Draper & Kramer Mortgage Corporation
Documents in this case
- Complaint · · 8 p.
- Complaint · · 26 p.
- Consent order · · 13 p.
Case summary
On January 17, 2025, the Consumer Financial Protection Bureau filed a complaint against Draper & Kramer Mortgage Corporation, along with a proposed consent order. The Bureau’s complaint alleged violations of the Equal Credit Opportunity Act (ECOA); ECOA’s implementing regulation; and the Consumer Financial Protection Act of 2010 (CFPA).
On January 24, 2025, the court entered the consent order that, among other things, required Draper & Kramer to pay a $1.5 million civil money penalty and enjoined violations of ECOA and the CFPA. Draper & Kramer has since paid that civil penalty and provided required documents to their employees.
The consent order also imposed on Draper & Kramer a 5-year ban on residential mortgage lending. However, in 2024, Draper & Kramer ceased originating residential mortgage loans and has confirmed its commitment to working diligently to wind down its mortgage lending operations in an orderly manner.
On May 15, 2025, the Bureau issued a no-action letter on the following grounds. First, Draper & Kramer has already paid the civil money penalty and has ceased originating residential mortgage loans so expending resources on monitoring the order is unnecessary. Second, pursuant to the President’s “Restoring Equality of Opportunity and Meritocracy” Executive Order, the Bureau is focusing its supervisory and enforcement resources on fair lending matters with direct evidence of overt racial discrimination and identified victims, which were not present in this matter. Finally, the Bureau is focusing its enforcement and supervision resources on pressing threats to consumers, particularly servicemembers and veterans.
Consistent with these priorities, the Bureau will cease monitoring compliance with this order, will not engage in any supervisory activity to assess compliance with the consent order, and will take no steps to enforce the consent order. The Bureau takes this step in the interest of focusing resources on supporting hard-working U.S. taxpayers, servicemembers, veterans, and small businesses.
Complaint ()
PDF of this document (8 pages)
Page 2
Exhibit A
Page 3
Draper & Kramer Applications 2019 to 2021 Chicago MSA Cook Co DeKalb Co DuPage Co Grundy Co Kane Co Kendall Co Lake Co McHenry Co Will Co Lake Co Newton Co Kenosha Co Jasper Co Porter Co City of Chicago, County of DuPage, County of Will, Esri, HERE, Garmin, USGS, EPA, NPS 1 Dot = 1 Application Offices Chicago MSA County Boundaries ACS 2019 Percent Black and Hispanic Population by Tract =0% - 50% >50% - 80% >80% - 100% 2.5 7.5 1.25 Miles
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Exhibit B
Page 5
Draper & Kramer Applications 2019 to 2021 Boston MSA
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Page 6
Exhibit C
Page 7
Draper & Kramer Offices 2019 to 2021 Chicago MSA
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Exhibit D
Page 9
Draper & Kramer Offices 2019 to 2021 Boston MSA
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Complaint ()
PDF of this document (26 pages)
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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
DRAPER & KRAMER MORTGAGE CORPORATION,
Defendant.
) ) ) ) No. 25-cv-00605 ) ) ) JURY DEMAND ) ) ) ) ) COMPLAINT INTRODUCTION 1.
The Consumer Financial Protection Bureau (Bureau) brings this action against Draper & Kramer Mortgage Corporation (DKMC) under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f; ECOA’s implementing regulation (Regulation B), 12 C.F.R. pt. 1002; and the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536(a)(1)(A), to remedy discrimination in DKMC’s mortgage lending.
2.
ECOA prohibits creditors, such as non-depository mortgage companies, like DKMC, from discriminating on the basis of race, color, national origin, or other prohibited characteristics in their mortgage lending practices. ECOA and its implementing regulation, Regulation B, 12 C.F.R. pt. 1002, make it unlawful for a creditor to discriminate against an applicant in any aspect of a credit transaction on the basis of race, color, national origin, or other prohibited bases. ECOA and Regulation B also prohibit any statements, acts, or practices that would discourage on a prohibited basis an applicant or prospective applicant from making or Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 1 of 26 PageID #:1
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pursuing an application to DKMC for credit. 15 U.S.C. § 1691(a); 12 C.F.R. § 1002.4(b); 12 C.F.R. pt. 1002, Supp. I, ¶ 4(b)(1).
3.
