Magazine article American Banker

Mortgage Firm Sued for Rejecting Small Loans

Magazine article American Banker

Mortgage Firm Sued for Rejecting Small Loans

Article excerpt

WASHINGTON -- A minority tester and a white tester both applied for loans above a suburban Philadelphia mortgage company's minimum loan requirement of $50,000. Both applications were processed.

Another minority tester and another white tester applied for loans below the requirement; neither application was processed. Is this discrimination or just business?

It's discrimination, according to the Philadelphia Commission on Human Relations, a government agency that has sued Sunrise Mortgage Co. for violating the Fair Housing Act by requiring a minimum loan amount. The Department of Housing and Urban Development has joined in the suit.

The human rights agency's complaint said that because a greater percentage of minorities than whites in Philadelphia live in housing that would not require a mortgage of $50,000 or more, the policy is discriminatory.

Question of Profit

The mortgage company, however, says that "business necessity" keeps it from selling smaller loans. And according to a statement from the company's law firm, "Not only would our client fail to make a profit on its processing and origination [and sale] of small loans, but [it] would even lose money."

The company's attorney, Leonard Bernstein of Reed Smith Shaw & McClay, said that the case should be a warning to the numerous institutions that maintain a minimum loan requirement.

"HUD says they see this as a trend," said Mr. Bernstein. "It's a situation that goes way beyond this client's predicament."

Mr. Bernstein said that this is the first case of its kind he has seen. …

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