A U.S. lender will pay $20m to settle claims of discrimination against minority home buyers, the Department of Justice says. Trident Mortgage Company, owned by Warren Buffett's Berkshire Hathaway, is accused of discriminatory lending in Pennsylvania, New Jersey and Delaware.
The funds will be used to increase credit opportunities in under-served neighborhoods, prosecutors said. It is the second-largest lending discrimination settlement in history.
The practice - known as "red lining" - was a common feature of the 20th Century, but is illegal under U.S. law. Banks and other lenders would draw on maps in red marker, singling out neighborhoods where they wanted to avoid making loans. These were disproportionately areas in which racial minorities lived. To date, black and Latino households are much less likely to own their home compared to white households.
According to a complaint filed in federal court, Trident used the practice from at least 2015-19. It claims that Trident's offices were concentrated in majority-white neighborhoods, and that its loan officers did not serve the credit needs of prospective minority home buyers in the cities of Philadelphia, Camden and Wilmington.
The complaint further alleges that loan officers and other employees sent and received work emails containing racial slurs and referring to minority communities as "ghetto".
As part of its settlement with the federal government, Trident - which no longer writes mortgages - will contract another lender to provide $20m in loan subsidies and other services to the communities it red lined. It is also required to maintain at least four office locations in those neighbourhoods, as well as employ loan officers and a full-time community lending manager dedicated to serving minority home buyers.
"Redlining is not a problem from a bygone era," said Assistant Attorney General Kristen Clarke. "Trident's unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth, and devalued properties in their neighborhoods."
HomeServices of America, a Berkshire Hathaway affiliate of which Trident is a division, said they "strongly disagree" with the justice department's findings in the settlement. "Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race," HomeServices said in a statement, noting that Trident did not have to admit to wrongdoing as part of the case. Buffett himself has not yet commented.
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