Lender GFI Mortgage Bankers filed a motion to dismiss a housing discrimination case brought by the U.S. Department of Justice on the grounds that the government "failed to state a cognizable claim."
The case, like many housing discrimination cases, focuses on disparate impact — a legal concept in which an activity that is put into practice, such as lending standards, is found to have had a disparate impact on different groups (in this case borrowers) even though there may be no intent to discriminate.
The initial claim accused GFI of violating the Fair Housing Act and the Equal Credit Opportunity Act. The complaint alleges the firm, from 2005 through 2009, charged African-Americans and Hispanic borrowers higher interest rates and fees on mortgages when compared to whites with similar credit profiles.
In its complaint, the Justice Department alleged that African-Americans in similarly situated circumstances were charged interest rates that were 41 basis points higher in 2005, 19 basis points above 2007 levels and 25 basis points higher in 2008. The lawsuit contended this was the case after looking at credit profiles and other control factors that put the borrowers in a comparable position to other consumers.
New York-based GFI, in its motion to dismiss, alleges the DOJ's claim fails to establish a link between the firm's policies and the lending disparities outlined in the lawsuit.
GFI says neither the Federal Housing Administration or the Equal Credit Opportunity Act has disparate impact claims included in the statutory language.
While the lender says the Supreme Court has not officially ruled on the possibility of using disparate impact claims in FHA or ECOA discrimination claims, the firm relies on precedent Supreme Court cases involving Title VII employment discrimination cases, which have only allowed disparate impact claims when the law itself includes language allowing for that type of treatment.
The GFI plaintiffs even cite the recent Freeman v. Quicken loans case, saying it shows the Supreme Court is refusing to expand an act beyond limitations specifically drawn into the law. That case involved the Real Estate Settlement Procedures Act. GFI cites the case in its motion to dismiss to suggest disparate impact claims cannot be automatically drawn into ECOA and the Fair Housing Act.
The lending institution also claims that even if disparate impact applies, it would not survive in the current case.
"The complaint fails to satisfy these pleading standards lacking alleged facts establishing a “specific policy or practice” or a causal connection between the challenged conduct and the statistical disparities on which the complaint is based," the lender said.
GFI is a subsidiary of GFI Capital Resources Group out of New York.