On Oct. 15, 2024, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) announced a proposed consent order with Fairway Independent Mortgage Corporation (Fairway) for illegal redlining. It requires Fairway to pay a $1.9 million civil penalty and provide $7 million for a loan subsidy program to offer affordable home purchase, refinance and home improvement loans in majority Black neighborhoods.

According to the CFPB and DOJ, from at least 2018 through 2022, Fairway engaged in a pattern or practice of unlawful discrimination against applicants and prospective applicants based on race and color, including by redlining majority Black areas within Birmingham, Alabama. Fairview also discouraged, on a prohibited basis, consumers from making or pursuing a loan. 

According to the complaint, Fairway claimed to serve all of Birmingham, Alabama, but it demonstrated a pattern or practice of underserving and avoiding providing lending services in majority and high Black areas. HMDA data from 2018 through 2022 showed that Fairway disproportionately failed to serve majority and high Black areas within Birmingham, Alabama. Fairway significantly underperformed as compared to similarly situated “peer” lenders in generating applications from majority and high Black areas as a percentage of the applications it generated in all areas within Birmingham, Alabama. Fairway’s peer lenders generated applications for properties in majority Black areas at over three times the rate of Fairway, and in high Black areas, over eight times the rate of Fairway.

In addition to its underperformance in generating mortgage loan applications in majority Black areas, Fairway significantly underperformed its peer lenders in making mortgage loans in majority Black areas within Birmingham, Alabama. From 2018 through 2022, Fairway’s peer lenders made loans in majority Black areas at more than three times the rate of Fairway and made loans in high Black areas at more than eight times the rate of Fairway.

Fairway’s redlining practices included locating and maintaining all its physical retail locations and loan officers in majority white areas and failing to locate any physical locations and loan officers in, or train, instruct or incentivize its loan officers to effectively serve majority Black areas within Birmingham, Alabama. Between 2015 through 2022, Fairway operated three retail loan offices and three loan production desks located in real estate offices within Birmingham, Alabama, all of which were in majority white areas. Fairway failed to take actions that effectively compensated for its lack of retail locations in majority and high Black areas within Birmingham, Alabama. Fairway’s leadership lacked a strategy for recruiting new mortgage loan officers, such as hiring new loan officers with experience in serving, or ties to referral sources in, majority and high Black areas within Birmingham, Alabama.

Fairway predominantly directed its marketing and advertising to majority white areas from 2018 through 2022, while failing to conduct effective marketing and advertising to majority Black areas in the within Birmingham, Alabama until at least late 2022. Images of Fairway’s loan officers and other employees in the area were displayed on Fairway’s websites, in marketing materials, including on social media, and, at times, even in loan officer signature blocks in emails. These images in Fairway’s marketing materials depicted Fairway’s employees in the Birmingham, Alabama area, nearly all of whom were white and none of whom were Black.

Three hundred digital or print advertisements used by Fairway 2018 through 2020 in the Birmingham, Alabama area contained an image of a person, such as a loan officer, real estate agent or model, with about 99% containing at least one image of a person who appeared to be white and only about 1% containing an image of a person who appeared to be Black. Of over 15,000 direct mailings showing images of a person, only about 150 mailings contained an image of someone who appeared to be other than white (about 1%). Of the over 20,000 direct mailings that Fairway sent to an identified address in the Birmingham, Alabama area from 2018 through 2020, less than 3% were sent to a majority Black area and less than 0.5% were sent to a high Black area.

Fairway also directed significant marketing and advertising expenditures at the members of a country club, an annual charity event, a fitness center, middle school and a religious college, all of which were located in majority white areas. 

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