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Provident Charged with Discrimination on Loans from 2006 to 2011
Tuesday, June 2, 2015
Provident Funding Associates has been charged by two federal
agencies with charging higher broker fees to minority borrowers. The Consumer
Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) filed the
joint complaint asking the court to require the California lender to pay $9
million in damages to African American and Hispanic borrowers the agencies say
were harmed.
Provident originates mortgage loans
through a nationwide network of brokers. Last week's complaint alleges that between
2006 and 2011, Provident, which made over 450,000 mortgage loans during the
period, set base or par rates for its various loan products reflecting the
company's assessment of individual applicant creditworthiness, current interest
rates, and what investors were willing to pay for the loans. These rates were published on sheets provided
to brokers who were also given schedules of yield spread premiums (YSP) Provident
would pay brokers who originated higher priced loans. The fees paid to Provident's brokers were
thus made up of two components: payments by Provident from increased interest
revenue and from the direct fees paid by the borrower.
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