PNC agrees to pay $35 million to settle mortgage suit
PNC Financial Services Group Inc. agreed on Monday to pay $35 million in restitution to some black and Hispanic customers to settle allegations by the federal government that National City Bank overcharged them for mortgage loans before it was acquired by PNC.
The Department of Justice and the Consumer Financial Protection Bureau accused National City of discriminating against 76,000 borrowers because of their race between 2002 and 2008. The allegations, which are outlined in a 15-page complaint and settlement filed in U.S. District Court, Downtown, do not involve mortgage discrimination by PNC. The settlement needs court approval.
PNC said that it took steps to improve policies and procedures governing the mortgage lending practices once it acquired Cleveland-based National City Bank at the end of 2008. The loans were made to consumers nationwide.
“This settlement puts to rest allegations associated with the residential mortgage lending of National City Bank prior to its acquisition by PNC,” said Fred Solomon, PNC senior vice president, corporate communications.
The settlement is the latest for Pittsburgh-based PNC involving mortgage problems. Earlier this month, it agreed to pay $81 million to government-backed mortgage giant Freddie Mac to resolve problem loans made between 2000 and 2008. That case involved soured loans that were sold to Freddie Mac and included mortgages originated by both PNC and National City Bank.
In the latest case with the Justice Department and the consumer protection agency, the complaint alleged black borrowers paid on average $159 more a year for residential loans obtained directly from National City Bank than white borrowers with similar creditworthiness. Hispanics paid about $125 more annually than white borrowers.
For loans arranged through an outside broker, blacks were charged $228 more annually than similarly situated whites; Hispanics paid $154 more annually than whites.
“This settlement will provide deserved relief to thousands of African-American and Hispanic borrowers who suffered discrimination at the hands of National City Bank,” said Attorney General Eric Holder. “As alleged, the bank charged borrowers higher rates not based on their creditworthiness, but based on their race and national origin.”
The settlement calls for PNC to set up the fund and appoint a settlement administrator who will work the government and the bank to locate and pay affected customers.
The government alleged that the compensation system at National City rewarded loan officers for charging rates or fees that were higher than what the bank posted and discouraged them from charging less. Those rates and fees are not related to loan terms or to a borrower's credit worthiness. Loan officers pocket a share of the fees above the bank's posted rate.
PNC received about $7.6 billion of the federal government's Troubled Asset Relief Program, or TARP, to purchase National City. PNC repaid the government in 2010.
Individuals who believe that they may have been victims of lending discrimination by National City and have questions about the settlement may email the Justice Department at firstname.lastname@example.org.
Bobby Kerlik is a staff writer for Trib Total Media. He can be reached at 412-320-7886 or email@example.com.