I bet you thought the campus “affirmative action bake sales,” in which anti-race-preferences students sold cookies for a high price to white and Asian students, and a lower price to black and Hispanic students, were just a way to make a political point. It turns out that this is happening in earnest, with much more money at stake. Here’s a Washington Post article (emphasis added):
Consider the recent federal court settlement of a class-action suit involving a large and prominent savings bank that is an active player in the mortgage market nationwide.
Under the $1.2 million settlement in U.S. District Court in Indianapolis, the lending institution — Flagstar Bank of Troy, Mich. — admitted “no wrongdoing, liability or improper conduct.” But its internal loan pricing instructions distributed in writing to loan officers explicitly required them to charge different fees to different racial groups.
What is unusual, though, is that the instructions required loan officers to limit the fees they charged black and Hispanic home buyers while allowing higher fees to be charged to white borrowers. Here is what Flagstar’s “Revenue Per Loan Procedure” policy required of loan officers:
* Minority home buyers could be charged no more than 3 percent in loan origination fees or “points,” but white applicants could be charged up to 4 percent.
* Loan officers whose “revenue per loan average” from mortgages made to minority applicants exceeds their “non-minority [white] average” will be subject to disciplinary actions, including probation and termination.
* “Non-minority will be defined as any borrower who is determined on the loan application to be white, not of Hispanic origin.” . . .
A Flagstar spokeswoman declined comment on the settlement, noting that the company has a policy against discussing litigation.
However, the lawyer for the plaintiffs, Amy Ficklin DeBrota of Indianapolis, said the bank’s loan pricing policy — initiated in May 2001 and discontinued at the end of January 2002 — resulted in higher mortgage fees being paid by approximately 1,000 white mortgage borrowers. The affected borrowers will receive refunds and non-economic damage awards from the proceeds of the $1.2 million settlement. The lead plaintiff will receive $10,000. . . .
DeBrota believes that while racial preferences in mortgage lending may appear to favor one group over another, the reality is that “it is a lose-lose situation.” Those charged lower fees can also be harmed, she argues, “because it creates a disincentive to lend to them.” When loan officers stand to earn less from one category of borrowers than another, they will naturally tend to emphasize making loans to clients who will bring them the highest fees and income — white borrowers, in this case.
The irony behind the Flagstar loan pricing policy? Though not confirmed by Flagstar, DeBrota said the dual-standard loan fee policy originally was put into place as a way to avoid any appearance of discrimination against black and Hispanic borrowers.
Auditors from the federal Office of Thrift Supervision had warned the bank about a possible pattern of higher fees to minority applicants, DeBrota said. The resulting policy instruction to loan officers — the “Revenue Per Loan Procedure” — had a subtitle: “Monitoring Fair Lending Practices.”
The way to achieve fair lending for minorities, in other words, was to enforce a policy of higher-fee lending to non-minorities. . . .
Thanks to David Boaz for the pointer.
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