JP Morgan Chase Settles for $55 Million on Charges of Discriminatory Mortgage Practices

On January 18, 2017, the U.S. Attorney for the Southern District of New York filed a lawsuit against J.P. Morgan Chase with claims that the bank had engaged in discriminatory mortgage practices from 2006 to 2009.  These discriminatory practices occurred when brokers charged African-American and Hispanic borrowers higher rates for mortgages than white borrowers with similar credit profiles.  It is estimated that the disparities in loan terms may have resulted in around 53,000 African-American and Hispanic borrowers being charged tens of millions of dollars more than white borrowers.

The U.S. Attorney found that J.P. Morgan Chase allowed mortgage brokers to vary the interest rate they charged customers based on factors other than creditworthiness.  Brokers make more money when the rate on a loan is higher than the rate designated by the bank based on creditworthiness.  The discretion given to brokers, in the case of JP Morgan Chase, resulted in higher rates being charged based on the basis of race and ethnicity, breaking federal discrimination laws.  Although the brokers were the ones giving the higher rates, JP Morgan Chase had the legal responsibility to determine if pricing discretion was being used in a way that violated the law.  JP Morgan Chase’s failure to adequately monitor the practices of the brokers and to prevent or fix practices that resulted in racial and ethnic discrimination, violates the Federal Housing Act and the Equal Credit Opportunity Act.  Through J.P. Morgan Chase denies allegations of wrongdoing, they have agreed to pay $55 million to settle the claims.