 202−349−8080 Email: alouis@buckleysandler.com TERMINATED: 11/15/2013 PRO HAC VICE
April Michelle Rancier Schwartz Perry & Heller LLP 3 Park Avenue 27th Floor New York, NY 10016 (212)−889−6565 Fax: (212)−779−8208 Email: arancier@offitkurman.com ATTORNEY TO BE NOTICED
Joseph John Reilly Buckley Sandler LLP (DC) 1250 24th Street NW Suite 700 Washington, DC 20037 (202) 349−7965 Fax: (202) 349−8080 Email: jreilly@buckleysandler.com TERMINATED: 11/15/2013
Kirk D. Jensen BuckleySandler LLP 1250 24th Street, NW, Suite 700 Washington, DC 20037 202−349−8000 Fax: 202−349−8080 Email: kjensen@buckleysandler.com TERMINATED: 11/15/2013

Date Filed 04/02/2012 04/02/2012 04/02/2012 04/02/2012 04/10/2012
04/19/2012 04/19/2012 05/01/2012
05/02/2012
05/25/2012

# Docket Text
1 COMPLAINT against GFI Mortgage Bankers, Inc. Document filed by United States Of America.(ama) (Entered: 04/04/2012)
SUMMONS ISSUED as to GFI Mortgage Bankers, Inc. (ama) (Entered: 04/04/2012)
Magistrate Judge Frank Maas is so designated. (ama) (Entered: 04/04/2012)
Case Designated ECF. (ama) (Entered: 04/04/2012)
2 WAIVER OF SERVICE RETURNED EXECUTED. GFI Mortgage Bankers, Inc. waiver sent on 4/2/2012, answer due 6/1/2012. Document filed by United States Of America. (Kennedy, David) (Entered: 04/10/2012)
3 NOTICE OF APPEARANCE by Sam Shina Majeed on behalf of United States Of America (Majeed, Sam) (Entered: 04/19/2012)
4 NOTICE OF APPEARANCE by Burtis Marshall Dougherty on behalf of United States Of America (Dougherty, Burtis) (Entered: 04/19/2012)
5 NOTICE OF INITIAL PRETRIAL CONFERENCE: Initial Conference set for 5/29/2012 at 11:00 AM in Courtroom 15A, 500 Pearl Street, New York, NY 10007 before Judge Katherine B. Forrest. (Signed by Judge Katherine B. Forrest on 5/1/2012) (jfe) (Entered: 05/01/2012)
6 CERTIFICATE OF SERVICE of Notice of Initial Conference served on GFI Mortgage Brokers on 5/1/12. Service was made by Email. Document filed by United States Of America. (Kennedy, David) (Entered: 05/02/2012)
7 NOTICE OF APPEARANCE by 482959 John Reilly on behalf of GFI Mortgage Bankers, Inc. (Reilly, 482959) (Entered: 05/25/2012)

05/25/2012 05/29/2012 05/29/2012
05/29/2012 05/30/2012 06/01/2012 06/01/2012 06/01/2012 06/01/2012 06/01/2012 06/08/2012
06/08/2012 06/19/2012 06/20/2012 06/29/2012

