NEW YORK — A Pennsylvania mortgage company, owned by billionaire Warren Buffett, discriminated against would-be black and Hispanic homebuyers in Philadelphia, New Jersey and Delaware, the Justice Department said Wednesday, in what is being described as the second-biggest redlining deal in history.
Trident Mortgage Co., a division of Berkshire Hathaways HomeServices of America, deliberately avoided providing mortgages in minority-majority neighborhoods in West Philadelphia like Malcolm X Park; Camden, New Jersey; and in Wilmington, Delaware, the Justice Department and Consumer Financial Protection Bureau said in their settlement with Trident.
As part of the deal with the government, Trident must set aside $20 million to lend to underserved neighborhoods.
“Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, deprived them of an opportunity to build wealth, and devalued real estate in their neighborhoods,” said Kristen Clarke, assistant attorney general for the Department of Justice’s civil rights division, in a prepared statement .
Sen. Vincent Hughes, a Philadelphia Democrat, grew up a few blocks from West Philadelphia Park, where a news conference on the deal was held Wednesday. Hughes said parts of his life have been shaped by discriminatory credit practices that prevent black and brown communities from building wealth.
Hughes’ father worked for one of the oldest black-owned savings and credit institutions, a company called Berean, which financed mortgages for black families when other banks and lenders turned them down.
“I’ve had people come up to me and say, ‘Vince, your dad gave me a mortgage on my first home when I was getting rejected everywhere. I couldn’t have bought my house without Berean and your father,” Hughes said. “We witnessed this discrimination in real time.”
Redlining is a term used to describe when banks deliberately avoid lending to non-white communities. Banks and the US government drew red markers on maps for neighborhoods considered undesirable for home loan origination. The neighborhoods were almost always areas inhabited by racial minorities and even included other historically discriminated communities such as Jewish neighborhoods.
This practice effectively cuts entire communities off from the primary path to wealth creation in the US: home ownership. To date, Black and Hispanic households are far less likely to own a home compared to their white counterparts.
The alleged redlining activity took place between 2015 and 2019 – Trident stopped writing mortgages in 2020. In addition to avoiding mortgages in minority neighborhoods, Trident employees made racist comments about lending to black homebuyers and called certain neighborhoods “ghettos.” A Trident executive was photographed posing in front of the Confederate flag. The marketing materials used by Trident were aimed exclusively at white people, and almost all of the company’s employees were white.
Josh Shapiro, the Pennsylvania Attorney General running for governor, called Trident’s behavior “systematic racism, pure and simple.”
Philadelphia has a long history of racism toward black homebuyers. The Philadelphia City Council released a report Wednesday that found that 95% of all home appraisers in the city were white and there is a racial divide between appraisals of homes owned by black homeowners versus homes owned by white owners.
Hughes said he and other lawmakers were furious over revelations of redlining by Trident and others in a 2018 Reveal investigation into Buffett’s mortgage company. They harassed Shapiro during an appropriations hearing, and the attorney general responded by setting up a hotline to collect personal stories.
As part of the settlement, Trident agreed to hire mortgage loan officers in affected neighborhoods and pay a $4 million fine. Since Trident is no longer in the lending business, a separate company will be hired to provide the $20 million in lending subsidies, the Justice Department said.
The Trident settlement also includes the first redlining case against a non-bank mortgage lender. Since the Great Recession, about half of all mortgages in the country have been written by companies, who immediately sell the mortgage to investors. These non-bank lenders include firms such as Quicken Loans, Rocket Mortgage, and Loan Depot, among others.
“Credit discrimination is illegal regardless of whether the law-breaking entity is a traditional bank or a non-bank lender,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.
In a statement, HomeServices of America said they “totally disagree” with the Justice Department’s and CFPB’s findings in the settlement, noting that Trident was not required to admit wrongdoing as part of the case. Buffett himself did not immediately respond to a request for comment, but has in the past deferred any comment to Berkshire’s subsidiaries.
Hughes said he has no personal experience with Trident, but said he wasn’t surprised to learn the company’s statement after the settlement was announced that there was wrongdoing.
“That’s what these companies do, right? None of them admit it, they just pay the money,” he said.
AP reporter Claudia Lauer contributed to this report from Philadelphia. AP Business Writer Josh Funk contributed from Omaha, Nebraska.