DOJ Intends to Finalize Fair Lending and Housing Settlement with Housing Developer Without Court Approval

According to a major news outlet, the DOJ intends to dismiss its fair lending and housing claims against a housing developer filed in Texas federal court and proceed with an out-of-court settlement, rather than obtain court approval of the parties’ negotiated settlement.

The DOJ, along with the CFPB, sued the developer, its affiliated mortgage lender, and another mortgage lender, alleging that they engaged in reverse redlining by targeting Hispanic borrowers for loans with high interest rates and hidden expenses that the borrowers could not afford to repay.  Separately, the State of Texas sued the developer, alleging that the same conduct constituted fraud and violated state and federal deceptive trade practice laws.

The U.S. District Court for the Southern District of Texas granted the other lender’s motion to dismiss in full and granted the developer’s motion to dismiss as to the Fair Housing Act Claims.  The Court otherwise denied the developer’s motion to dismiss.  WBK covered that order here.

Subsequently, the parties announced that they had reached an agreement to settle both cases.  As part of the agreement, the developer agrees to spend money on general infrastructure improvements and additional personnel for its developments.  The developer, though, would not admit any liability or wrongdoing or pay any civil money penalty or fine.  WBK covered that agreement here.

At a preliminary hearing to evaluate the settlement, the court stated that it had “serious questions” regarding the nature of the agreement.  Despite these concerns, a DOJ attorney stated that the agency continues to support the deal.  Accordingly, she announced that the agency would dismiss the case and proceed with a settlement that will not require the court’s approval.