“Redlining” is one type of discrimination prohibited under ECOA and ECOA’s implementing regulation, Regulation B. Redlining occurs when lenders discourage loan applications, deny equal access to home loans and other credit services, or avoid providing home loans and other credit services to neighborhoods based on the race, color, or national origin of the residents of those neighborhoods.
4.
From at least 2019 through 2021, DKMC engaged in a pattern or practice of unlawful discrimination against applicants and prospective applicants, on the basis of race, color, or national origin, including (a) by redlining majority-Black and Hispanic neighborhoods in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area (Chicago MSA) and the Boston-Cambridge-Newton, MA-NH Metropolitan Statistical Area (Boston MSA), and (b) by engaging in acts and practices directed at applicants and prospective applicants in those MSAs that discouraged them from making or pursuing an application for credit from DKMC. 5.
From at least 2019 through 2021, DKMC engaged in a pattern or practice of unlawful redlining. As alleged in detail herein, DKMC avoided providing home loans and other home mortgage services in majority-Black and Hispanic neighborhoods in the Chicago and Boston MSAs and discouraged applicants and prospective applicants living in, or seeking credit to purchase properties in, these neighborhoods from making or pursuing an application for credit from DKMC. DKMC thereby discriminated against such applicants and prospective applicants. 6.
From at least 2019 through 2021, DKMC’s practices included locating and maintaining all of its offices in majority-white neighborhoods and avoiding having offices in—or having loan officers serve—majority-Black and Hispanic areas. DKMC also concentrated its Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 2 of 26 PageID #:2
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outreach, advertising, and marketing in majority-white neighborhoods and avoided marketing to majority-Black and Hispanic areas. Further, DKMC’s internal compliance program with respect to fair lending was inadequate to prevent and monitor for redlining, a fact that DKMC was aware of since July 2019, if not earlier, when the Bureau provided DKMC with a Supervisory Letter containing Supervisory Recommendations to address these problems. As a result of these and other practices, DKMC generated disproportionately low numbers of mortgage loan applications and mortgage loans from majority-Black and Hispanic neighborhoods in the Chicago and Boston MSAs compared to similarly situated lenders.
7.
DKMC’s conduct and practices were intended to deny, and had the effect of denying, equal access to home loans for those residing in, or seeking credit for properties located in, majority-Black and Hispanic neighborhoods in the Chicago and Boston MSAs, and its practices discouraged those individuals from applying for home loans on the basis of the race, color, or national origin of the residents of those neighborhoods. DKMC’s conduct was not justified by a legitimate, non-discriminatory reason or business necessity and was not necessary to achieve a substantial, legitimate, non-discriminatory interest.
JURISDICTION AND VENUE 8.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1); presents a federal question, 28 U.S.C. § 1331; and is brought by an agency of the United States, 28 U.S.C. § 1345. 9.
Venue is proper in this district under 28 U.S.C. § 1391(b) and 12 U.S.C. § 5564(f), because DKMC conducted business in, and a substantial part of the events or omissions giving rise to the claims occurred in, this district.
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PARTIES 10.
The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority, including the authority to enforce the CFPA and ECOA. 12 U.S.C. §§ 5564(a)-(b), 5481(12)(D), (14). 11.
DKMC is a Delaware corporation with its principal place of business in Downers Grove, Illinois. DKMC is a wholly owned subsidiary of DKH, Inc. Between at least January 1, 2019, and December 31, 2021, DKMC was a non-depository mortgage company that received applications and originated mortgage loans across the United States, including in Illinois, Indiana, Massachusetts, New Hampshire, and Wisconsin. In 2024, DKMC ceased originating residential mortgage loans and wound down its mortgage lending operations. 12.
For purposes of this complaint, the terms “mortgage loans” and “home loans” refer to loans that DKMC and other creditors must report under the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. §§ 2801-2810, and “mortgage lending” refers to providing those loans. 13.
DKMC is subject to ECOA, and its implementing regulation, 12 C.F.R. pt. 1002, as well as the CFPA.
14.
DKMC is a “creditor” under ECOA, 15 U.S.C. § 1691a(e). 15.
DKMC is a “covered person” under the CFPA. 12 U.S.C. § 5481(6)(A), (15)(A)(i). FACTUAL ALLEGATIONS 16.
