Thread: Fannie Mae Is Being Sued

Fannie Mae Is Being Sued
For Alleged Discrimination


DOW JONES NEWSWIRES

WASHINGTON -- Fannie Mae, the nation's largest purchaser of home mortgages, is being sued for alleged discriminatory lending practices based on the credit-scoring system it requires lenders to use if they want to sell their mortgages to Fannie Mae.

The lawsuit, filed Sept. 13 in U.S. District Court for the District of Columbia, charges Fannie Mae with violating the Fair Housing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act.

Although Fannie Mae doesn't directly lend to consumers, it requires lenders to use Fannie's credit guidelines, generally through its Desktop Underwriter software, to screen loans it may want to buy, assigning each applicant a classification based upon their credit score.

Plaintiff Safiyyah Rahmaan, who is African-American, was denied a $95,000 mortgage with a 6.75% interest rate from the Cornerstone Bank in Wilson, N.C., based upon a credit score produced by Fannie Mae's Desktop Underwriter. She eventually obtained a home loan at 10.5% from American Fidelity Finance Co.

The lawsuit asks the court to bar Fannie Mae from using "or relying upon racially discriminatory credit-scoring systems in mortgage-loan underwriting." It also seeks an unspecified amount of economic and punitive damages against the company as well as lawyers' fees.

Fannie Mae spokeswoman Janice Daue said the company's automatic underwriting system accurately predicts a borrower's ability to make timely payments on a mortgage and doesn't discriminate.

Updated September 25, 2002 8:59 p.m. EDT

Am I missing it, where does race factor in?

Sassy

when in doubt pull the race card and see if they will settle out of court to avoid negitive publicity. I could get a payday because I have bad credit and am an ethnic minority?

Search for the words "credit scoring disparate impact."

Originally posted by dep_tx
when in doubt pull the race card and see if they will settle out of court to avoid negitive publicity. I could get a payday because I have bad credit and am an ethnic minority?

Well dep,

I was hoping that wasn't the reason but admit that is what I thought as well.

Probably I'll get strung up, as soon as I click on reply, but I'm going to anyway.

I've had this same conversation with my 18-year old son, just on his own and trying to get a foot-hold on life, working, grants and scholarships, credit, etc.

There was a day when being a young white male in America could have been considered a perk. I'm not so naive as to think that discrimination still doesn't exist but mostly there are laws and processes in place to right that wrong swiftly.

I think we've swung too far the other way, there's no balance -- no equal playing field, which I thought was the point. A young, healthy, white male in America today has obstacles in his path because he is white. They have to find the opportunities and make it happen, not that there's anything wrong with that, but that's not a fair and equal playing field.

I'm not even really sure white is the majority anymore, there have been some studies that indicate otherwise publicized. For a society that has tried to right some wrongs, I think we are now contributing to them.

Says me.

BTW, everyone's font reads the same to me on this board, I don't know who is black, white, brown, yellow or green -- nor do I care -- I'm just starting to wonder where color stops and human being begins.

Sassy

Originally posted by G. Fisher
Search for the words "credit scoring disparate impact."

I'm curious about this, Greg, and I will search but haven't yet.

This is what you were asking David (Wells Fargo) to clarify, yes? I was waiting for his answer as well with the specific law.

I know the last I had mortgage dealings, the broker told me he was required to fill in the information based on his OBSERVATION if I refused to disclose!

Sassy

Since I love playing devil's advocate, here I go.....

I noticed that everyone jumped in and either implied or boldly stated that the plaintiff was playing the race card. Frankly, the article is a little sparse on facts so how can everyone jump to that conclusion? Maybe a statistician was employed to show bias based on race before the lawsuit was filed? Who knows, but in reading the article, we have no idea on what basis she is making her claim. What ever happened to the benefit of the doubt?

I find it odd also that Topic A around here is ALWAYS about FICO scores and how unfair they are and how they don't make sense. This person sues because she says they're unfair and all of a sudden she's wrong and FICO is right? Let's at least be consistent in our arguments.

And before anyone asks....I'm a white male.

My 2 cents.....

