NAACP Expands Mortgage Class Action Suit

Calling the Bush administration’s plan to stem the tide of foreclosures deficient, the NAACP in December expanded its class action suit against mortgage lenders that the organization says engaged in racially discriminatory lending practices. (See “Subprime Lenders Under Fire,” Newpoints, October 2007.) The new defendants are CitiMortgage, SunTrust Mortgage, GMAC Rescap, JP Morgan, National City, and First Horizon.

The expanded class action suit comes weeks after President George W. Bush announced his plan to halt the mortgage crisis. According to Irvine, California-based foreclosure monitor RealtyTrac Inc., there were 201,950 foreclosures filed in November, up nearly 68% from the year before. A study by the Association of Community Organizations for Reform Now, an advocate for low- and moderate-income families, found that African Americans were 2.7 times more likely to be offered a high-cost loan than white Americans, putting them at a higher risk of foreclosure.

With Bush’s plan, Americans with good credit histories who can afford their current adjustable rate mortgages may be able to delay the resetting of their interest rates for five years. However, the NAACP argues that many African Americans victimized by predatory lending practices would be excluded since their credit may be tarnished as a result of an unaffordable mortgage.

The administration disagrees. “You’re going to have a significant portion of the population that you’re not going to be able to reach out to,” says Jennifer Zuccarelli, a spokeswoman for the Treasury Department. “They’ve already fallen too far behind on their payments. But even if [consumers] do have low credit scores, if they’ve been making payments, there’s a chance they will qualify for this [interest rate] freeze.”

The new defendants had plenty to say in their defense: Mark Rodgers, spokesman for CitiMortgage, said, “We consider each applicant by the same objective criteria, which are blind to race, ethnicity, gender, and any other prohibited basis.” GMAC, Chase, and First Horizon echoed that sentiment. “The allegations in this suit regarding SunTrust are without merit, and we look forward to addressing them in the proper legal forum,” said spokesman Hugh Sohr. And Kelly Wagner Amen, a spokeswoman for National City, said, “Any allegations of discrimination on behalf of National City would be false and misleading.”