8 NOTICE OF CHANGE OF ADDRESS by 482959 John Reilly on behalf of GFI Mortgage Bankers, Inc.. New Address: BuckleySandler LLP, 1250 24th Street NW, Suite 700, Washington, DC, USA 20037, (202) 349−7965. (Reilly, 482959) (Entered: 05/25/2012)
Minute Entry for proceedings held before Judge Katherine B. Forrest: Initial Pretrial Conference held on 5/29/2012. Trial in this action is set for 1/21/2013 at 09:00 AM before Judge Katherine B. Forrest. The next Status Conference is set set for 8/27/2012 at 02:00 PM. (jp) (Entered: 05/29/2012)
9 SCHEDULING ORDER: All parties do not consent to conducting all further proceedings before a United States Magistrate Judge, including motions and trial. Trial in this matter shall commence on Jan. 21, 2013. Trial is anticipated to take 2 weeks. Summary Judgment Motions due by 11/16/2012. Responses due by 12/13/2012 Replies due by 12/21/2012. Fact Discovery due by 10/5/2012. Expert Discovery due by 11/16/2012. Status Conference set for 8/27/2012 at 02:00 PM before Judge Katherine B. Forrest. All pretrial materials, including the Joint Pretrial Order due by 12/18/2012; Motion to Dismiss Briefing Opening − 6/1/2012; Opposition − 6/29/2012; Reply − July 13, 2012; Letters with citations: Defendant's due May 30, 2012; Government's − June 1, 2012; (Signed by Judge Katherine B. Forrest on 5/29/2012) (djc) Modified on 5/30/2012 (laq). (Entered: 05/30/2012)
10 MOTION for Kirk D. Jensen to Appear Pro Hac Vice. Document filed by GFI Mortgage Bankers, Inc.(pgu) (Entered: 05/30/2012)
11 MOTION for Andrew R. Louis to Appear Pro Hac Vice. Document filed by GFI Mortgage Bankers, Inc.(pgu) (Entered: 05/30/2012)
12 ORDER FOR ADMISSION PRO HAC VICE granting 11 Motion for Andrew R. Louis to Appear Pro Hac Vice. (Signed by Judge Katherine B. Forrest on 5/31/2012) (djc) (Entered: 06/01/2012)
13 RULE 7.1 CORPORATE DISCLOSURE STATEMENT. No Corporate Parent. Document filed by GFI Mortgage Bankers, Inc..(Reilly, Joseph) (Entered: 06/01/2012)
14 MOTION to Dismiss Complaint. Document filed by GFI Mortgage Bankers, Inc.. Responses due by 6/29/2012(Reilly, Joseph) (Entered: 06/01/2012)
15 MEMORANDUM OF LAW in Support re: 14 MOTION to Dismiss Complaint.. Document filed by GFI Mortgage Bankers, Inc.. (Reilly, Joseph) (Entered: 06/01/2012)
16 AFFIRMATION of Joseph J. Reilly in Support re: 14 MOTION to Dismiss Complaint.. Document filed by GFI Mortgage Bankers, Inc.. (Reilly, Joseph) (Entered: 06/01/2012)
17 ENDORSED LETTER addressed to Judge Katherine B. Forrest from David J. Kennedy dated 6/1/12 re: Counsel submits this letter in response to the May 30, 2012 letter of defendant GFI Mortgage Bankers, Inc. Counsel states that GFI cannot show any basis for its motion to dismiss, much less a stay of discovery. ENDORSEMENT: Order. The Court thanks the parties for the caselaw submissions. The Court's prior ruling denying a stay of discovery remains in place at this time. (Signed by Judge Katherine B. Forrest on 6/8/2012) (mro) Modified on 6/11/2012 (mro). (Entered: 06/08/2012)
18 MEMO ENDORSEMENT on MOTION FOR ADMISSION PRO HAC VICE granting 10 Motion for Kirk D. Jensen to Appear Pro Hac Vice. (Signed by Judge Alison J. Nathan in Part I on 6/5/2012) (rjm) (Entered: 06/08/2012)
CASHIERS OFFICE REMARK on 10 Motion to Appear Pro Hac Vice in the amount of $200.00, paid on 05/29/2012, Receipt Number 1039416. (jd) (Entered: 06/19/2012)
CASHIERS OFFICE REMARK on 11 Motion to Appear Pro Hac Vice in the amount of $200.00, paid on 05/30/2012, Receipt Number 1039540. (jd) (Entered: 06/20/2012)
19 MEMORANDUM OF LAW in Opposition re: 14 MOTION to Dismiss Complaint.. Document filed by United States Of America. (Kennedy, David) (Entered: 06/29/2012)

07/11/2012 07/13/2012 07/31/2012
08/06/2012
08/17/2012 08/23/2012 08/23/2012 08/27/2012

