Buffett company discriminated against black homebuyers – DOJ
A Pennsylvania mortgage company owned by billionaire businessman Warren Buffett’s Berkshire Hathaway discriminated against potential black and Latino homebuyers in Philadelphia, New Jersey and Delaware, the United States Department of Justice said Wednesday, in what is being called the second-largest redlining settlement in history.
Trident Mortgage Company, a division of Berkshire’s HomeServices of America, deliberately avoided writing mortgages in minority-majority neighbourhoods in West Philadelphia 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 agreement with the DOJ and the CFPB, Trident will have to set aside US$20 million to make loans in underserved neighbourhoods.
“Trident’s unlawful redlining activity denied communities of colour equal access to residential mortgages, stripped them of the opportunity to build wealth, and devalued properties in their neighbourhoods,” said Kristen Clarke, an assistant Attorney General of the Justice Department’s Civil Rights Division, in a prepared statement.
Redlining is a term used to describe when banks deliberately avoid making loans to non-white communities. Banks and the U.S. government used to draw on maps in red marker those neighbourhoods that were deemed undesirable to make home loans – hence the term “redlining”. The neighbourhoods were almost always areas where racial minorities lived, and even included other historically discriminated-against communities such as Jewish neighbourhoods.
The practice effectively cut off entire communities from the primary pathway for wealth generation in the US: homeownership. To this day, black and Latino households are far less likely to own their home compared to their white counterparts.
The redlining activity DOJ alleged happened between 2015 and 2019 – Trident stopped writing mortgages in 2020. Along with avoiding making mortgages in minority neighbourhoods, the employees of Trident made racist comments about making loans to black homebuyers, calling certain neighbourhoods “ghettos”. One manager of Trident was photographed posing in front of the Confederate Flag. The marketing materials used by Trident involved exclusively white individuals, and nearly all of the company’s staff were white.
Josh Shapiro, Pennsylvania’s attorney general who is running for governor, called the behaviour by Trident “systematic racism, pure and simple.”
Philadelphia has a long history of racism toward black homebuyers. The Philadelphia City Council released a report Wednesday that found that 95 per cent of all of Philly’s home appraisers were white and a racial gap remains between how homes owned by black homeowners are valued versus homes owned by white owners.
Trident also agreed to hire mortgage loan officers in impacted neighbourhoods as well as pay a monetary fine of US$4 million. Since Trident no longer operates a lending business, a separate company will be contracted to provide the US$20 million in loan subsidies, the DOJ said.
The Trident settlement also involves the first redlining case against a nonbank mortgage lender. Since the Great Recession, roughly half of all mortgages in the country are underwritten by companies that immediately sell off the mortgage to investors. These nonbank lenders include firms like Quicken Loans, Rocket Mortgage and Loan Depot, among many others.
“Credit discrimination is illegal regardless of whether the lawbreaking company is a traditional bank or a nonbank lender,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.
In a statement, HomeServices of America said they “strongly disagree” with the DOJ and CFPB’s findings in the settlement, noting that Trident did not have to admit to wrongdoing as part of the case. Buffett himself did not immediately respond to a request for comment, but historically has deferred any comment to Berkshire’s subsidiary companies.
– AP