Race bias alleged in loans of AIG unit

Filing to HUD cites Windsor Mill office

December 16, 2005|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

A national fair housing group has filed a federal complaint against American International Group Inc., accusing one of the nation's largest lenders of discriminating against African-American homeowners in metropolitan Baltimore.

The National Community Reinvestment Coalition, in its complaint to the Department of Housing and Urban Development and the Justice Department this week, said AIG and its American General Finance subsidiary have a policy of denying home-equity loans on houses worth less than $70,000.

The coalition alleges that such a policy amounts to discrimination in Baltimore, where more than 65 percent of homes in that price range are owned by black residents.

AIG, a global insurance company that also provides financial services, denies setting minimum home values as a requirement for loans.

The coalition is seeking an injunction against AIG and unspecified damages. After HUD investigates, the agency may bring a case before an administrative law judge. If the case gets moved to federal District Court, Justice Department prosecutors may get involved.

The coalition also is considering a lawsuit and has retained the Washington law firm of civil rights lawyer John P. Relman, who handled high-profile discrimination cases against the Denny's restaurant chain and Adam's Mark Hotels & Resorts.

According to the complaint, coalition "mystery shoppers" over the past two years visited an American General Finance branch in Windsor Mill, a community west of the city in Baltimore County. The shoppers were told three times that homes had to be worth more than $70,000, or in two cases $85,000, to qualify for a loan.

Relman, the coalition's lawyer, said AIG would have to prove a business justification for any minimum home-value policy.

"The property value has nothing to do with the creditworthiness of the borrower," he said.

A review of the books of the Windsor Mill branch of its American General subsidiary found loans that were secured by real estate valued at less than $70,000, said Joe Norton, an AIG spokesman.

"American General Finance rigorously adheres to both the letter and the spirit of fair-lending laws," Norton said.

Norton said that, given AIG's research into the Windsor Mill branch's lending history, company officials "have trouble believing" the shoppers' accounts.

Seventy-eight percent of the applicants seeking refinancing, home improvement loans and mortgages at American General Finance last year were white and 16 percent were black, the coalition said, citing data lenders must submit to federal regulators.

"Redlining in 2005? This is just shocking to see a lender of their size doing this," said David Berenbaum, an executive vice president of the national coalition, which has its headquarters in Washington.

Mirroring other major metropolitan areas, Baltimore has a history of struggling with racially segregated housing patterns, from "white flight" to the suburbs several decades ago to a recent court case over segregation in public housing.

A federal judge earlier this year ruled that HUD had breached fair-housing laws by failing to take a regional approach to desegregating the city's public housing system.

laura.smitherman@baltsun.com

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