DKMC has acted to meet the credit needs of majority-white neighborhoods while avoiding serving the credit needs of majority- and high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs. DKMC’s statements, acts, and practices directed at applicants and prospective applicants discouraged applicants and prospective applicants living in, or seeking Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 4 of 26 PageID #:4
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credit to purchase properties in, majority- and high-Black and Hispanic neighborhoods from making or pursuing an application for credit from DKMC. 17.
A “majority-Black and Hispanic” census tract is one where more than 50% of the residents are identified as either “Black or African American” or “Hispanic or Latino” by the United States Census Bureau. A “high-Black and Hispanic” census tract is one where more than 80% of residents are identified as either “Black or African American” or “Hispanic or Latino” by the United States Census Bureau. A “majority-white” census tract is one where more than 50% of residents are identified as non-Hispanic white by the United States Census Bureau.1 The Chicago MSA 18.
From 2019 through 2021, the Chicago MSA comprised 14 counties in 3 states: Cook County, DeKalb County, DuPage County, Grundy County, Kane County, Kendall County, Lake County, McHenry County, and Will County in Illinois; Jasper County, Lake County, Newton County, and Porter County in Indiana; and Kenosha County in Wisconsin. 19.
As of 2019,2 the population of the Chicago MSA was 9,508,605, of which 16% of the residents identified themselves as Black (non-Hispanic), 22% as Hispanic, 7% as Asian, and 52% as non-Hispanic white.
20.
As of 2019, the Chicago MSA comprised 2,203 census tracts of which 828 (38%) were majority-Black and Hispanic tracts and 528 (24%) were high-Black and Hispanic tracts.
1 This complaint uses “majority-Black and Hispanic census tract,” “majority-Black and Hispanic area,” and “majority-Black and Hispanic neighborhood” interchangeably and does the same for “high-Black and Hispanic census tract,” “high-Black and Hispanic area,” and “high- Black and Hispanic neighborhood” as well as for “majority-white census tract,” “majority-white area,” and “majority-white neighborhood.”
2 All demographic data discussed in this complaint is based on the 2019 American Community Survey data from the United States Census Bureau. Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 5 of 26 PageID #:5
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21.
In the 828 majority-Black and Hispanic census tracts in the MSA, 40% of the residents identified themselves as Black (non-Hispanic), 40% as Hispanic, 2% as Asian, and 15% as non-Hispanic white. In the 525 high-Black and Hispanic census tracts in the MSA, 54% of the residents identified themselves as Black (non-Hispanic), 38% as Hispanic, 0.7% as Asian, and 6% as non-Hispanic white.
The Boston MSA 22.
From 2019 through 2021, the Boston MSA comprised 7 counties in 2 states: Norfolk County, Plymouth County, Suffolk County, Essex County, and Middlesex County in Massachusetts and Rockingham County and Strafford County in New Hampshire. 23.
As of 2019, the population of the Boston MSA was 4,832,346, of which 8% of the residents identified themselves as Black (non-Hispanic), 11% as Hispanic, 8% as Asian, and 70% as non-Hispanic white.
24.
As of 2019, the Boston MSA comprised 995 residential census tracts of which 128 (13%) were majority-Black and Hispanic tracts and 47 (5%) were high-Black and Hispanic tracts. 25.
In the 128 majority-Black and Hispanic census tracts in the MSA, 32% of the residents identified themselves as Black (non-Hispanic), 40% as Hispanic, 4% as Asian, and 19% as non-Hispanic white. In the 47 high-Black and Hispanic census tracts in the MSA, 43% of the residents identified themselves as Black (non-Hispanic), 46% as Hispanic, 1% as Asian, and 7% as non-Hispanic white.
DKMC Received Disproportionately Low Numbers of Home Loan Applications for Properties Located in Majority- and High-Black and Hispanic Neighborhoods
26.
DKMC’s self-defined lending footprint included the entire Chicago and Boston MSAs. However, DKMC’s lending demonstrated a pattern of disproportionately failing to serve those areas of the MSAs that are majority and high-Black and Hispanic, when compared with its Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 6 of 26 PageID #:6
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peer lenders.
27.
DKMC, through its policies and practices alleged herein—including having no offices, no loan officers, and virtually no marketing or outreach in majority- or high-Black and Hispanic neighborhoods—has discriminated against, including by discouraging, applicants and prospective applicants living in majority- and high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs, or seeking to purchase property located in such a neighborhood, from making or pursuing an application to DKMC for credit.
28.
