The CFPB has taken action against the Draper & Kramer Mortgage Corp. (DKMC) based on allegations of discriminatory lending activities that, according to the CFPB, discouraged homebuyers from applying to the company for home mortgage loans in majority-Black and Hispanic neighborhoods in the Chicago and Boston areas.

The CFPB alleged that from 2019 through 2021, DKMC, a non-bank mortgage lender based in Downers Grove, Illinois, engaged in redlining, and that this resulted in the company significantly underperforming its peers in lending activity in the Chicago and Boston areas. Specifically, the CFPB alleged that DKMC:

  • Focused mortgage lending activity in majority-white neighborhoods. In particular, the CFPB alleged that the company had no offices in majority- or high-Black and Hispanic neigborhoods in Chicago and Boston, and that the company’s outreach centered on majority-white neighborhoods.
  • Discouraged mortgage applicants from pursuing properties in majority-Black and Hispanic neighborhoods.

The consent order does not provide for the typical remedies contained in recent redlining consent orders, likely because, according to the complaint, DKMC ceased originating residential mortgage loans and wound down its mortgage lending operations in 2024. If approved by the U.S. District Court for the Northern District of Illinois, Draper would be required to refrain from engaging in mortgage lending activity for five years and pay a $1.5 million penalty.

Separately, the Justice Department has announced that The Mortgage Firm, a non-bank mortgage lender headquartered in Altamonte Springs, Florida, has agreed to pay $1.75 million to resolve allegations it engaged in lending discrimination by redlining predominantly Black and Hispanic neighborhoods in neighborhoods in the Miami-Fort Lauderdale-West Palm Beach, Florida, Metropolitan Statistical Area (Miami MSA).

According to the complaint, the company located its offices predominantly in white neighborhoods and failed to develop referral networks within Black and Hispanic neighborhoods. As a result, according to the DOJ, The Mortgage Firm generated mortgage loan applications in predominantly Black and Hispanic neighborhoods in the Miami MSA at rates far below peer institutions. As is common in DOJ and CFPB redlining matters, the DOJ considered peer institutions to be bank and non-bank mortgage lenders that received between 50% and 200% percent The Mortgage Firm’s annual volume of home mortgage loan applications.   

If approved, the proposed consent order, filed in the U.S. District Court for the Southern District of Florida, would require The Mortgage Firm during the five-year term of the order to:

  • Conduct a community needs assessment and use that assessment to design future loan programs, marketing materials and outreach efforts in the Miami MSA.
  • Provide $1.75 million for a loan subsidy program to offer affordable home purchase, refinance and home improvement loans in in predominantly Black and Hispanic neighborhoods in the Miami MSA.
  • Conduct a detailed assessment of its fair lending program in the Miami MSA.
  • Enhance its fair lending training and staffing, including by having a director of community lending in staff
  • Expand outreach and advertising efforts by maintaining an office in a majority-Black and Hispanic neighborhood in Miami-Dade County, and by translating its website into Spanish.
  • Improve connections with the community and build referral sources in predominately Black and Hispanic neighborhoodsby providing four outreach events per year, six financial education seminars per year and partnering with one or more community organization to increase access to credit in predominately Black and Hispanic neighborhoods in the Miami MSA.

The DOJ has entered into numerous redlining consent orders with mortgage lenders since announcing the initiative to combat redlining in October 2021, and the CFPB has also been active in this area.  Both consent orders were announced during the waning days of the Biden Administration, so we will have to wait and see how the Trump Administration handles existing redlining enforcement matters, and to the extent to which new redlining enforcement matters will be initiated.