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African American borrowers to collect $6.1 mil from AIG subsidiaries.

April 10th, 2010

This is an interesting case of discrimination. Two subsidiaries of AIG have to pay $6.1 million to 2,500 African American homeowners. It works out to about $2,300 per borrower. The companies are AIG Federal Bank and Wilmington Finance. Plus, they have to spend $1 million on a consumer financial education program.

Why? Well, the mortgage brokers that sent loans to these two companies were doing some shady stuff. They were charging very, very high fees to their Black clients. At the same time they were charging lower fees to the White clients, even though the qualifications were the same.

This is a quick fix and it looks good in the press. A big name AIG,  they got a ship load of taxpayers’ money. And the financial amount catches the eye.

Why not go after the mortgage broker who did the wrong, and who pocketed the fees. Put him in jail. This would be too much work. There are hundreds of brokers and they have all scattered.

The message this sends to lenders is that “Big Brother is watching you”. What it will actually accomplish is fewer lenders willing to work with brokers, even the good guys. The borrower will now have to deal directly with the lender. Seeing that there are very few offices to walk into, borrowers will have to go online and apply for a mortgage. Will the savings be passed on to the borrower? We’ll wait and see.

Entry Filed under: African American borrowers