CFPB Takes Action Against Draper & Kramer Mortgage for Discriminatory Mortgage Lending Practices

WASHINGTON, D.C. - Today, the Consumer Financial Protection Bureau (CFPB) took action against Draper & Kramer Mortgage Corporation (Draper) for discriminatory mortgage lending activities that discouraged homebuyers from applying to Draper for homes in majority-Black and Hispanic neighborhoods in the greater Chicago and Boston areas. The CFPB alleges that Draper located all its offices in majority-white neighborhoods, concentrated its marketing in majority-white neighborhoods, and avoided marketing to majority-Black and Hispanic areas. These actions resulted in disproportionately low numbers of mortgage loan applications and mortgage loan originations from majority-Black and Hispanic neighborhoods in Chicago and Boston compared to other lenders. If entered by the court, the proposed order announced today would ban Draper from engaging in residential mortgage lending activities for five years, and require Draper to pay a $1.5 million civil money penalty into the CFPB's victims relief fund.

"Draper illegally excluded homeowners and engaged in redlining across the Chicago and Boston metro areas," said CFPB Director Rohit Chopra. "Today's order bans Draper from mortgage lending for five years and ensures that the company pays for its unlawful discrimination."

Draper & Kramer Mortgage Corporation is a non-depository mortgage lender based in Downers Grove, Illinois. Draper received applications and originated mortgage loans across the United States, including in Illinois, Indiana, Massachusetts, New Hampshire, and Wisconsin.

The CFPB alleges that, from 2019 through 2021, Draper engaged in redlining majority-Black and Hispanic neighborhoods in the greater Chicago and Boston areas, resulting in it significantly underperforming its peers in lending activity to these areas. Draper discouraged mortgage applicants from making or pursuing an application for credit on the basis of race, color, and national origin, violating the Equal Credit Opportunity Act and Regulation B.

Specifically, the CFPB alleges that Draper violated the law by:

• Intentionally focusing mortgage lending activities in majority-white neighborhoods and excluding Black and Hispanic neighborhoods: Draper had no offices, no loan officers, and virtually no marketing or outreach in majority- or high-Black and Hispanic neighborhoods in Chicago and Boston. Draper did not assign any loan officers to solicit applications in majority-Black and Hispanic communities and failed to train or incentivize its loan officers to lend in these communities. Draper's outreach and marketing also specifically targeted majority-white neighborhoods and largely avoided majority-Black and Hispanic neighborhoods.
• Discouraging mortgage applicants from pursuing properties in majority-Black and Hispanic neighborhoods: Draper's business model discouraged borrowers from applying for loans to purchase property located in these neighborhoods. Draper's peer lenders generated applications for properties in majority-Black and Hispanic areas in the Chicago metro area at over two and-a-half times the rate and in the Boston metro area at three times the rate that Draper generated such applications. Draper also originated disproportionately low amounts of mortgage loans for properties in these neighborhoods, with peers in Chicago and Boston originating two and-a-half times more loans than Draper in majority-Black and Hispanic neighborhoods.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial laws, including the Equal Credit Opportunity Act and engaging in unfair, deceptive, or abusive acts and practices.

If entered by the court, the order would require Draper to:

• Cease residential mortgage lending activities for five years: For a period of five years, Draper cannot perform any residential mortgage lending activities, nor receive any compensation for any residential mortgage lending.
• Pay a $1.5 million penalty: Draper will pay a $1.5 million civil penalty to the CFPB's victims relief fund.

Read today's proposed order.

Consumers can submit complaints about financial products and services by visiting the CFPB's website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to [email protected]. To learn more about reporting potential industry misconduct, visit the CFPB's website.