Mortgage lender owned by Warren Buffett accused of housing discrimination
A Pennsylvania mortgage company owned by billionaire Warren Buffett's Berkshire Hathaway discriminated against potential Black and Latino homebuyers in Philadelphia, New Jersey and Delaware, the Department of Justice said Wednesday in what the agency called the second-largest settlement ever over allegations of "redlining."
Trident Mortgage, a division of Berkshire's HomeServices of America, deliberately avoided writing mortgages in minority-majority neighborhoods in West Philadelphia like Malcolm X Park; Camden, New Jersey; and in Wilmington, Delaware, the Justice Department and Consumer Financial Protection Bureau said in announcing the federal settlement with Trident. As part of the agreement, Trident will set aside $20 million to make loans in underserved communities.
"Trident's unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth, and devalued properties in their neighborhoods," Kristen Clarke, a DOJ assistant attorney general, said in a statement.
HomeServices of America didn't immediately reply to a request for comment. Buffett himself didn't immediately respond to a request for comment, but typically defers any comment to Berkshire's subsidiary companies.
Redlining is a practice that started in the 1930s where banks denied mortgages to people, mostly people of color in urban areas, preventing them from buying a home in certain neighborhoods or getting a loan to renovate their house. It took place for decades in many of the nation's largest cities, such as Atlanta, Chicago, Detroit, Tampa and others with large minority populations.
The term redlining is a nod to how lenders identified neighborhoods with a greater share of people deemed more likely to default on a mortgage. Using red ink, lenders outlined on paper maps the parts of a city that were considered at high risk of default, as well as more desirable neighborhoods for approving a loan.
Scholars who study housing discrimination point to redlining as one factor behind the gulf in wealth between Blacks and white Americans. Redlining became illegal in the 1960s under the Fair Housing Act and the 1977 Community Reinvestment Act.
"With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach," CFPB Director Rohit Chopra said in a statement about the settlement with Trident.
"Systematic racism"
Josh Shapiro, Pennsylvania's attorney general, called the behavior by Trident "systematic racism, pure and simple."
Justice Department officials alleged that between 2015 and 2019 Trident employees made racist comments about offering loans to Black homebuyers, calling certain neighborhoods "ghettos." One Trident manager was photographed posing in front of the Confederate Flag. The marketing materials used by Trident involved exclusively white people, and nearly all of the company's staff were white. The company stopped writing mortgages in 2020.
Some of Trident's practices played out frequently in Philadelphia, which has a long history of racism toward Black homebuyers. The Philadelphia City Council released a report Wednesday that found that 95% of all of Philly's home appraisers were white and that a racial gap remains between how homes owned by Black homeowners are valued versus homes owned by white owners.
Trident also agreed to hire mortgage loan officers in impacted neighborhoods as well as pay a $4 million fine. Since Trident no longer exists, a separate company will be contracted to provide the $20 million in loan subsidies, the DOJ said.