DKMC’s own data on loan applications and originations that it is required to report to regulators under HMDA, 12 U.S.C. §§ 2801-2811, confirm that DKMC largely avoided serving majority- and high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs. See Exhibit A (maps showing distribution of DKMC’s mortgage applications in the Chicago MSA) and Exhibit B (maps showing distribution of DKMC’s mortgage applications in the Boston MSA). 29.
From at least 2019 through 2021, DKMC significantly underperformed its peer lenders in drawing mortgage loan applications from majority- and high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs. “Peer lenders” refers to lenders that received between 50% and 200% of DKMC’s annual volume of home loan applications. 30.
The disparity between the rate of applications generated by DKMC and the rate generated by its peer lenders from majority- and high-Black and Hispanic neighborhoods was both statistically significant—meaning unlikely to be caused by chance—and sizable in every year from 2019 through 2021.
31.
From 2019 through 2021, DKMC drew 22,507 total HMDA-reportable applications for one- to four-family, owner-occupied dwellings in the Chicago MSA. Only 1,507 (6.7%) of those mortgage applications were for a property located in a majority-Black and Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 7 of 26 PageID #:7
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Hispanic census tract. By contrast, over the same period, 19.1% of mortgage applications received by DKMC’s peer lenders were for a property located in a majority-Black and Hispanic census tract.
32.
In other words, from 2019 through 2021, DKMC’s peer lenders generated applications for properties in majority-Black and Hispanic areas in the Chicago MSA at over two-and-a-half times the rate that DKMC generated such applications. 33.
From 2019 through 2021, DKMC drew 9,399 total HMDA-reportable applications for one- to four-family, owner-occupied dwellings in the Boston MSA. Only 230 (2.4%) of those mortgage applications were for a property located in a majority-Black and Hispanic census tract. By contrast, over the same period, 7.2% of mortgage applications received by DKMC’s peers were for a property located in a majority-Black and Hispanic census tract. 34.
In other words, from 2019 through 2021, DKMC’s peer lenders generated mortgage applications for properties in majority-Black and Hispanic areas in the Boston MSA at three times the rate that DKMC generated such applications. 35.
The disparities were even more severe in high-Black and Hispanic neighborhoods. 36.
From 2019 through 2021, only 393 (1.7%) of DKMC’s 22,507 HMDA-reportable applications generated for one- to four-family, owner-occupied dwellings in the Chicago MSA were for a property located in a high-Black and Hispanic census tract, whereas 9% of mortgage applications received by DKMC’s peers over the same period were for a property located in a high- Black and Hispanic census tract.
37.
In other words, from 2019 through 2021, DKMC’s peer lenders generated mortgage applications for properties in high-Black and Hispanic areas in the Chicago MSA at over five times the rate that DKMC generated such applications.
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38.
From 2019 through 2021, only 40 (0.43%) of DKMC’s 9,399 HMDA-reportable applications generated for one- to four-family, owner-occupied dwellings in the Boston MSA were for a property located in high-Black and Hispanic census tract, whereas 1.8% of mortgage applications received by DKMC’s peers over the same period were for a property located in a high- Black and Hispanic census tract.
39.
In other words, from 2019 through 2021, DKMC’s peer lenders generated mortgage applications for properties located in high-Black and Hispanic areas in the Boston MSA at over four times the rate that DKMC generated such applications. 40.
Even when DKMC generated applications for properties located in majority- and high-Black and Hispanic census tracts, the applicants themselves were more likely to be white as compared to DKMC’s peers.
41.
From 2019 through 2021, in majority-Black and Hispanic census tracts in the Chicago MSA, even though only 15% of the population identified themselves as white, 44% of DKMC’s applications, where the applicants identified their race, came from applicants who identified as white. By contrast, when DKMC’s peers generated applications for properties located in majority-Black and Hispanic census tracts in the Chicago MSA over the same time period, only 21% of their applications came from white applicants.
42.
From 2019 through 2021, in majority-Black and Hispanic census tracts in the Boston MSA, even though only 19% of the population identified themselves as white, 53% of DKMC’s applications, where the applicant identified their race, came from applicants who identified as white. By contrast, when DKMC’s peers generated applications for properties in majority-Black and Hispanic neighborhoods in the Boston MSA over the same time period, only 27% of their applications came from white applicants.
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43.