20 STIPULATED PROTECTIVE ORDER...regarding procedures to be followed that shall govern the handling of confidential material... ENDORSEMENT: Parties to follow Judge;s individual rules. (Signed by Judge Katherine B. Forrest on 7/11/2012) (ft) (Entered: 07/11/2012)
21 REPLY MEMORANDUM OF LAW in Support re: 14 MOTION to Dismiss Complaint.. Document filed by GFI Mortgage Bankers, Inc.. (Jensen, Kirk) (Entered: 07/13/2012)
22 ENDORSED LETTER addressed to Judge Katherine B. Forrest from Kirk D. Jensen dated 7/30/2012 re: GFI Mortgage Bankers, Inc. ("GFI") has instructed us to request an extension of time to respond to Plaintiffs July 26, 2012 letter to the Court concerning discovery issues in the above referenced matter. Our law firm does not represent GFI in discovery−related matters. The company is currently in the process of identifying discovery counsel, and GFI has informed us that such counsel should be secured sometime this week. GFI expects that counsel will then make an appearance in this case and respond to Plaintiff's submission. ENDORSEMENT: GFI should have anticipated the need for additional counsel sooner. The Court will grant an extensions only to 8/2/12. (Signed by Judge Katherine B. Forrest on 7/30/2012) (lmb) (Entered: 07/31/2012)
23 ENDORSED LETTER addressed to Judge Katherine B. Forrest from David J. Kennedy dated 8/3/2012 re: The United States respectfully requests that the Court set a conference and order both Buckley Sandler counsel and a principal of GFI to attend, and respectfully requests that the Court "so order" the schedule proposed by the United States − that GFI to respond to the Interrogatories no later than August 6, 2012; that GFI make all of its lending files, from January 1, 2005, through December 31, 2011, available for inspection beginning August 6, 2012; and that GFI produce all responsive documents no later than August 6, 2012. ENDORSEMENT: Application granted. All pertinent lending files to be made available immediately in original form and conditions. Conference in Court already set for 8/21 at 2 p.m. (Signed by Judge Katherine B. Forrest on 8/6/2012) (jfe) (Entered: 08/06/2012)
24 ORDER: The Court is skeptical of the argument that neither the Fair Housing Act nor the Equal Credit Opportunity Act permits disparate impact claims under Smith v. City of Jackson, 544 U.S. 228 (2005). However, the Court will hear argument on that issue. Accordingly, it is hereby ORDERED that the status conference currently scheduled for August 27, 2012, at 2:00 p.m. will be heard that same day (August 27) at 1:00 p.m. and will be used both as oral argument as well as a status conference., ( Status Conference set for 8/27/2012 at 01:00 PM before Judge Katherine B. Forrest.) (Signed by Judge Katherine B. Forrest on 8/17/2012) (lmb) (Entered: 08/17/2012)
25 ORDER terminating 14 Motion to Dismiss. It having been reported to this Court that this case has been settled, it is hereby ORDERED that the above−captioned action is hereby discontinued. The Court will enter the parties proposed Consent Order separately. The Clerk of the Court is directed to terminate any pending motions and this action. (Signed by Judge Katherine B. Forrest on 8/23/2012) (ago) (Entered: 08/23/2012)
26 ENDORSED LETTER addressed to Judge Katherine B. Forrest from David J. Kennedy dated 8/23/2012 re: Plaintiff's counsel writes on behalf of the Government and GFI, write to advise the Court that the parties have settled this matter. ENDORSEMENT: The conference scheduled for August 27 is hereby adjourned. (Signed by Judge Katherine B. Forrest on 8/23/2012) (ago) (Entered: 08/23/2012)
27 CONSENT ORDER: The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1345,42 U.S.C. § 3614, and 15 U.S.C. § 1691e(h) and as further set forth in this order. GFI, including all of its officers, employees, agents, assignees, successors in interest, and all those in active concert or participation with any of them, is hereby enjoined from the adoption, performance, or implementation of any policy, practice, or act that results in discrimination on the basis of race or national origin in violation of the FHA or of the ECOA in the origination or pricing of residential mortgage loans. Nothing in this Order will require OFT to require loans to be originated or priced based upon the race or national origin of the borrower or prospective borrower and as further set forth in this order. (Signed by Judge Katherine B. Forrest on 8/27/2012) (lmb) (Entered: 08/27/2012)

