Brokerage Fined for Predatory Loans

to Black Home-Buyers

 

Posted on Tue, Dec. 21, 2004



Associated Press

A state agency has hit a black-owned mortgage brokerage with nearly $910,000 in damages and fines for so-called "reverse redlining" - selling loans with predatory terms to black families.

The Pennsylvania Human Relations Commission said that McGlawn & McGlawn Inc. of Elkins Park and former company head Reginald McGlawn advertised aggressively on black radio stations and in black newspapers. They targeted black clients in the Philadelphia area to sell them loans with unfair or undisclosed terms, the commission said.

They "used any manner of persuasion to broker these predatory transactions. The methods used were high interest rates, hidden fees, prepayment penalties, and in some instances, falsification of documents," according to the commission's findings.

The commission's Oct. 26 order directed repayments to 10 former customers for the difference between the rates they were charged and the prevailing market rates, as well as an aggregate $185,000 for "embarrassment and humiliation damages."

Commission chairman Stephen A. Glassman said laws against targeting racial groups for unfair housing lending have apparently not previously been applied to mortgage brokers.

"It is precisely the minority-on-minority cases that become often the most egregious, because there's an automatic level of trust because you're dealing with people in your own community," Glassman said.

The company and McGlawn filed an appeal to Commonwealth Court, which prompted the commission on Monday to go public with the case. McGlawn attorney Jeffry Homel said the McGlawn family disputes the commission's statement of facts.

"They say to me that things did not happen the way it was alleged that they happened. I believe them," Homel said Tuesday.

Reginald McGlawn relinquished his stake in the company to his brother Anthony in August to settle a legal dispute with the Pennsylvania Banking Department over an alleged failure to disclose McGlawn & McGlawn's participation in litigation, Homel said.

In one case, the commission said a Philadelphia police employee who owned her home outright was seeking a loan to pay off credit-card debt when she was sold a $35,000 loan with $3,800 in fees and other charges, a $31,000 balloon payment and an early payoff penalty.

Another woman who needed a roof-repair loan got instead a 30-year, 13-percent mortgage for $23,000 and left settlement with just $3.75 in cash. She was then unable to afford repairs and her ceiling collapsed, according to the commission report.

McGlawn also was accused of pressuring an applicant to falsify records for a nonexistent day-care business. The commission said he dismissed her concerns by saying "she should not worry because no one else would see the documents." Homel said McGlawn denies those charges.

McGlawn's testimony to the commission lacked "veracity or credibility," and he even lied about matters that were easy to verify from his own records, such as his status as the company's chief executive, the commission concluded.

McGlawn & McGlawn had assets of $292,000 and took in brokerage fees of $39,000 in 2002, according to a Banking Department report. Homel said he will seek to have the commission's financial penalties put on hold until the Commonwealth Court appeal is resolved.

ON THE NET

McGlawn & McGlawn Inc.: www.mcglawn.com

Pa. Human Relations Commission: www.phrc.state.pa.us

 

 

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