DOJ defends minority homebuyers in Philadelphia from discrimination

The Department of Justice says that a Warren Buffett-owned company avoided offering mortgages in certain areas, blocking African Americans and other minorities from obtaining housing. Now, following a legal settlement, the company will have to make it right.

First Look

A Pennsylvania mortgage company owned by billionaire businessman Warren Buffett’s company discriminated against potential Black and Latino homebuyers in Philadelphia, New Jersey, and Delaware, the Department of Justice said Wednesday, in what is being called the second-largest redlining settlement in history.

Trident Mortgage Co., a division of Berkshire Hathaway’s HomeServices of America, deliberately avoided writing mortgages in minority-majority neighborhoods in West Philadelphia like Malcolm X Park; Camden, New Jersey; and in Wilmington, Delaware, the Justice Department, and the Consumer Financial Protection Bureau said in their settlement with Trident.

As part of the agreement with the government, Trident will have to set aside $20 million to make loans in underserved neighborhoods.

“Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth, and devalued properties in their neighborhoods,” said Kristen Clarke, an assistant Attorney General of the Justice Department’s Civil Rights Division, in a prepared statement.

Sen. Vincent Hughes, a Philadelphia Democrat, grew up a few blocks from the West Philadelphia park where a news conference on the settlement was held Wednesday. Senator Hughes said portions of his life have been framed by the discriminatory lending practices that prevent Black and brown communities from building wealth.

Mr. Hughes’ father worked for one of the oldest Black-owned savings and loans, a company named Berean that would finance mortgages for Black families when they were turned away by other banks and lenders.

“I’ve had people come up to me and say, ‘Vince, your dad gave me a mortgage for my first home when I was turned down everywhere else. If it wasn’t for Berean and your dad, I wouldn’t have been able to buy my home,” Mr. Hughes said. “We witnessed that discrimination in real time.”

Redlining is a term used to describe when banks deliberately avoid making loans to non-white communities. Banks and the U.S. government used to draw on maps in red marker those neighborhoods that were deemed undesirable to make home loans. The neighborhoods were almost always areas where racial minorities lived, and even included other historically discriminated-against communities such as Jewish neighborhoods.

The practice effectively cut off entire communities from the primary pathway for wealth generation in the U.S.: homeownership. To this day, Black and Latino households are far less likely to own their home compared to their white counterparts.

The alleged redlining activity happened between 2015 and 2019 – Trident stopped writing mortgages in 2020. Along with avoiding making mortgages in minority neighborhoods, the Trident employees made racist comments about making loans to Black homebuyers, calling certain neighborhoods “ghettos.” One manager of Trident was photographed posing in front of the Confederate Flag. The marketing materials used by Trident involved exclusively white individuals, and nearly all of the company’s staff were white.

Josh Shapiro, Pennsylvania’s attorney general who is running for governor, called the behavior by Trident “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 of the city’s home appraisers were white and a racial gap remains between how homes owned by Black homeowners are valued versus homes owned by white owners.

Mr. Hughes said he and other legislators were furious about revelations of the redlining by Trident and others in a 2018 investigation by Reveal into Mr. Buffett’s mortgage companies. They pressed Mr. Shapiro during an appropriations hearing, and the Attorney General responded by setting up a hotline to gather personal stories.

As part of the settlement, Trident agreed to hire mortgage loan officers in impacted neighborhoods as well as pay a $4 million fine. Since Trident no longer operates a lending business, a separate company will be contracted to provide the $20 million in loan subsidies, the Justice Department said.

The largest redlining case involved Wisconsin-based Associated Bank, which was charged with discriminatory practices between the years 2008 and 2011. The bank settled with regulators in 2015 for $200 million.

The Trident settlement also involves the first redlining case against a nonbank mortgage lender. Since the Great Recession, roughly half of all mortgages in the country are underwritten by companies that immediately sell off the mortgage to investors. These nonbank lenders include firms like Quicken Loans, Rocket Mortgage, and Loan Depot, among many others.

“Credit discrimination is illegal regardless of whether the lawbreaking company is a traditional bank or a nonbank lender,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.

In a statement, HomeServices of America said they “strongly disagree” with the Justice Department’s and CFPB’s findings in the settlement, noting that Trident did not have to admit to wrongdoing as part of the case. Mr. Buffett himself did not immediately respond to a request for comment, but historically has deferred any comment to Berkshire’s subsidiary companies.

Mr. Hughes said he did not have personal experience with Trident, but he said he was not surprised to learn the company’s statement after the settlement was announced denied there was wrongdoing.

“That’s what these companies do, right? None of them admit it, they just wind up paying the money,” he said.

This story was reported by The Associated Press. AP reporter Claudia Lauer contributed to this report from Philadelphia. AP business reporter Josh Funk contributed from Omaha, Nebraska.