11/08/2013 11/14/2013 11/15/2013
11/15/2013 11/15/2013 07/26/2016 07/26/2016

28 NOTICE OF APPEARANCE by April Michelle Rancier on behalf of GFI Mortgage Bankers, Inc.. (Rancier, April) (Entered: 11/08/2013)
29 MOTION for Joseph J. Reilly, Kirk D. Jensen, and Andrew R. Louis to Withdraw as Attorney. Document filed by GFI Mortgage Bankers, Inc.. (Attachments: # 1 Text of Proposed Order)(Louis, Andrew) (Entered: 11/14/2013)
30 MEMO ENDORSEMENT terminating 29 Motion to Withdraw as Attorney. ENDORSEMENT: Ordered: This matter has been closed since 8/23/13. No action shall be taken in this case. (Signed by Judge Katherine B. Forrest on 11/15/2013) (mro) (Entered: 11/15/2013)
31 LETTER addressed to Judge Katherine B. Forrest from David J. Kennedy dated November 15, 2013 re: US v GFI, 12 Civ 2502. Document filed by United States Of America.(Kennedy, David) (Entered: 11/15/2013)
32 MEMO ENDORSEMENT on re: 31 Letter filed by United States Of America. ENDORSEMENT: So ordered. (Signed by Judge Katherine B. Forrest on 11/15/2013) (mro) (Entered: 11/18/2013)
33 LETTER addressed to Judge Katherine B. Forrest from David J Kennedy dated 7/26/16 re: Proposed Second Addendum. Document filed by United States Of America.(Kennedy, David) (Entered: 07/26/2016)
34 SECOND ADDENDUM TO CONSENT ORDER: IT IS HEREBY ORDERED, ADJUDGED, and DECREED: 1. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1345, 42 U.S.C. § 3614, and 15 U.S.C. § 1691e(h). 2. The payment schedule under Paragraph 18 of the Consent Order is modified solely to the following extent as further set forth in this order. (Signed by Judge Katherine B. Forrest on 7/26/2016) (lmb) (Entered: 07/26/2016)

 Hom e » Briefing Room » Ju stice New s

Department of Justice

Office of Public A ffairs FOR IMMEDIA TE RELEASE

Monday , April 2, 2012

Justice Department Alleges GFI Mortgage Bankers Engaged in Illegal Lending Discrimination
Complaint A lleges New Y ork-Based Company Charged Higher Interest Rates and Fees to African-A merican and Hispanic Borrow ers

WA SHINGTON – The Department of Justice and the U.S. A ttorney ’s Office for the Southern District of New Y ork filed a lawsuit alleging that GFI Mortgage Bankers Inc., a mortgage banker with operations in sev en states, v iolated federal fair lending laws by charging A frican-American and Hispanic borrowers higher interest rates and fees on home mortgage loans because of their race or national origin, not based on their creditworthiness.

The complaint, filed today in the Southern District of New Y ork under the federal Fair Housing Act and Equal Credit Opportunity Act, alleges that GFI engaged in a pattern or practice of discrimination on the basis of race and national origin by charging A frican-A merican and Hispanic borrowers higher interest rates and fees on home mortgage loans compared to similarly -situated white borrowers. The Department of Justice and the U.S. A ttorney ’s Office for the Southern District of New Y ork inv estigated and filed the lawsuit jointly .

“Charging people more for home loans simply because of their race or national origin – as we hav e alleged in our complaint against GFI – is illegal. The Justice Department will act aggressiv ely to ensure that all people hav e equal access to credit and a lev el play ing field ,” said Thomas E. Perez, A ssistant Attorney General for the Civ il Rights Div ision. “For that reason, v igorous enforcement of fair lending laws remains a top priority .”

U.S. Attorney for the Southern District of New Y ork Preet Bharara said, “As the lawsuit we filed today alleges, discrimination still ex ists in certain quarters and it has profound consequences for the v ictims. A t a time when so many American homeowners of all races and nationalities are struggling to make their mortgage pay ments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers pay ing higher fees and interest rates for their residential mortgages. As today ’s suit demonstrates, this ty pe of discriminatory action will not be tolerated. We will continue to work
to ensure that fair lending laws are enforced throughout the district.”

“HUD and the Justice Department work together to end lending discrimination in A merica. This case and others nationwide demonstrate our commitment to pursue lenders if they v iolate the Fair Housing Act and seek relief for discrimination v ictims,” said Department of Housing and Urban Dev elopment (HUD) A ssistant Secretary for Fair Housing and Equal Opportunity John Trasv iña.

