Director Chopra’s Prepared Remarks at a Joint DOJ, CFPB Press Event on the Trident Enforcement Action
For many years, nonbank lenders have been able to avoid many of the legal obligations and responsibilities of traditional banks. Even the Community Reinvestment Act of 1977, specifically passed to address the consequences of redlining and one of our most important tools for encouraging financial institutions to meet the credit needs of low- and moderate-income neighborhoods, exempts nonbank lenders.
But, let me be clear, nonbank lenders are not, nor have they ever been, exempted from the mandates of the nation’s fair housing and fair lending laws. So, while today’s enforcement action against Trident may mark the first ever nonbank government settlement for redlining, credit discrimination is illegal regardless of whether the lawbreaking company is a traditional bank or a nonbank lender.
Nonbank lenders now originate most mortgages in the United States. In May 2022, the percentage of mortgages originated by nonbank lenders reached 77% of all reported mortgages in the country.1 Accordingly, federal policymakers should continue to consider ways to ensure that every mortgage lender serves qualified applicants, particularly minority applicants residing in neighborhoods that have been historically excluded from equal credit access.
The discriminatory actions of Trident sound the alarm that we cannot rest on laurels or past accomplishments alone. Even in Philadelphia, synonymous with liberty, Trident, for years, felt it could redline with impunity.
However, enforcement alone is not the answer. It’s also important to increase the resources available to states that support their supervision and regulation of nonbank lenders. One area where many states are expanding their own fair lending toolboxes is through community reinvestment laws. Recognizing the limits of federal law, Illinois, Massachusetts, and New York all have state versions of the Community Reinvestment Act that obligate both banks and nonbanks to meet state requirements for investments in underserved communities.
I’m so glad we are here alongside the Attorneys General of Pennsylvania, New Jersey, and Delaware. They are a testament to the fact that states will continue to play a leading role to right the wrongs of discrimination. To support their efforts, the CFPB has taken steps to ensure states know all the ways that they are entitled to use federal consumer financial protection law to hold bank and nonbank financial institutions accountable.
Mortgage lenders should serve all qualified applicants, regardless of their skin color or the demographics of their neighbors. We will continue to seek new remedies to ensure all lenders meet and fulfill their responsibilities and obligations and the CFPB continues to be on the lookout for emerging digital redlining to ensure that discrimination cannot be disguised by an algorithm.