Mortgage Lending, Servicing + Banking

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The New Mexico Supreme Court recently confirmed consumer standing to pursue state law claims against a credit union after it pursued debt collection lawsuits against its members in the New Mexico magistrate courts. Several members filed a class action lawsuit against the credit union for the unauthorized practice of law and under the Unfair Practices Act (UPA), but the trial court dismissed the case, finding the plaintiffs lacked standing. The court of appeals reversed and the Supreme Court affirmed, finding the plaintiffs had standing to bring claims under both the statute prohibiting the unlicensed practice of law and the UPA.

On November 13, the Consumer Financial Protection Bureau (CFPB or Bureau) released a pilot study titled “Matched-Pair Testing in Small Business Lending Markets” highlighting what the CFPB believes were two statistically significant disparities in the treatment of Black and white small business owners seeking loans. First, the secret shopping study indicated that Black entrepreneurs were less encouraged by small business lenders to apply for loans. Specifically, such lenders expressed interest in obtaining loan applications from 40% of white participants, but only 23% of Black participants. Second, the study found that Black participants were more frequently steered toward alternative financing products — such as business credit cards or real estate-secured loans — compared to their white counterparts with similar or weaker business credit profiles. Specifically, non-requested or alternative credit products were discussed with 59% of Black participants, compared to 39% of white participants.

In a significant development, the Consumer Financial Protection Bureau (CFPB or Bureau) has finally reached a settlement with Townstone Financial, Inc. (Townstone) in the first redlining case brought against a nonbank mortgage lender and broker. This settlement follows the Seventh Circuit Court of Appeals’ pivotal decision in favor of the CFPB that expanded the Equal Credit Opportunity Act (ECOA) to include protections for prospective applicants who may be discouraged from applying for credit. The settlement marks a resolution of protracted litigation that began in 2020 when the CFPB sued Townstone by accusing the company of redlining practices.

On October 18, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s vacatur of a maritime attachment order, providing a detailed analysis of the requirements for personal and in rem jurisdiction over attached property under the Federal Rules of Civil Procedure.

On October 29, New Jersey Attorney General Matthew Platkin and the state’s Division on Civil Rights (DCR) released a report detailing the findings of a multi-year investigation into Republic First Bank (Republic) and its alleged mortgage redlining practices. According to the report, the investigation revealed that Republic engaged in a pattern or practice of redlining against Black, Hispanic, and Asian communities in New Jersey, in violation of the New Jersey Law Against Discrimination.

On October 15, the Consumer Financial Protection Bureau (CFPB or Bureau) and the Department of Justice (DOJ) announced that they reached a settlement with Fairway Independent Mortgage Corporation (Fairway). This settlement addresses allegations of redlining in majority-Black neighborhoods in Birmingham, Alabama. Fairway is headquartered in Madison, WI, but operates under the trade name MortgageBanc in the Birmingham area. Fairway, the third-largest mortgage lender in the United States, is now the second non-bank mortgage company to enter into a redlining settlement.

On October 4, the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (Fed) announced increased dollar thresholds used to determine whether certain consumer credit and lease transactions in 2025 are exempt from Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing).

On October 10, the U.S. Department of Justice (DOJ) announced a landmark redlining settlement with Citadel Federal Credit Union (Citadel), marking the first such agreement with a credit union in the DOJ’s history. This settlement, the 14th in DOJ’s Combatting Redlining Initiative since 2021, addresses allegations that Citadel engaged in discriminatory lending practices by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia. Under the terms of the proposed consent order, Citadel will pay over $6.5 million to resolve these allegations.

Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) announced it had entered into a consent order with NewDay USA, a Florida-based non-bank direct mortgage lender, over allegations that the lender misled veterans and military families about the costs associated with cash-out refinance loans. According to the Bureau, NewDay USA gave misleading and incomplete cost comparisons to borrowers refinancing in North Carolina, Maine, and Minnesota, which made the company’s loans appear less expensive relative to the borrowers’ existing mortgages.