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In Baltimore, HUD Reaches Settlement With Mortgage Company

The U.S. Department of Housing and Urban Development announced that it has negotiated a settlement for $500,000 with SouthStar Funding LLC, to resolve allegations of discrimination against African Americans and Hispanics in mortgage lending. This agreement resolves a complaint filed in March 2006 by the National Community Reinvestment Coalition (NCRC) alleging that SouthStar Funding LLC discriminated against African Americans and Hispanics by refusing to make loans on any row house valued at less than $100,000 and on all row houses in Baltimore.

NCRC contended that these policies discriminated against Hispanics and African Americans because row houses valued under $100,000 are more heavily concentrated in African American and Hispanic neighborhoods and approximately two-thirds of Baltimore's row houses are located in those areas.

The Department of Housing and Urban Development investigated the complaint and, as required by the Fair Housing Act, attempted conciliation. As part of the conciliation agreement, SouthStar Funding LLC, among other things, agreed to:

• Pay NCRC $500,000 over a four-year period. NCRC will use the money to further its mission to combat discrimination, including conducting seminars to help educate housing counselors in ways to work with people who have had problems getting loans;
• Discontinue using property type to exclude borrowers trying to purchase row homes
• No longer use a minimum property value as an absolute bar to the making of any loan;
• Change its underwriting guidelines so that loans secured by row homes have the same underwriting criteria as loans secured by town homes and condominiums;
• Institute a "second review" procedure for all denied loan applications to ensure SouthStar processes all mortgage loan applications without discrimination;
• Advertise its loan products to media that serve the general public, as well as media targeted to African-American and Hispanic communities; and
• Educate employees about its anti-discrimination policy.

"We are pleased that SouthStar Funding took these steps to create more home ownership opportunities for minority homebuyers," said Kim Kendrick, HUD's Assistant Secretary for Fair Housing and Equal Opportunity. "Our hope is that other mortgage companies will take note and examine their policies that impose similar restrictions."

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