The Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) have filed a joint complaint against California lender Provident Funding Associates alleging it charged higher broker fees to minority borrowers. The two federal agencies have asked the court to require Provident to pay $9 million in damages to approximately 14,000 African-American and Hispanic borrowers they say were harmed by these discriminatory practices.

Provident originates mortgage loans through a nationwide network of brokers. The complaint stated that for the more than 450,000 mortgage loans made between 2006 and 2011, Provident set base or par rates for its various loan products using three criteria: the company's assessment of the creditworthiness of the individual applicant, current interest rates, and what investors were willing to pay for the loans.

The consents order, in addition to the $9 million in damages, requires Provident to engage a settlement administrator to distribute the funds and to keep its current broker compensation policy intact. That policy was changed—according to Provident—in 2010 and 2011 in response to regulatory developments and does not allow discretion in borrower-or lender-paid broker compensation. Provident also must keep its fair lending training and broker monitoring programs in place.

According to Richard Andreano, Jr., writing in Ballard and Spahr's CFPB blog, the consent order requires brokers to disclose to applicants (a) the full amount of broker compensation, stated separately for lender-paid or borrower-paid fees, and whether or not that compensation is negotiable, and (b) a specified notice of non-discrimination.

Andreano also says, "The consent order indicates that under Provident's current broker compensation policy, brokers cannot charge different amounts of fees to borrowers on a loan-by-loan basis because each broker (a) must periodically select its compensation level as a percentage of loan amount, up to a maximum percentage or dollar amount, (2) must charge the percentage or dollar amount it has selected to each loan application it submits to Provident during the applicable period, and (c) may not charge any other fee in connection with originating a Provident loan."

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