From 2005 through at least 2009, GFI charged higher loan prices to African-A merican and Hispanic borrowers than it charged to similarly -situated white borrowers by charging higher interest rates and fees for home mortgage loans. For ex ample, an A frican-A merican borrower who took out a home mortgage loan in 2007 paid on av erage approx imately $7 ,500 more ov er the first four y ears of the loan than a similarly -situated white borrower. For a Hispanic borrower, the difference was approx imately $5,600 more ov er the first four y ears of the loan than a similarly -situated white borrower. The disparities, based on race or national origin, are statistically significant, and are unrelated to credit risk or loan characteristic.

During the period when the discrimination occurred, GFI had a policy or practice of allowing and encouraging its loan officers in New Y ork and New Jersey to promote loan products, price loans and charge fees in a manner that was unrelated to credit risk or loan characteristics. GFI knew that its loan officers priced loans in way s unrelated to a borrower’s creditworthiness, resulting in thousands of dollars in ov ercharges for African-American and Hispanic borrowers based on their race or national origin. By prov iding its loan officers a substantial percentage of

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the profits generated on each loan, GFI’s compensation scheme prov ided strong financial incentiv es to loan officers to price their loan products in a discriminatory manner. Moreov er, GFI failed to superv ise, train, or adequately monitor its loan officers to ensure that they were pricing loans in a non-discriminatory manner.
During the period when the discrimination occurred, the number of home mortgage loans issued by GFI increased from 97 4 in 2005 to 2,27 0 in 2009. At the same time, GFI’s rev enue from its home mortgage loan serv ices increased from $305 million in 2005 to $7 68 million in 2009.
This case resulted from a referral by HUD to the Justice Department’s Civ il Rights Div ision in 2010.
The Civ il Rights Div ision and other agencies inv olv ed in this matter are part of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressiv e, coordinated and proactiv e effort to inv estigate and prosecute financial crimes. The task force includes representativ es from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civ il enforcement resources. The task force is working to improv e efforts across the federal ex ecutiv e branch, and with state and local partners, to inv estigate and prosecute significant financial crimes, ensure just and effectiv e punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recov er proceeds for v ictims of financial crimes. For more information on the task force, v isit www.StopFraud.gov .
African-American and Hispanic borrowers who receiv ed GFI loans since 2005 , former employ ees of GFI or any other indiv iduals with information relev ant to this lawsuit are encouraged to contact the U.S. Department of Justice at 1 -800-896-7 7 43, mailbox 9992, or at:
Chief, Civ il Rights Unit U.S. Attorney ’s Office, S.D.N.Y . 86 Chambers Street, 3rd Floor New Y ork, NY 1 0007
A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department website at www.justice.gov /fairhousing. Fighting illegal housing discrimination is a top priority of the Justice Department. More information about the Civ il Rights Div ision and the laws it enforces is av ailable at http://www.usdoj.gov /crt.

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 Hom e » Briefing Room » Ju stice New s

Department of Justice

Office of Public A ffairs

FOR IMMEDIA TE RELEASE

Tuesday , August 28, 201 2

Justice Department Reaches Lending Discrimination Settlement with GFI Mortgage Bankers Inc.
GFI Mortgage Bankers Inc., a large independent home mortgage firm that concentrates on the New Y ork, New Jersey , and Florida markets, will pay $3.5 55 million to resolv e a lending discrimination lawsuit filed by the Department of Justice and the U.S. Attorney ’s Office for the Southern District of New Y ork. The lawsuit alleges that GFI engaged in a pattern or practice of discrimination by pricing residential mortgage loans for qualified A frican-A merican and Hispanic borrowers higher than for similarly -qualified non-Hispanic white borrowers between 2005 and 2009.

The settlement prov ides $3.5 million in compensation to approx imately 600 A frican-A merican and Hispanic GFI borrowers identified by the United States as pay ing more for a loan based on their race or national origin, and it requires GFI to pay the max imum $55,000 civ il penalty allowed by the Fair Housing A ct. The settlement also requires GFI to dev elop and implement new policies that limit the pricing discretion of its loan officers, require documentation of loan pricing decisions, and monitor loan prices for race and national origin disparities not justified by objectiv e borrower credit characteristics or loan features.