From 2019 through 2021, in high-Black and Hispanic census tracts in the Chicago MSA, even though only 6% of the population identified themselves as white, 19% of DKMC’s applications, where the applicants identified their race, came from applicants who identified as white. By contrast, when DKMC’s peers generated applications for properties in high-Black and Hispanic neighborhoods in the Chicago MSA over the same time period, only 8% of their applications came from white applicants.
44.
From 2019 through 2021, in high-Black and Hispanic census tracts in the Boston MSA, even though only 7% of the population identified themselves as white, 24% of DKMC’s applications, where the applicants identified their race, came from applicants identified as white. By contrast, when DKMC’s peers generated applications for properties in high-Black and Hispanic census tracts in the Boston MSA over the same time period, only 12% of their applications came from white applicants.
45.
The statistically significant disparities between the applications DKMC drew for properties located in majority- and high- Black and Hispanic neighborhoods in the Chicago and Boston MSAs and the applications drawn by its peer lenders for properties in those same neighborhoods show that there were significant numbers of applicants seeking mortgage loans for properties located in those neighborhoods. DKMC had no legitimate, non-discriminatory reason to draw such a low percentage of mortgage applications for properties in these neighborhoods compared to its peers.
46.
These data show a statistically significant failure by DKMC to draw applications for home loans and provide residential mortgage services to individuals seeking credit to purchase property in majority- and high-Black and Hispanic neighborhoods on a non-discriminatory basis when compared with similarly situated lenders from 2019 through 2021. These data also Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 10 of 26 PageID #:10
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demonstrate the extent to which DKMC’s discouragement of applications from individuals living in, or seeking credit to purchase properties in, such neighborhoods was successful. DKMC Made Disproportionately Low Numbers of Mortgage Loans for Properties Located in Majority- and High-Black and Hispanic Neighborhoods
47.
From at least 2019 through 2021, in addition to its underperformance in generating mortgage loan applications for properties located in majority- and high-Black and Hispanic census tracts in the Chicago and Boston MSAs, DKMC significantly underperformed its peer lenders in making mortgage loans in those neighborhoods.
48.
The disparity between the rate of mortgage loans made by DKMC and the rate made by its peer lenders for properties located in majority- and high-Black and Hispanic neighborhoods was both statistically significant—meaning unlikely to be caused by chance—and sizable in every year from 2019 through 2021.
49.
From 2019 through 2021, DKMC made 19,159 total HMDA-reportable mortgage loans for one- to four-family, owner-occupied dwellings in the Chicago MSA. Only 1,179 (6.2%) of those mortgage loans were for a property located in a majority-Black and Hispanic census tract. By contrast, over the same period, 15.9% of mortgage loans made by DKMC’s peer lenders were for a property located in a majority-Black and Hispanic census tract. 50.
In other words, from 2019 through 2021, DKMC’s peer lenders made mortgage loans for properties located in majority-Black and Hispanic areas in the Chicago MSA at more than two-and-a-half times the rate that DKMC made such loans. 51.
From 2019 through 2021, DKMC made 8,252 total HMDA-reportable mortgage loans for one- to four-family, owner-occupied dwellings in the Boston MSA. Only 180 (2.2%) of those mortgage loans were for a property located in a majority-Black and Hispanic census tract. By contrast, over the same period, 5.9% of mortgage loans made by DKMC’s peer lenders were Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 11 of 26 PageID #:11
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for a property located in a majority-Black and Hispanic census tract. 52.
In other words, from 2019 through 2021, DKMC’s peer lenders made mortgage loans for properties located in majority-Black and Hispanic areas in the Boston MSA at more than two-and-a-half times the rate that DKMC made such loans. 53.
The disparities were even more severe in high-Black and Hispanic neighborhoods.
54.
From 2019 through 2021, only 275 (1.4%) of DKMC’s 19,159 HMDA-reportable mortgage loans made for one- to four-family, owner-occupied dwellings in the Chicago MSA were for a property located in a high-Black and Hispanic census tract, whereas 6.9% of mortgage loans made by DKMC’s peers over the same period were for a property located in a high-Black and Hispanic census tract.
55.
In other words, from 2019 through 2021, DKMC’s peer lenders made mortgage loans for properties located in high-Black and Hispanic areas in the Chicago MSA at more than four-and-a-half times the rate that DKMC made such loans. 56.
