The U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) announced today that Fairway Independent Mortgage Corporation has agreed to an $8 million settlement, alongside a $1.9 million civil penalty, to resolve allegations of discriminatory lending practices. The settlement addresses claims that Fairway engaged in redlining predominantly Black neighborhoods in and around Birmingham, Alabama.
Redlining, an illegal practice where lenders avoid offering services to residents in communities of color due to race, has long been a barrier to homeownership and economic opportunity. This settlement is part of the DOJ’s Combating Redlining Initiative, which has now secured over $150 million in relief for communities of color nationwide since its inception. With this latest case, the DOJ has reached 15 redlining settlements in just three years, aiming to restore fair access to credit and homeownership.
Attorney General Merrick B. Garland emphasized the historical significance of this effort: “This case is a reminder that redlining is not a relic of the past. The Justice Department will continue to combat lending discrimination wherever it arises and secure relief for the communities harmed by it.”
The DOJ and CFPB allege that Fairway specifically discriminated against Black residents of Birmingham through targeted marketing and lending policies that discouraged mortgage applications from these communities. While Fairway claimed to serve the entire Birmingham area, it concentrated its services in majority-white neighborhoods, directing less than 3% of its advertising to majority-Black areas. The company failed to address glaring signs of this disparity, even as internal data showed it lagged far behind peer lenders in serving Black communities.
Under the terms of the settlement, Fairway is required to invest $7 million into a loan subsidy program, offering affordable home purchase, refinance, and home improvement loans in Birmingham’s majority-Black neighborhoods. The company will also invest $1 million to support financial education, advertising, and outreach efforts in these communities. Additionally, Fairway will open a loan office in a predominantly Black neighborhood and pay the $1.9 million civil penalty into the CFPB’s victims’ relief fund.
Assistant Attorney General Kristen Clarke of the DOJ’s Civil Rights Division stated, “This settlement will provide Birmingham’s Black neighborhoods with the access to credit they have long been denied, increasing opportunities for homeownership and generational wealth.”
The settlement also highlights a growing partnership between the DOJ and CFPB in combating modern-day redlining. CFPB Director Rohit Chopra added, “Fairway’s unlawful redlining discouraged families from seeking loans in Black neighborhoods. We are holding them accountable for their actions.”
As one of the nation’s largest mortgage lenders, Fairway’s actions had a broad impact on Birmingham, a city with a deep civil rights history. This case demonstrates that despite progress, communities of color still face significant hurdles in accessing financial services. The DOJ’s continued efforts under the Combating Redlining Initiative aim to remove these barriers, ensuring that all Americans have equal opportunities for homeownership and economic mobility.
- Provide $7 million for a loan subsidy program: The order would require Fairway to offer home purchase, refinance, and home improvement loans on a more affordable basis than otherwise available in majority-Black neighborhoods in the Birmingham MSA. The program may provide lower interest rates, down payment assistance, closing cost assistance, or payment of initial mortgage insurance premiums.
- Invest at least $1 million in redlined neighborhoods: Fairway would be required to open or acquire a new loan production office or full-service retail office in a majority-Black neighborhood in the Birmingham MSA. The company must also spend at least $500,000 on advertising and outreach, at least $250,000 on consumer financial education, and at least $250,000 on partnerships with one or more community-based or governmental organizations to serve the affected neighborhoods.
- Pay a $1.9 million penalty: The proposed order imposes a $1.9 million civil penalty against Fairway, which would be paid into the CFPB’s Civil Penalty Fund, also referred to as the victims’ relief fund.