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Mortgage lending practices yield new complaints, settlement

WASHINGTON - Lenders that won't make mortgages on American Indian reservations are starting to feel the heat.

Hot on the heels of a lawsuit filed against a California subprime lender for allegedly redlining Indian land, another subprime firm has settled a similar charge and four additional complaints have been filed. In total, seven lenders have now been charged with Indian redlining.

The agreement, signed by Houston-based Aegis Mortgage Corp. and the National Community Reinvestment Coalition, will cost the subprime lender $475,000 to settle the charges.

Provision H of the settlement states: ''Improved real property shall not be ineligible to secure a residential mortgage loan solely because it is located on Native American tribal lands.''

Michael Balog, Aegis' executive vice president, said, ''We have agreed to clarify our underwriting guidelines to remove any perceived barriers to equal access to credit for all eligible borrowers.''

Aegis was the 20th largest subprime mortgage lender in the country last year, according to National Mortgage News, making $8.5 billion in loans. According to Home Mortgage Disclosure Act filings it made with the government, in 2005, Aegis funded $51 million in loans to American Indians or Alaska Natives, making it 77th in the country.

Besides the nearly half-million dollars it will pay, Aegis has agreed to review its employee training to make sure its employees understand and follow the provisions of the settlement. It also has agreed to remove a $60,000 minimum property value requirement - something NCRC alleges was discriminatory against American Indians.

The nonprofit NCRC filed a civil rights complaint against Aegis with the Department of Housing and Urban Development, alleging violations of the Fair Housing Amendments Act of 1988 and saying the lender had a policy of not making mortgages on Indian reservations, among other allegedly discriminatory behavior.

This follows a suit it recently filed against NovaStar Mortgage of Orange, Calif., for allegedly also redlining reservations. NovaStar has said the suit has no merit and will be contested.

And last year, in settling an abusive lending charge brought by the Securities and Exchange Commission, another California lender, Ameriquest Mortgage, acknowledged its lending practices on reservations had been cited. That settlement, for $325 million, was one of the largest ever entered into for allegedly abusive lending practices.

In addition to the Aegis settlement, NCRC has filed similar fair lending complaints with HUD against four more lenders: Guaranteed Rate of Chicago; Franklin Bank Corp. of Houston; ComUnity of Morgan Hill, Calif.; and Hyperion Capital of Lake Oswego, Ore. ComUnity made $37 million in mortgages to Indians in 2005, ranking in the top 100 lenders. Hyperion made $4.5 million in Indian mortgages in 2005, while Guaranteed made $2.3 million in mortgages.

NCRC ''alleges that the lenders intentionally structured their underwriting to exclude Native American tribal communities and/or persons with disabilities.''

It said Guaranteed lends in 20 states and is the largest independent mortgage banker in the Midwest. Franklin lends in all 50 states and has origination offices in 19 of them, the nonprofit said. ComUnity lends in 31 states and is one of the top 100 mortgage lenders in the country, it said, and Hyperion lends in California, Washington and Oregon.