Magazine article American Banker

Bank, Justice Department Lawyers Clash over Fair-Lending Action

Magazine article American Banker

Bank, Justice Department Lawyers Clash over Fair-Lending Action

Article excerpt

Byline: Kevin Wack

WASHINGTON a A Justice Department lawyer on Friday defended a recent fair-lending settlement against an accusation of prosecutorial overreach.

A California lender, Luther Burbank Savings, was alleged to have engaged in discriminatory practices by establishing a $400,000 minimum on single-family residential loans. The impact of that policy was to provide too few loans to African-Americans and Latinos, according to prosecutors.

The bank agreed to a $2 million settlement this week. It also pledged not to reinstate the minimum loan amount, which has not been in effect since 2011.

Andrew Sandler, a lawyer who represented Luther Burbank, said Friday at American Banker's Regulatory Symposium that the bank was only offering single-family loans because regulators required it to diversify from its multifamily lending business, which served minority communities.

He argued that the government is overreaching a in effect, forcing banks to develop new loan products to avoid charges that their existing products have a disparate negative impact on minorities. Luther Burbank's single-family loans were nontraditional mortgages a including negatively amortized and interest-only loans a that were intended for wealthy borrowers.

"Taking and using the disparate impact theory in this very aggressive and, I would submit, inappropriate way goes too far," Sandler, the chairman and executive partner of BuckleySandler LLP, said during a panel discussion of fair-lending cases. …

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