CFPB Takes Action Against Draper & Kramer for Discriminatory Lending Practices.
The Consumer Financial Protection Bureau (CFPB) has taken action against Draper & Kramer Mortgage Corporation (Draper) for discriminatory mortgage lending practices that discouraged homebuyers from applying for loans in majority-Black and Hispanic neighbourhoods in the greater Chicago and Boston areas. The CFPB alleges that Draper strategically located all its offices in predominantly white neighbourhoods, focused its marketing efforts on these areas, and avoided marketing to Black and Hispanic communities. This resulted in disproportionately low mortgage loan applications and originations from majority-Black and Hispanic neighbourhoods in comparison to other lenders.
If approved by the court, the proposed order would ban Draper from engaging in residential mortgage lending for five years and require the company to pay a $1.5 million civil penalty into the CFPB’s victims relief fund.
“Draper illegally excluded homeowners and engaged in redlining across the Chicago and Boston metro areas,” said CFPB Director Rohit Chopra. “Today’s order bans Draper from mortgage lending for five years and ensures that the company pays for its unlawful discrimination.”
Draper & Kramer Mortgage Corporation is a non-depository mortgage lender based in Downers Grove, Illinois. The company originates mortgage loans across multiple states, including Illinois, Indiana, Massachusetts, New Hampshire, and Wisconsin.
The CFPB alleges that between 2019 and 2021, Draper engaged in redlining majority-Black and Hispanic neighbourhoods in the greater Chicago and Boston areas. This resulted in Draper underperforming its peers in terms of mortgage lending activity in these communities. The CFPB asserts that Draper’s practices discouraged mortgage applicants from applying for credit based on race, colour, and national origin, in violation of the Equal Credit Opportunity Act and Regulation B.
Specifically, the CFPB claims that Draper violated the law by:
- Focusing mortgage lending activities in majority-white neighbourhoods: Draper had no offices, no loan officers, and very little marketing or outreach in majority-Black and Hispanic neighbourhoods in Chicago and Boston. The company did not assign loan officers to these communities and failed to train or incentivise them to lend in these areas. Additionally, Draper’s marketing efforts were directed predominantly toward white neighbourhoods and largely excluded Black and Hispanic communities.
- Discouraging mortgage applicants from pursuing properties in majority-Black and Hispanic areas: Draper’s business model discouraged borrowers from applying for loans to purchase property in these communities. Peer lenders in the Chicago metro area generated mortgage applications for properties in majority-Black and Hispanic neighbourhoods at more than two and a half times the rate Draper did, while in the Boston metro area, the figure was three times the rate. Draper also originated significantly fewer mortgage loans for properties in these areas compared to its peers, with peers originating two and a half times more loans in these communities than Draper.
Enforcement Action
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against financial institutions violating consumer financial laws, including the Equal Credit Opportunity Act, and engaging in unfair, deceptive, or abusive acts and practices.
If the court enters the proposed order, Draper would be required to:
- Cease residential mortgage lending activities for five years: For five years, Draper would be prohibited from performing any residential mortgage lending activities and from receiving any compensation for such activities.
- Pay a $1.5 million penalty: Draper would be required to pay a $1.5 million civil penalty to the CFPB’s victims relief fund.
Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
