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DOJ reaches ‘historic’ redlining settlement with Philadelphia mortgage lender

Trident Mortgage Company, a subsidiary of Fox & Roach LP, has agreed to reinvest more than $20 million due to a history of what officials called racist lending practices in Philadelphia and elsewhere.

State and federal officials announce one of the largest redlining settlements in the Justice Department's history against Trident Mortgage Services at a news conference Wednesday in Malcolm X Park in West Philadelphia. At the podium is Kristen Clarke, assistant attorney general for the Justice Department’s Civil Rights Division. L to R:  New Jersey First Assistant Attorney General Lyndsay Ruotolo, Pennsylvania State Sen. Vincent Hughes, Pennsylvania Attorney General Josh Shapiro, Consumer Financial Protection Bureau Director Rohit Chopra, Delaware Attorney General Kathy Jennings and Jacqueline C. Romero, United States Attorney for the Eastern District of Pennsylvania.
State and federal officials announce one of the largest redlining settlements in the Justice Department's history against Trident Mortgage Services at a news conference Wednesday in Malcolm X Park in West Philadelphia. At the podium is Kristen Clarke, assistant attorney general for the Justice Department’s Civil Rights Division. L to R: New Jersey First Assistant Attorney General Lyndsay Ruotolo, Pennsylvania State Sen. Vincent Hughes, Pennsylvania Attorney General Josh Shapiro, Consumer Financial Protection Bureau Director Rohit Chopra, Delaware Attorney General Kathy Jennings and Jacqueline C. Romero, United States Attorney for the Eastern District of Pennsylvania.Read moreALEJANDRO A. ALVAREZ / Staff Photographer

The Justice Department on Wednesday announced what it described as one of the largest redlining settlements in its history against a top Philadelphia-area mortgage firm whose lending practices officials said had denied home loans to Black and Latino borrowers for years.

Trident Mortgage Co. — a subsidiary of Chester County-based Berkshire Hathaway HomeServices Fox & Roach, Realtors — has agreed to set aside more than $20 million to make loans in underserved neighborhoods in the city, South Jersey, and Delaware, officials with the department and the Consumer Financial Protection Bureau said.

The suit against Trident and the settlement it produced are the latest efforts by the Justice Department to crack down on modern-day redlining, a practice by which banks and mortgage lenders actively avoid issuing loans in low-income neighborhoods and communities of color. Attorney General Merrick Garland has identified the issue as a top priority for the Justice Department’s civil division.

Federal officials announced the deal at a news conference in Malcolm X Park in West Philadelphia, one of the neighborhoods most shaped over decades by redlining practices that historically have led to disinvestment and associated effects such as poverty, poor health, limited educational opportunities, unemployment, and violent crime.

“This settlement is a stark reminder that redlining is not a problem from a bygone era,” said Kristen Clarke, an assistant attorney general of the Justice Department’s Civil Rights Division. “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.”

» READ MORE: Trident’s loans in Philadelphia went to whiter and wealthier neighborhoods, Inquirer analysis shows

Wednesday’s settlement came after a four-year investigation that showed between 2015 and 2019 Trident actively avoided issuing mortgages for homes in Black and Latino neighborhoods, maintained a nearly all-white staff, and ignored warnings that its lending practices were likely in violation of the federal Fair Housing Act.

What’s more, the department alleged, Trident loan officers and Fox & Roach real estate agents traded racist emails, including some that contained racial slurs or referred to certain neighborhoods in Philadelphia as “the ghetto.”

One message, sent under the subject line “You know when you’re in the hood” and highlighted in a 23-page complaint filed Wednesday in federal court in Philadelphia, contained a photo of a wheelbarrow full of watermelons with a sign that read, “Apply for a Credit Card. Free Watermelon.”

Another depicted a senior vice president for Trident posing in front of a Confederate flag.

“This was systemic racism — pure and simple,” said Pennsylvania Attorney General Josh Shapiro, who along with counterparts in New Jersey and Delaware signed separate agreements with the company. He added: “This is about real people. People who were ignored and who were harmed and left behind.”

A spokesperson for HomeServices of America, the parent company of Berkshire Hathaway HomeServices Fox & Roach, Realtors, disputed those allegations and stressed in a statement that Trident, which stopped writing mortgages in 2020, had admitted no wrongdoing as part of the deal.

