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Federal prosecutors have reached a $9.9 million settlement with Fairway Independent Mortgage Corporation over allegations of redlining in predominantly Black neighborhoods in Birmingham, Alabama. Redlining is the illegal practice of denying financial services to residents of specific areas based on their racial or ethnic composition. While Fairway has agreed to the settlement, which includes a $1.9 million fine and an $8 million loan subsidy fund, the company strenuously denies engaging in any discriminatory lending practices. This case highlights the ongoing enforcement of federal fair lending laws and the complex methods used to identify potential discrimination in the mortgage industry.
The joint complaint, filed by the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB), centers on Fairway's operations in the Birmingham metropolitan area between 2018 and 2022. The government's case relied on a comparative analysis of loan application data. The key allegation is that only 3.7% of Fairway’s loan applications came from majority-Black census tracts in Birmingham. This figure was significantly lower than the 12.2% application rate from similar neighborhoods for a group of peer lenders used as a benchmark.
The complaint further alleged that Fairway’s physical branch locations reinforced this disparity. During the period in question, the company operated three loan offices in the Birmingham area, all of which were situated in "majority-white areas." Based on our experience assessment, the location of lending branches can significantly influence the geographic source of loan applications. The government argued that this branch placement, combined with marketing and sales actions, discouraged residents of majority-Black neighborhoods from applying for mortgages with Fairway.
In a strongly worded statement, Fairway Independent Mortgage Corp. denied the core allegations. The company stated that the multi-year investigation "did not identify any evidence of redlining or other discrimination by Fairway." Instead, Fairway contends that the government’s case was based on "quotas," arguing that the share of applications from majority-Black areas was deemed insufficient without proof of intentional discrimination.
Fairway presented a counter-argument based on volume rather than percentage. The company claimed that it actually received a higher number of loan applications—and originated more loans—in majority-Black areas of Birmingham than any other non-bank lender with a physical presence in the metro area. This means that while a smaller percentage of Fairway’s total business came from these neighborhoods compared to peers, the actual number of loans was higher, positioning Fairway as a leading lender in those communities. The company also expressed "strong disagreement with the government agencies’ legal and statistical approach."
The settlement with Fairway is part of the DOJ's Combatting Redlining Initiative, launched in 2021. This case marks the initiative's 15th settlement, with total relief for communities of color nationwide now surpassing $150 million. For Birmingham, the practical outcome is the creation of an $8 million loan subsidy program. This fund is designated to offer affordable mortgage products to residents of predominantly Black neighborhoods in Birmingham, aiming to increase access to credit.
The city of Birmingham holds a profound place in the history of the American civil rights movement, having been a focal point for efforts to end racial segregation in the 1960s. U.S. Attorney Prim Escalona for the Northern District of Alabama stated the settlement is "a win for communities of color here in Birmingham that have historically been denied access to vital economic resources." The agreement is designed to directly address past inequities by increasing investment and opportunity in homeownership.
Redlining is a term originating from the 1930s, when the federal government’s Home Owners’ Loan Corporation created maps that color-coded neighborhoods by perceived lending risk. Areas with significant Black populations were often outlined in red and deemed "hazardous" for lending, leading to systemic disinvestment for decades. Although the Fair Housing Act of 1968 made redlining illegal, its historical effects persist in the form of wealth and homeownership gaps.
The Fairway case underscores that regulatory bodies view redlining as a contemporary issue, not just a historical one. Attorney General Merrick B. Garland noted, "This case is a reminder that redlining is not a relic of the past." Enforcement now often involves statistical analysis of lending data to identify modern disparities, even in the absence of explicit, intentional discrimination. Homebuyers should be aware that federal laws like the Fair Housing Act protect them from discrimination based on race, color, or national origin throughout the mortgage application process.
The key takeaway is that lenders are being closely monitored for fair lending compliance based on both their operational patterns and statistical outcomes. Borrowers who believe they have faced discrimination can file a complaint with the CFPB or DOJ.
