Fairway Independent Mortgage Corp. must pay nearly $10 million in a settlement over allegations by the U.S. Justice Department and the Consumer Financial Protection Bureau (CFPB) that the lender engaged in keeping credit from predominately Black Birmingham neighborhoods.

The Justice Department and Consumer Financial Protection Bureau (CFPB) announced today that Fairway has agreed to pay $8 million, and a $1.9 million civil money penalty, to resolve allegations of redlining, or lending discrimination.

The Justice Department and CFPB allege that Fairway, through its marketing and sales actions, discouraged residents of Black neighborhoods from applying for mortgage loans.

Fairway will provide $7 million for a loan subsidy program to offer affordable home purchase, refinance and home improvement loans in Birmingham’s majority-Black neighborhoods.

It will also invest $1 million in programs to support that loan subsidy fund, and pay a $1.9 million civil penalty to the CFPB’s victims relief fund.

Headquartered in Madison, Wisc., Fairway operates in the Birmingham area under the trade name MortgageBanc.

Attempts to contact Fairway for comment were not immediately successful.

“Birmingham lies at the heart of our nation’s civil rights struggle but is also a community that bears the legacy of discriminatory redlining and other exclusionary policies,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said.

“This settlement will provide Birmingham’s Black neighborhoods with the access to credit they have long been denied and increase opportunities for homeownership and generational wealth.

“This settlement makes clear our intent to uproot modern-day redlining in every corner of the country, including in the deep South,” Clarke said.

According to the Justice Department, the company’s own data showed that it was failing to serve Black neighborhoods as far back as at least 2017. Before October 2022, it took no meaningful actions to address redlining risk.

Between 2018 and 2022, only 3.7% of Fairway’s applications were for properties in majority-Black areas, compared to 12.2% for Fairway’s peer lenders.

The disparity was even higher in neighborhoods with 80% or more Black residents, where Fairway made loans at less than one-eighth the rate of its peer lenders.

Between 2015 and 2022, the Justice Department contends, Fairway operated three retail loan offices and three loan production desks within real estate offices in the Birmingham metro area, all of which were in majority-white areas.

Most of Fairway’s referral sources and referred consumers were located in majority-white areas.

Fairway predominantly directed its marketing to majority-white areas and failed to train or incentivize its loan officers to better serve majority-Black areas, the Justice Department stated.

The $1.9 million penalty is to be paid into the CFPB’s Civil Penalty Fund, also referred to as the victims’ relief fund.