Sage Bank fined $1.2 million by DOJ for discriminatory lending

Massachusetts-based bank accused of charging higher fees to minority borrowers

Massachusetts-based Sage Bank will pay nearly $1.2 million to settle charges brought against the bank by the Department of Justice, which accused the Sage Bank of “engaging in a pattern or practice of discrimination on the basis of race and national origin in the pricing of its residential mortgage loans.”

According to the DOJ, Sage Bank allegedly charged African-American and Hispanic borrowers higher prices for home loans than the bank charged to “similarly situated” white borrowers for reasons beyond their creditworthiness.

In a complaint filed against Sage Bank, the DOJ alleged that each of Sage Bank’s loan officers were each assigned a “target price,” which was the price a loan officer was required to achieve on each home loan, regardless of a borrower’s creditworthiness.

The DOJ complaint stated that Sage Bank assigned higher target prices to certain loan officers, and those loan officers “disproportionately” served African-American and Hispanic borrowers.

The DOJ complaint also alleged that Sage Bank’s loan officers were given discretion to price loans above their target prices and did so to a greater extent for African-American and Hispanic borrowers than for white borrowers.

According to the DOJ, the average African-American borrower at Sage Bank paid approximately $2,500 more for their loan than did a similarly qualified white borrower, while the average Hispanic borrower paid approximately $1,400 more than white borrowers.

The Justice Department alleged that these practices constituted violations of Fair Housing Act and the Equal Credit Opportunity Act.

Under the terms of the consent order, which was filed in U.S. District Court for the District of Massachusetts, Sage Bank will pay $1,175,000 into a settlement fund to compensate borrowers and applicants who were harmed by Sage Bank’s policies. 

The DOB said that the consent order also requires Sage Bank to establish a new loan pricing policy and a new loan officer compensation policy, have loan officers and bank employees undergo fair housing and fair lending training, and establish a monitoring program to detect future unlawful disparities in mortgage loan pricing.

“Sage Bank’s loan pricing policies created the risk that borrowers would be treated differently based on impermissible characteristics like race and national origin, and that was in fact the result,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. 

“This settlement ensures that all potential borrowers will be treated equally, regardless of race and national origin, and Sage Bank has agreed to restructure and monitor its lending practices to ensure that it is meeting those obligations,” Vanita continued.

“Sage Bank’s discriminatory practices were aimed at some of our most vulnerable neighborhoods and populations,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts. “Homeownership is the foundation of the American dream, and we will continue our work to ensure that all people – regardless of their skin color or the language they speak – have equal access to that dream.”

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