From 2019 through 2021, only 29 (0.4%) of DKMC’s 8,252 HMDA-reportable mortgage loans made for one- to four-family, owner-occupied dwellings in the Boston MSA were for a property located in a high-Black and Hispanic census tract, whereas 1.4% of mortgage loans made by DKMC’s peers over the same period were for a property located in a high-Black and Hispanic census tract.
57.
In other words, from 2019 through 2021, DKMC’s peer lenders made mortgage loans for properties located in high-Black and Hispanic areas in the Boston MSA at three-and-ahalf times the rate that DKMC made such loans. 58.
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high-Black and Hispanic census tracts, the loans themselves were more likely to be made to white borrowers as compared to DKMC’s peers.
59.
From 2019 through 2021, in majority-Black and Hispanic census tracts in the Chicago MSA, even though only 15% of the population identified themselves as white, 47% of DKMC’s mortgage loans, where the borrowers identified their race, were made to borrowers identified as white. By contrast, when DKMC’s peers made mortgage loans for properties located in majority-Black and Hispanic census tracts in the Chicago MSA over the same time period, only 24% of their mortgage loans were made to white borrowers. 60.
From 2019 through 2021, in majority-Black and Hispanic census tracts in the Boston MSA, even though only 19% of the population identified themselves as white, 55% of DKMC’s mortgage loans, where the borrowers identified their race, were made to borrowers identified as white. By contrast, when DKMC’s peers made mortgage loans for properties located in majority-Black and Hispanic census tracts in the Boston MSA over the same time period, only 32% of their mortgage loans were made to white borrowers. 61.
From 2019 through 2021, in high-Black and Hispanic census tracts in the Chicago MSA, even though only 6% of the population identified themselves as white, 22% of DKMC’s mortgage loans, where the borrowers identified their race, were made to borrowers identified as white. By contrast, when DKMC’s peers made mortgage loans for properties located in high- Black and Hispanic census tracts in the Chicago MSA over the same time period, only 8% of their mortgage loans were made to white borrowers.
62.
From 2019 through 2021, in high-Black and Hispanic census tracts in the Boston MSA, even though only 7% of the population identified as white, 25% of DKMC’s mortgage loans, where the borrowers identified their race, were made to borrowers identified as white. By Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 13 of 26 PageID #:13
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contrast, when DKMC’s peers made mortgage loans for properties located in high-Black and Hispanic census tracts in the Boston MSA over the same time period, only 14% of their mortgage loans were made to white borrowers.
63.
The statistically significant disparities between the mortgage loans DKMC made for properties located in majority- and high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs and the mortgage loans made by its peer lenders for properties in those same neighborhoods show that there were a significant number of applicants who were seeking and qualified for mortgage loans for properties located in those neighborhoods. DKMC had no legitimate, non-discriminatory reason to originate such a low percentage of mortgage loans for properties in these neighborhoods compared to its peers. 64.
These data show a statistically significant failure by DKMC to originate mortgage loans and provide residential mortgage services to individuals seeking credit to purchase property in majority- and high-Black and Hispanic neighborhoods on a non-discriminatory basis when compared with similarly situated lenders from 2019 through 2021. DKMC’s Offices Were Located Exclusively in Majority-White Neighborhoods 65.
From at least 2019 through 2021, DKMC’s offices were located to serve the credit needs of residents in majority-white neighborhoods and to avoid serving the credit needs of residents in majority- and high-Black and Hispanic neighborhoods. 66.
DKMC’s office locations were determined based on where its loan officers lived. From 2019 through 2021, none of DKMC’s loan officers in the Chicago and Boston MSAs lived in a majority- or high-Black and Hispanic neighborhood. Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 14 of 26 PageID #:14
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67.
From 2019 through 2021, DKMC operated 13 offices in the Chicago MSA, none of which was located in a majority- or high-Black and Hispanic neighborhood. See Exhibit C (map showing the location of DKMC’s office locations in the Chicago MSA). 68.
From 2019 through 2021, DKMC operated six offices in the Boston MSA, none of which was located in a majority- or high-Black and Hispanic neighborhood. See Exhibit D (map showing the location of DKMC’s office locations in the Boston MSA). 69.
All of DKMC’s office locations could accept mortgage loan inquiries from prospective applicants and the addresses were displayed on DKMC’s website. “Draper & Kramer” advertising signs were also visible to the public at most of DKMC’s office locations. 70.