As part of the settlement, GFI admits that an analy sis of the note interest rates and fees that it charged on mortgage loans to qualified borrowers showed statistically significant disparities between non-Hispanic white borrowers and both A frican-A merican and Hispanic borrowers that could not be ex plained by objectiv e borrower characteristics or loan product features. The company also admitted that it prov ided financial incentiv es to its loan officers to charge higher interest rates and fees to borrowers and that it did not hav e fair lending training and monitoring programs in place to prev ent those interest rate and fee disparities from occurring. The settlement came after the United States had filed its opposition to GFI’s motion to dismiss the case and the court had stated it was “skeptical” of GFI’s argument that federal law allows lenders to price loans in a way that produces such disparate impacts on minority borrowers.

The settlement, which was entered by the court, was filed in federal court in Manhattan, where GFI is headquartered.

“The Justice Department will not hesitate to litigate against lenders to enforce federal fair lending laws where the ev idence warrants and to obtain compensation for borrowers who were v ictims of unlawful lending practices,” said Thomas E. Perez, A ssistant Attorney General for the Civ il Rights Div ision. “This department is determined to address discriminatory lending practices and to ensure equal credit opportunity for all borrowers in the y ears to come. We also greatly appreciate our strong partnership with the U.S. A ttorney ’s Office for the Southern District of New Y ork, which worked jointly with the department to prosecute this case.”

“With the settlement we announce today , the hundreds of v ictims of lending discrimination committed by GFI will be made whole, and the company has admitted the conduct that led to this lawsuit, and agreed to reform its residential lending practices,” said Preet Bharara, U.S. Attorney for the Southern District of New Y ork. The swift resolution of this case demonstrates the commitment of this Office and of the entire Department of Justice to aggressiv ely enforcing the laws against discriminatory lending, and to holding accountable those who engage in this illegal conduct .”

The Department of Housing and Urban Dev elopment (HUD) started the inv estigation into GFI’s lending practices by opening a Secretary -initiated inv estigation under the Fair Housing A ct. HUD rev iewed GFI’s documents and loan files, interv iewed GFI’s employ ees, and analy zed GFI’s loan data. HUD referred the lender to DOJ in January 201 0 for a potential pattern or practice of disc r iminatio n.

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disc r iminatio n.
“No prospectiv e home buy er should be saddled with a higher cost mortgage because of their rac e or natio nal origin,” stated HUD A ssistant Secretary for Fair Housing and Equal Opportunity John Trasv iña. “This ty pe of practice has no place in the mortgage market. HUD and the Justice Department hav e made a v igorous commitment to ending unlawful lending discrimination.”
Today ’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in Nov ember 2009 to wage an aggressiv e, coordinated and proactiv e effort to inv estigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney s’ offices and state and local partners, it’s the broadest coalition of law enforcement, inv estigatory and regulatory agencies ev er assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased inv estigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, v ictims, financial institutions and other organizations. Ov er the past three fiscal y ears, the Justice Department has filed more than 1 0,000 financial fraud cases against nearly 1 5,000 defendants including more than 2,7 00 mortgage fraud defendants. For more information on the task force, v isit www.stopfraud.gov .
A copy of the complaint and proposed consent order, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department website at www.justice.gov /fairhousing .
The proposed settlement prov ides for an independent administrator to contact and distribute pay ments of compensation at no cost to borrowers whom the Justice Department identifies as v ictims of GFI’s discrimination. Borrowers who are eligible for compensation from the settlement will be contacted by the administrator. The department will make a public announcement and post contact information on its website once the administrator begins
contacting v ictims. Indiv iduals who believ e that they may hav e been v ictims of lending discrimination by GFI and hav e questions about the settlement may email the department at gfi.settlement@usdoj.gov or call 1 -800-896-7 7 43, ex tension 9992 or 21 2-637 -0840, or write to the following address:

Chief, Civ il Rights Unit U.S. Attorney ’s Office, S.D.N.Y . 86 Chambers Street, 3rd Floor New Y ork, NY 1 0007
Related Material:
Consent Order
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Civ il Rights Div ision

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Output: On April 12, 2012, the United States sued GFI Mortgage Bankers under the Fair Housing Act and Equal Credit Opportunity Act for charging African American and Hispanic borrowers higher fees and costs for home mortgage loans than it charged similarly situated white borrowers. The parties entered a Consent Decree on August 27, 2012, which required GFI to pay $3.555 million and implement fair lending policies and a fair lending monitoring system. The case is now closed.