Mortgage

CFPB Beats Chicago Mortgage Lender With Redlining Lawsuit

The Consumer Financial Protection Bureau sued a Chicago-based mortgage lender who allegedly used illegal redlining by preventing potential black applicants from applying for home loans.

The CFPB announced on Wednesday the complaint against Townstone Financial, a small non-bank mortgage lender that marketed its services through an infomercial and podcast called "The Townstone Financial Show".

The office's complaint alleged that the company's CEO and President – not mentioned in the lawsuit – "illegally redlined" from 2014 to 2017 by making "disheartening statements" to "potential applicants working in African-American." Areas living in the MSA of Chicago apply for "discouraged" mortgage loans from Townstone. "

The lawsuit raises questions about freedom of speech and whether mortgages can be held accountable for redlining based on comments made on marketing home loans on talk radio programs.

The CFPB announced on Wednesday the complaint against Townstone Financial, a small non-bank mortgage lender that marketed its services through an infomercial and podcast called "The Townstone Financial Show".

Bloomberg news

"The Townstone Financial Show co-hosts made several statements in several episodes that would prevent potential African-American applicants from applying for Townstone mortgage loans and would discourage potential applicants who live in suburban African-American areas from applying for mortgage loans at Townstone would prevent potential applicants in other areas from applying for Townstone mortgage loans for real estate in Afro-American neighborhoods, ”said the CFPB in the 19-page lawsuit.

Townstone did not immediately respond to a request for comment.

The CFPB cited a episode of the January 2017 radio show in which the company's CEO called a downtown Chicago Jewel Osco grocery store "Jungle Jewel" frequented by "people from around the world" and called the store “A scary place. "

In a episode of the June 2016 radio broadcast, the CFPB said Townstone's CEO said the south side of Chicago was a "hoodlum weekend" between Friday and Monday and that the police were "the only ones between turning into a real war zone and." Keep it where it is somehow. "

During another radio show in January 2014, the President of Townstone replied to a caller's question by saying that the caller's wife "is a woman and she is unlikely to have a good credit because she is a woman."

The lawsuit alleges that Townstone violated the Consumer Finance Protection Act, the Equal Opportunities Act, and Regulation B, which prohibit mortgages from discriminating against applicants based on race, color, or national origin. The lawsuit was filed with the Northern District of Illinois District Court.

The CFPB said Townstone had made no effort to market directly to African Americans, who make up 30% of Chicago's population. Townstone received 2,700 loan applications from 2014 to 2017. But only 37 or 1.4% came from black applicants, well below its peer group, the office said.

In a press release, the CFPB said its complaint was "not a finding or decision that Townstone had violated the law."

The CFPB demands unspecified damages, legal remedies to consumers and a civil fine.

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