NEW YORK (AP) — A Pennsylvania mortgage company owned by billionaire businessman Warren Buffett, Berkshire Hathaway has discriminated against potential black and Latino home buyers in Philadelphia, New Jersey and Delaware, said Wednesday the Department of Justice, in what is called the second largest redlining settlement in history.
Trident Mortgage Co., a division of Berkshire’s HomeServices of America, deliberately avoided issuing mortgages in majority-minority West Philadelphia neighborhoods like Malcolm X Park; Camden, New Jersey; and in Wilmington, Delaware, the DOJ and the Consumer Financial Protection Bureau said in their settlement with Trident. As part of the deal with the DOJ and CFPB, Trident will have to set aside $20 million to make loans in underserved neighborhoods.
“Trident’s illegal redlining activity has deprived communities of color of equal access to residential mortgages, deprived them of the opportunity to create wealth, and devalued properties in their neighborhoods,” said Kristen Clarke, Assistant Attorney General of the Civil Rights Division of the Department of Justice, in a Prepared Affirmation.
Redlining is a term used to describe when banks deliberately avoid lending to non-white communities. Banks and the US government used to draw on maps with red markers neighborhoods deemed undesirable for mortgages – hence the term “redlining”. Neighborhoods were almost always areas where racial minorities lived and even included other historically discriminated communities such as Jewish neighborhoods.
The practice has effectively cut off entire communities from the main avenue of wealth creation in the United States: home ownership. To date, black and Latino households are much less likely to own their homes than their white counterparts.
The redlining activity alleged by the DOJ occurred between 2015 and 2019 – Trident stopped issuing mortgages in 2020. In addition to avoiding mortgages in minority neighborhoods, Trident employees made racist comments about giving loans to black buyers, calling some neighborhoods “ghettos”. A Trident official was photographed posing in front of the Confederate flag. The marketing materials used by Trident exclusively involved white people, and nearly all of the company’s personnel were white.
Josh Shapiro, Pennsylvania’s gubernatorial attorney general called Trident’s behavior “systematic racism, plain and simple.”
Philadelphia has a long history of racism towards black homebuyers. The Philadelphia City Council released a report on Wednesday which revealed that 95% of all home appraisers in Philly were white and that a racial gap remains between how homes owned by black owners are appraised versus homes owned by white owners.
Trident also agreed to hire mortgage loan officers in affected neighborhoods and pay a $4 million fine. Since Trident is no longer in the lending business, a separate company will be hired to provide the $20 million in loan subsidies, the DOJ said.
The Trident settlement also involves the first case of redlining against a non-bank mortgage lender. Since the Great Recession, about half of all mortgages in the country have been underwritten by companies that immediately sell the mortgage to investors. These non-bank lenders include companies such as Quicken Loans, Rocket Mortgage, and Loan Depot, among others.
“Credit discrimination is illegal whether the company breaking the law is a traditional bank or a non-bank lender,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.
In a statement, HomeServices of America said it “strongly disagrees” with the findings of the DOJ and CFPB in the settlement, noting that Trident did not have to admit wrongdoing in the case. . Buffett himself did not immediately respond to a request for comment, but has historically deferred any comment to Berkshire affiliates.