Mortgage Lender Draper and Kramer Fined $1.5M for Discriminatory Lending Practices

A nonbank mortgage lender with offices in five states has been fined $1.5 million and banned from residential mortgage lending for five years due to discriminatory practices. Illinois-based Draper and Kramer Mortgage has settled claims brought by the Consumer Financial Protection Bureau (CFPB), which alleged that the company’s actions resulted in discrimination against Black and Hispanic homebuyers.

The CFPB’s investigation revealed that Draper and Kramer’s practices violated federal laws prohibiting discrimination in housing. Specifically, the bureau accused Draper’s offices and marketing efforts of discouraging minority borrowers from applying for mortgages. Additionally, loan officers were found to have actively discouraged homebuyers from purchasing homes in neighborhoods that were predominantly Black or Hispanic, a practice known as “redlining.”

Discriminatory Practices and Redlining Allegations

According to the CFPB, Draper and Kramer engaged in unlawful exclusionary practices in areas with high concentrations of Black and Hispanic residents, particularly in the Chicago and Boston metro areas. Redlining, a term that dates back to the mid-20th century, refers to the discriminatory practice of denying or limiting financial services to certain neighborhoods based on racial or ethnic composition.

“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.” The fine and the five-year ban on residential mortgage lending are part of the CFPB’s broader efforts to combat systemic discrimination in the housing market.

The CFPB’s settlement with Draper and Kramer marks a significant enforcement action aimed at addressing discrimination in the mortgage industry. The company, which has operated across multiple states, including Illinois, Indiana, Massachusetts, New Hampshire, and Wisconsin, was found to have violated the Fair Housing Act and the Equal Credit Opportunity Act, both of which are designed to prevent discrimination based on race, color, national origin, and other protected characteristics.

Impact on Minority Communities

The consequences of discriminatory lending practices, such as redlining, have long-lasting effects on minority communities. By discouraging Black and Hispanic homebuyers from purchasing homes in certain neighborhoods, Draper and Kramer contributed to the ongoing racial and economic segregation that persists in many American cities. This exclusionary behavior not only limited access to homeownership but also hindered the ability of minority families to build wealth through real estate investments.

The CFPB’s actions against Draper and Kramer are part of a broader initiative to address housing discrimination and ensure that all individuals, regardless of their race or ethnicity, have equal access to mortgage lending and homeownership opportunities.

Financial Penalty and Ban on Lending

As part of the settlement, Draper and Kramer has agreed to pay a $1.5 million fine. The company will also be prohibited from engaging in residential mortgage lending for five years. The ban is a significant penalty, particularly for a company that has been active in multiple states and has originated a large number of mortgage loans over the years.

In addition to the financial penalty and lending ban, Draper and Kramer will be required to take corrective actions to ensure that it no longer engages in discriminatory practices. This includes revising its marketing strategies and ensuring that all employees are trained to comply with federal fair lending laws.

CFPB’s Commitment to Fair Lending

The CFPB has made it clear that it is committed to holding companies accountable for discriminatory practices in the housing market. The bureau’s enforcement actions are part of its broader mission to promote fair lending and ensure that all consumers, regardless of their background, have equal access to financial services.

“Draper and Kramer’s discriminatory practices denied Black and Hispanic borrowers equal access to mortgage loans,” said Chopra. “The Bureau will continue to use its authority to hold companies accountable and ensure that all consumers are treated fairly.”

Looking Ahead

The fine and the five-year ban on mortgage lending for Draper and Kramer serve as a reminder of the ongoing challenges in addressing discrimination in the housing market. While significant progress has been made in recent decades, the CFPB’s actions highlight the need for continued vigilance in ensuring that discriminatory practices are eradicated from the industry.

The settlement also underscores the importance of fair lending laws and the need for companies to adopt policies and practices that promote inclusion and equity in the mortgage lending process. As the housing market continues to evolve, it will be essential for regulators, lenders, and consumers to work together to ensure that discrimination has no place in the pursuit of homeownership.

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