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Financial Fraud Settles with AIG

Posted in Latest News on March 26th, 2010 by rklein – 29,020 Comments

 

Financial Fraud Enforcement Task Force Announces Settlement with AIG Subsidiaries to Resolve Allegations of Lending Discrimination

Lenders Accountable for Higher Broker Fees Charged to Minority Borrowers

WASHINGTON – Two subsidiaries of American International Group Inc. have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers, representatives of President Obama’s Financial Fraud Enforcement Task Force (FFETF) announced today.

The settlement was filed today in conjunction with a complaint made by the Justice Department in U.S. District Court in Delaware. Brought under the federal Fair Housing and Equal Credit Opportunity Acts, the complaint alleges African American borrowers nationwide were charged higher fees on wholesale loans made by AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), an affiliated mortgage lending company.

“Discriminatory practices by lenders, brokers, and other players in the mortgage market contributed to our nation’s housing crisis and economic meltdown. Lenders who looked the other way and ignored the discriminatory practices of brokers must be held accountable,” said Thomas E. Perez, Assistant Attorney General in charge of the Justice Department’s Civil Rights Division. “We will continue to pursue cases attacking a wide range of abuses that have destroyed communities and transformed the American dream of home ownership into a nightmare.”

AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants. The complaint alleges that AIG FSB and WFI failed to supervise or monitor brokers in setting broker fees. This practice had a disparate impact on African American borrowers, who were charged higher broker fees than white, non-Hispanic borrowers on thousands of such loans from July 2003 until May 2006, a period of time before the federal government obtained an ownership interest in American International Group Inc.

“Today’s settlement is significant because it marks the first time the Justice Department has held a lender responsible for failing to monitor its brokers to ensure that borrowers are not charged higher fees because of their race. If necessary, it will not be the last time,” Perez said.

According to the settlement, which is subject to court approval, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than similarly-situated, non-Hispanic white customers, and will invest at least $1 million in consumer financial education efforts. AIG FSB and WFI will also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending.

“Today’s settlement serves as a reminder for why President Obama established the Financial Fraud Enforcement Task Force and as an example of what you can expect to see in the future,” said Executive Director of the FFETF Robb Adkins. “The type of interagency communication that spurred this case and the subsequent hard work of dedicated law enforcement professionals will be the foundation for the task force’s achievements on behalf of the American people. Moving forward, the American people should expect to see more cases, public outreach and concrete results as an outcome of our new cooperation.”

This case resulted from a referral by the Treasury Department’s Office of Thrift Supervision to the Justice Department’s Civil Rights Division in 2007, when this type of communication between agencies was too often the exception to the rule, said Adkins. In November 2009, President Barack Obama established the FFETF to make such cross-agency coordination the standard.

The task force is waging an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes and remedy other abuses in the financial markets. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

“Today’s settlement should serve as a warning shot to potential fraudsters and those who would discriminate against borrowers – we are redoubling our fight, we are strengthening cooperation and we are using all our resources to combat these crimes,” said Executive Director Adkins.

AIG FSB and WFI are not currently engaged in the business of wholesale home mortgage lending, but the settlement provides that if either defendant re-enters that business, the lender will implement specific, nonracial standards for broker fees and monitor all fees charged on the mortgage loans they fund to ensure that all customers are treated equally.

A copy of the complaint, as well as additional information about fair-lending enforcement by the Justice Department, can be obtained from the Justice Department Web site at http://www.justice.gov/fairhousing. On March 4, 2009, American International Group Inc. issued stock to a trust established in favor of the United States Treasury.

The enforcement of federal fair-lending laws is a priority of the Justice Department’s Civil Rights Division.

This Just In!

Posted in Latest News on January 15th, 2010 by rklein – 54,250 Comments

 

HUD CHARGES NEW YORK LANDLORDS WITH DISCRIMINATING
AGAINST VETERAN WITH DISABILITIES
Vietnam-era veteran allegedly denied use of service animal

WASHINGTON – The U.S. Department of Housing and Urban Development today announced that it is charging two Poughkeepsie, New York-area landlords with violating the Fair Housing Act for allegedly refusing to allow a Vietnam-era veteran suffering from Post-Traumatic Stress Disorder to have a therapeutic service dog in his apartment. In addition, HUD’s charge contends that the landlords, Gerald and Patrick Paribelli, who manage and own the Apartment Buildings of South Street Builders, Inc., in Highland, NY, retaliated against the veteran by threatening to evict him because he filed a housing discrimination complaint.

The Fair Housing Act makes it unlawful to refuse to grant persons with disabilities reasonable accommodations, such as changes to rules, policies or practices that allow them to fully enjoy their home. The Fair Housing Act also prohibits coercing, intimidating, threatening, or interfering with a person for having exercised their fair housing rights.

“Every day, the men and women of our armed services risk their lives to defend our freedom,” said John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity. “It’s our duty to ensure that our service members, as well as everyone who calls America home, have access to safe and affordable housing, free from discrimination. HUD will continue to vigorously enforce our nation’s fair housing laws on behalf of our nation’s veterans and those currently serving.”

In his complaint, which was filed with HUD and the New York State Division of Human Rights, the resident alleged that the owners failed to grant his request for a reasonable accommodation when they denied his use of a service animal doctors had prescribed to reduce his post-traumatic stress, depression and seizures. Although one of the owners acknowledged that he had heard of assistance animals being used to treat these disorders, the landlords denied the tenant’s requests for a therapeutic service dog because his apartment building had a “no-pets” policy. HUD’s charge of discrimination also asserts that the landlords told the tenant that he would need to start looking for another place to live because he had filed a housing discrimination complaint.

The HUD charge will be heard by a United States Administrative Law Judge (ALJ) unless any party to the charge elects to have the case heard in federal district court. If an ALJ finds after a hearing that discrimination has occurred, the ALJ may award damages to the complainant for the damages suffered as a result of the discrimination. The ALJ may also order injunctive relief and other equitable relief to deter further discrimination, as well as payment of attorney fees. In addition, the ALJ may impose civil penalties in order to vindicate the public interest. A federal district court judge may also award punitive damages to the complainant.

FHEO and its partners in the Fair Housing Assistance Program investigate more than 10,000 housing discrimination complaints annually. People who believe they are the victims of housing discrimination should contact HUD at 1-800-669-9777 (voice), 800-927-9275 (TTY). Additional information is available at www.hud.gov/fairhousing.

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HUD is the nation’s housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation’s fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

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