“We are committed to supporting additional lending that will help to close the racial gap in home ownership,” the statement said. “Trident’s mission and culture always reflected unwavering integrity and a commitment to fairness to all. We do not tolerate discrimination in any form.”

Modern-day redlining

Redlining, which draws its name from when banks used to use red markers on maps to identify neighborhoods deemed undesirable for mortgage lending, was officially outlawed by the federal Fair Housing Act in the 1960s.

But it survives today in less overt and more pernicious ways.

A 2018 report by the Center for Investigative Reporting found that prospective Black homeowners in Philadelphia were 2.7 times as likely as their white counterparts to be denied a conventional mortgage, even when controlling for applicants’ income, loan amount and neighborhood.

And although the number of Black and white residents living within city limits is about the same, white residents received roughly 10 times as many conventional mortgage loans.

Those disparities have inhibited the ability of families in communities of color to build wealth through real estate over time. Nationally, the median wealth of a Black family is roughly $24,000, while that of white families is approximately $188,000.

In Philadelphia, the gap in home ownership rates for Black and white families was slightly wider in 2019 than it was in 1990. About 59% of white families in Philadelphia owned homes in 2019, compared to about 47% of Black families, according to the Federal Reserve Bank of Philadelphia.

In Pennsylvania, the home ownership gap is larger and also has been growing. About 73% of white Pennsylvanians own homes, compared to about 43% of Black Pennsylvanians.

“People get turned down for mortgages all the time, but they never get told, ‘We’re turning you down for a mortgage because of your race,’” said Michael Froehlich, an attorney at Community Legal Services of Philadelphia, which works primarily in low-income neighborhoods and with Black and Latino clients and routinely reviews mortgage data to identify lenders avoiding certain neighborhoods.

The Trident case marks the first time the Justice Department has filed a redlining suit against a mortgage-only lender, a sector of the market that has proliferated since the 2008 housing crash. Unlike traditional banks, lenders like Trident do not offer other financial services to clients.

“It’s significant that regulators are looking closely at these new types of mortgage originators that were not in existence when [fair housing] laws were passed but have increasingly taken over the market in the last few years,” Froelich said.

» READ MORE: Black home buyers face barriers from past racist policies and current practices

A less overt form of redlining

Court filings in the Justice Department’s suit portray Trident’s version of redlining as built into the very mechanisms by which it marketed and offered its loans.

Between 2015 and 2019, the years central to the lawsuit, Trident was one of the top mortgage originators in the five-county Philadelphia area — second only to Quicken Loans, according to federal mortgage data. In 2020, the company originated roughly 1,100 loans for home buyers in Philadelphia alone — about 7% of all mortgages.

Yet, of the 53 offices it operated from Fox & Roach realty storefronts across the region, 51 were located in predominantly white neighborhoods in the Philadelphia region.

Only four of the 68 loan officers the company employed were Black — all the rest were white. And two of those four were fired and not replaced in 2018, the Justice Department said.

And the company made “virtually no effort” to market to people of color. All of its advertising and marketing materials featured photos of white models and loan officers, according to the lawsuit.

Those practices resulted in significant disparities in Trident’s lending.

Much of it occurred in more affluent and predominately white communities, according to federal mortgage data.

In Philadelphia, the six zip codes in which the highest percentage of new mortgages came from Trident included areas of Chestnut Hill, Center City, Spring Garden, Fairmount, Bella Vista, and Queen Village.

On average, those neighborhoods are 11% Black and 6% Latino, while those populations make up 41% and 15%, respectively, of the city as a whole.

Of the roughly 22,960 loans the company reported issuing across the Philadelphia metro area between 2015 and 2019, less than 12% were issued for properties in neighborhoods with high concentrations of Black and Latino residents, the DOJ said. And even among those, nearly 58% of the loans went to white borrowers.

As part of the settlement, Trident has agreed to create an $18.4 million loan subsidy for residents of neighborhoods of color that will be administered by another firm.

The company has also agreed to pay a civil penalty of $4 million and set aside $2 million to fund outreach and education efforts targeting potential Black and Latino borrowers.

Staff writers Chris A. Williams and Craig R. McCoy contributed to this article.

The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.