By locating all of its offices in the Chicago and Boston MSAs outside of majorityand high-Black and Hispanic neighborhoods, DKMC discriminated against, including by discouraging, residents of those neighborhoods, and other individuals seeking credit to purchase properties in those neighborhoods, from making or pursuing an application to DKMC for credit. 71.
Further, from at least 2019 through 2021, DKMC failed to take actions that would compensate for its lack of a meaningful office presence in majority- or high-Black and Hispanic areas.
DKMC’s Mortgage Loan Officers Served Majority-White Neighborhoods but Not Majority- or High-Black and Hispanic Neighborhoods
72.
From at least 2019 through 2021, DKMC’s loan officers served the credit needs of majority-white neighborhoods but did not serve the needs of majority- or high-Black and Hispanic neighborhoods in the Chicago and Boston MSAs.
73.
DKMC relied on referrals to its loan officers to generate residential mortgage loan applications in the Chicago and Boston MSAs and positioned its loan officers as the primary Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 15 of 26 PageID #:15
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public-facing points of contact for applicants and prospective applicants. DKMC’s website contained images of its loan officers and their contact information. 74.
DKMC typically recruited and hired new loan officers based on the prospective loan officer’s prior relationship with a DKMC Regional Sales Manager, referrals from its existing mostly white loan officers, and word of mouth. The existing loan officers were experienced with serving, and had ties to referral sources largely in, majority-white areas in the Chicago and Boston MSAs. From 2019 through 2021, DKMC did not make efforts to hire loan officers experienced with serving, or with ties to referral sources in, the majority-Black and Hispanic areas of the Chicago and Boston MSAs.
75.
From 2019 through 2021, each DKMC loan officer was assigned to a specific office location, none of which were located in majority- or high-Black and Hispanic areas. DKMC failed to take actions that would compensate for its lack of offices in, and lack of loan officer ties to, majority- and high-Black and Hispanic areas. For example, DKMC did not assign any loan officers to solicit applications in majority- and high-Black and Hispanic communities and failed to train or incentivize its loan officers to lend in these communities. 76.
DKMC’s reliance on loan officer referral networks to generate business, and failure to train or incentivize its loan officers to lend in majority- or high-Black and Hispanic neighborhoods, was exacerbated by the fact that the vast majority of DKMC’s loan officers in the Chicago and Boston MSAs were white.
77.
From 2019 through 2021, DKMC employed 89 loan officers in the Chicago MSA. Seventy-six (85.4%) of these 89 loan officers were white. Of the remaining loan officers, eight were Hispanic, and none were Black, despite the fact that 38% of the Chicago MSA is either Black or Hispanic.
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78.
From 2019 through 2021, DKMC employed 29 loan officers in the Boston MSA. Of the 29 loan officers, 27 (93.1%) were white, despite the fact that 19% of the Boston MSA is either Black or Hispanic. None of DKMC’s loan officers in the Boston MSA were Black or Hispanic.
DKMC’s Marketing Targeted Majority-White Neighborhoods and Largely Avoided Majority- and High-Black and Hispanic Neighborhoods
79.
From at least 2019 through 2021, DKMC targeted its marketing efforts at majoritywhite neighborhoods and avoided marketing to majority- and high-Black and Hispanic neighborhoods.
80.
From at least 2019 through 2021, DKMC relied almost entirely on loan officers— almost all of whom were white and all of whom were assigned to offices outside of majority- or high-Black and Hispanic neighborhoods—to develop referral sources and conduct outreach to potential customers, as well as to distribute marketing materials related to DKMC’s mortgage lending services.
81.
One way that DKMC marketed to prospective applicants in the Chicago and Boston MSAs was through direct mail marketing campaigns. From 2019 through 2021, DKMC’s direct mail marketing campaigns were overwhelmingly concentrated in majority-white areas. In the Chicago MSA, where 38% of census tracts are majority-Black and Hispanic and 24% are high-Black and Hispanic, only 9.31% of DKMC’s direct mail advertisements were mailed to addresses in majority-Black and Hispanic census tracts, and 3.25% were mailed to addresses in high-Black and Hispanic census tracts. In the Boston MSA, where 13% of the census tracts are majority-Black and Hispanic and 5% are high-Black and Hispanic, only 4.68% of DKMC’s direct mail advertisements were mailed to addresses in majority-Black and Hispanic census tracts, and 0.61% were mailed to addresses in high-Black and Hispanic census tracts. Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 17 of 26 PageID #:17
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82.
