Luther Burbank Savings Settles with DOJ over Alleged Loan Bias

E. Scott Reckard, Los Angeles Times, September 12, 2012

Luther Burbank Savings has agreed to spend $2 million to settle a federal government lawsuit accusing the real estate lender of practices that resulted in too few home loans for African American and Latino borrowers from 2006 to 2010.

The Santa Rosa-based thrift, with $3.6 billion in assets, did not admit wrongdoing. It lends mainly to owners of apartments, many of them in minority neighborhoods—a business the government did not challenge.

The allegations instead related to a $400,000 minimum loan amount Luther Burbank had set for a smaller business line that issued jumbo mortgages through independent brokers to low-risk borrowers.

The Justice Department said in a statement that the effect was to limit the percentage of home loans Luther Burbank made to minorities. In Los Angeles, for example, 5.8% of the mortgages in question went to blacks and Latinos during the five-year period compared with 31.8% at other prime lenders.

The settlement, filed Wednesday in federal court in Los Angeles, is designed to encourage lending in California communities where more than 50% of the residents are members of minority groups, the Justice Department said.

The settlement is the latest resulting from an Obama administration push to bring fair-lending cases and follows far larger settlements by Wells Fargo & Co. and Bank of America Corp.


The S&L has since done away with the $400,000 minimum and set up a separate division, Luther Burbank Mortgage, which offers traditional 30-year loans that are sold to Fannie Mae and Freddie Mac, the giant government-supported mortgage finance firms.



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  • jedsrael

    Whom can we sue for Diversity’s disparate impact on our White privilege?

  • Oil Can Harry

    Yup. One week the Obama administration shakes down a bank for making loans to blacks and browns with bad credit (“predatory lending!”) and the next week they shake down a bank for refusing to make loans to blacks and browns with bad credit (“redlining!”). 

    • IstvanIN

       So true.  The insanity of it all.  If a bank has one set of standards for all borrowers and certain groups of borrowers do not meet those standards, that is discrimination.  But having a lower standard (or different standard) for black and browns isn’t discrimination against whites.  Does anyone see the contradiction.  The whole country is bizarre.

    • As I always say, when it comes to blacks, you’re damned if you do and damned if you don’t.

  • I wonder if the use of credit reports to deny loans will be discriminatory against minorities since they are more likely to have bad credit because they have low income and are overextended.

  • JackKrak

    Reality has a “disarate impact” on minorities.

  • I see the Justice Department isn’t aware of current events.

    Wasn’t one of the causes of our current economic prediciment lending money to people who didn’t have the means to re-pay their loans?