FTC Sues Lender Amid Foreclosure Property Listings

As Los Angeles tries its best to boost its real estate market battered by foreclosure property listings, the Federal Trade Commission has filed a lawsuit against Bakersfield-based mortgage lender Golden Empire Mortgage Inc. for allegedly discriminating against Latino borrowers.

The FTC claimed that Golden Empire Mortgage imposed higher mortgage rates and higher processing fees on mortgage loans taken out by Latino borrowers, compared to mortgage rates and fees imposed on loans taken out by non-Latino white Americans.

FTC investigators alleged that the applicants’ underwriting risks and credit histories cannot explain the discrepancies in the mortgage rates and fees.

Miami-based lawyer Paul Hancock, who works for Golden Empire, argued that the methodology used by the FTC is not exactly correct and that the firm will respond to the alleged discriminatory activities in court.

FTC officials have been investigating the practices of mortgage lenders as more delinquent properties are added to bank foreclosure listings and as more fraudulent activities related to mortgages and foreclosure property listings are being reported in the media.

According to FTC, Golden Empire’s top executives paid their loan officers percentages of overages as their commissions, and failed to track whether the officers were imposing higher rates and fees on the mortgage loans of non-whites.

The FTC particularly pointed to Golden Empire’s policy of giving its branch managers and employees the right to earn money by imposing higher charges on loans. The national origin of Hispanic Americans in the loan applications led to higher mortgage rates and processing fees.

Hancock explained that the lawsuit stemmed from mortgage loan investigations by FTC officials and their examination of loans made during the housing boom. Mortgage loans easily taken out during the housing boom led to hundreds of thousands of properties added to forclosure property listings.

Additionally, Hancock explained that the Latino borrowers were not given different loan rates and fees. He said that FTC should factor in the prevailing loan costs in different areas, including the kinds of loans taken out and the credit records of the borrowers. He claimed that Golden Empire passed the traditional method used to compare loans – by annual percentage rates.

The FTC lawsuit alleged that Golden Empire violated the Equal Credit Opportunity Act. It also asked the court to require Golden Empire to refund the charges and pay all costs spent by FTC in investigating the case, which is just one among FTC’s efforts to help mitigate the effects of overloaded foreclosure property listings.

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