District Court certifies class of borrowers allegedly subjected to discrimination based on race

United States District Court Judge Thelton E. Henderson (Northern District of California) certified a class of African-American and Hispanic borrowers allegedly charged higher rates on mortgage loans compared to whites as a result of Defendant GreenPoint Mortgage Funding, Inc.'s practice of allowing its brokers to mark up the price of wholesale loans.  Ramirez v. Greenpoint Mortg. Funding, Inc., ___ F.R.D. ___, 2010 WL 2867068 (July 20, 2010).  The suit alleges violation of federal fair lending and housing laws.  The alleged conduct presents an interesting theory:

The pricing of GreenPoint's mortgage loans consisted of an objective and a subjective component. GreenPoint relied on objective risk factors-such as FICO score, property value, and loan-to-value ratio-to determine credit parameters and set prices for its loan products. This information was communicated to brokers on a rate sheet listing GreenPoint's “par” interest rate, which did not result in any broker compensation. That objective component of loan pricing is not at issue here.

Plaintiffs' allegations relate to GreenPoint's discretionary pricing policy, which governed brokers' compensation for their services. GreenPoint paid brokers a “yield spread premium” or “rebate” when they set the interest rate higher than par; brokers were also permitted to charge loan origination and processing fees. GreenPoint did not set any objective criteria for the imposition of these higher rates and fees, which were set by the brokers according to their discretion. Brokers were paid more for loans that cost more to the borrower, but their compensation was capped at 5 percent of the loan amount. GreenPoint monitored the fees charged by its brokers to ensure they complied with its policies.

Slip op., at 1-2.