Dear white male in Texas ;-)

The details are sparse, nodding, that's what I want to know.

However, it doesn't mention anything other than african-american.

If denied a mortage at one rate but approved at a higher rate -- how would you find out the reason for denial, the real reason, I'm doubting anyone puts as a reason: race or ethnic origin.

If everything else is equal and you are purple -- can you then use color as the reason because nothing else makes sense or by process of elimination no other reasons are valid?

I know they collect the information.

That's what I want to know -- where did the race allegation come from?

What would lead you to believe it was race, what is that based on?

I've done the mortgage thing twice, two houses = 4 times, and I'm really trying to recall something in the process that you would be able to base that claim on.

Scoring isn't fair and isn't supposed to factor in color. However, I've noticed though that geographical demographics are collected -- if you can use the demographics to deduce that a neighborhood is composed mostly of purple people, is that what it's based on?

Sassy (Purple female in Arizona)

BTW: The article says Fannie Mae's system assigns you to a classification based on credit score -- the suit is for discrimination and asks the court to bar Fannie Mae from using scoring systems that are racially discriminating.

That has to be based on something. How do you jump from score xxx = 6% and score xxx = 10% that would lead you to believe there's a color factor in there?

Editing:

"I find it odd also that Topic A around here is ALWAYS about FICO scores and how unfair they are and how they don't make sense. This person sues because she says they're unfair and all of a sudden she's wrong and FICO is right? Let's at least be consistent in our arguments."

That's a big assumption -- I didn't read she was wrong and fico was right anywhere.

Sassy

It does appear to be based on geographical demographics! zip code!

I searched Greg, this is the only thread I found. It's a good one too! Thank you!

http://consumers.creditnet.com/strai...threadid=15551

Sassy

Originally posted by sassyinaz



There was a day when being a young white male in America could have been considered a perk. I'm not so naive as to think that discrimination still doesn't exist but mostly there are laws and processes in place to right that wrong swiftly.

I think we've swung too far the other way, there's no balance -- no equal playing field, which I thought was the point. A young, healthy, white male in America today has obstacles in his path because he is white. They have to find the opportunities and make it happen, not that there's anything wrong with that, but that's not a fair and equal playing field.

I'm not even really sure white is the majority anymore, there have been some studies that indicate otherwise publicized. For a society that has tried to right some wrongs, I think we are now contributing to them.

Sassy

The issue of discrimination is far more complicated than this. For one thing, white males make far more money than do members of other ethnicities. Or, take a look at the board of directors for any large corporation and see how many faces belong to someone other than white males. Or the senior management of almost any company. Or the members of any high-paying profession, for that matter. If there are more obstacles in the path of white males than in other groups, those white males sure do seem to be doing a hell of a job overcoming them.

I'm not even really sure white is the majority anymore, there have been some studies that indicate otherwise publicized.

The definition of a minority has nothing to do with numerical superiority; otherwise women would be a "majority." In South Africa, whites never had a numerical majority; however they were very much the majority race there, anyway.

In particular, though, this statement,

A young, healthy, white male in America today has obstacles in his path because he is white. They have to find the opportunities and make it happen, not that there's anything wrong with that, but that's not a fair and equal playing field.

causes problems for me. I happen to be black, and I grew up in a neighborhood where everyone else was black. If you want to know what "obstacles in your path" are, try growing up in an environment where there is massive unemployment, and an ingrained attitude that you cannot succeed, no matter how gifted you are or hard you try. And then go out in the world with that handicap, and hear people say things like, "all you have to do is get a job and keep it," and other platitudes that sound wonderful and practical, but do not offer much to people who are conditioned from birth to believe that a good job or a great education come along about as often and in the same way as a winning lottery ticket.

The issue of discrimination is complex, and deserves to be treated that way.


As to this suit specifically, I'm very curious about it. The CEO of Fannie Mae is a black man if I remember correctly, Franklin Rains or something like that (too lazy to look it up). Of course, that doesn't mean a whole lot, but having the guy testify in the suit would be a tough thing for a plaintiff to overcome in a suit claiming racism.