DKMC also marketed to prospective applicants in the Chicago and Boston MSAs through advertisements in newspapers and magazines. Many of DKMC’s newspaper and magazine advertisements contained images of its loan officers or models. From 2019 through 2021, all of the loan officers appearing in advertisements in the Chicago MSA, and virtually all of the loan officers appearing in advertisements in the Boston MSA, appeared to be white. None of the advertisements contained loan officers who appeared to be Black or Hispanic. Additionally, some of DKMC’s newspaper and magazine advertisements contained images of models. From 2019 through 2021, of the newspaper and magazine advertisements containing images of models, virtually all of the models appeared to be white.
83.
DKMC did not target any magazine or newspaper advertising outside of majority-white communities in the Chicago MSA until April 2021—nearly two years after the Bureau had identified in examination findings that DKMC’s marketing was heavily concentrated in majority-white areas—when it began advertising in the Hyde Park Herald and South Side Weekly. However, as of 2019, only 34% of Hyde Park’s population identified as Black or Hispanic. Thus, despite its proximity to majority- and high-Black and Hispanic neighborhoods, advertising in a Hyde Park publication does not guarantee distribution to such neighborhoods. In addition, in contrast to many of DKMC’s advertisements directed at majority-white neighborhoods, the advertisements in these publications were text-only and did not feature images of loan officers or models. DKMC did not target any magazine or newspaper advertising to majority-Black and Hispanic neighborhoods in the Boston MSA. 84.
DKMC provided each of its loan officers with an annual marketing budget, which the loan officers could spend as they wished, including by distributing pre-approved marketing material that DKMC made available to them. DKMC neither monitored nor documented where Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 18 of 26 PageID #:18
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or to whom its mortgage loan officers distributed marketing or outreach materials related to mortgage lending services to ensure that such distribution occurred in all neighborhoods throughout the Chicago and Boston MSAs, though it did track how frequently each of the preapproved advertisements were used by loan officers. Nearly all of the most frequently used preapproved advertisements contained images of exclusively white-appearing loan officers. Some of the pre-approved advertisements contained images of models, almost all of whom were white-appearing.
85.
DKMC further advertised to prospective applicants in the Chicago MSA through open-house flyers for properties listed by real estate agents that were generated by a third-party advertising platform. The open-house flyers typically contained images of a DKMC loan officer and the listing real estate agent. In the Chicago MSA, from 2019 through 2021, only 2.26% of the properties featured on the open house flyers generated through the third-party advertising platform with DKMC marketing information were located in majority-Black and Hispanic census tracts and only 0.53% were located in high-Black and Hispanic census tracts. Almost all flyers included images of white-appearing loan officers and real estate agents. 86.
The use of nearly all white-appearing models and loan officers on DKMC’s marketing materials discouraged residents in majority- and high-Black and Hispanic neighborhoods, or other individuals seeking credit to purchase properties in those neighborhoods, from making or pursuing an application for credit from DKMC. 87.
Finally, DKMC marketed to its past customers using flyers, emails, and social media posts. DKMC stored information about its past customers in its customer relationship management service (CRM) and used the CRM to send those past customers marketing materials. From 2019 through 2021, over 91% of the past customers serviced by the CRM in the Chicago Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 19 of 26 PageID #:19
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MSA, and over 96% of past customers serviced by the CRM in the Boston MSA, were located outside of majority- or high-Black and Hispanic neighborhoods. DKMC’s reliance on marketing to past customers who were overwhelmingly located outside of majority- or high-Black and Hispanic neighborhoods exacerbated the consequences of its failure to advertise, assign loan officers, and place offices in those neighborhoods.
88.
DKMC did not circulate any marketing materials or advertisements in Spanish. DKMC had no Spanish-language marketing materials available until May 2021 at the earliest, and at that time, it only provided those Spanish-language materials to two loan officers in the Chicago MSA who spoke Spanish. DKMC’s website had no content in Spanish and did not identify language abilities of any employees or direct potential customers to individuals who spoke Spanish. DKMC made minimal efforts to market or advertise to Spanish speakers, exacerbating the consequences of its failure to advertise, assign loan officers, and place offices in Hispanic communities.
89.
DKMC’s failure to locate any offices or assign any loan officers to majority- and high-Black and Hispanic areas, and failure to take any meaningful efforts through its advertising practices to compensate for its lack of offices and loan officers in majority- and high-Black and Hispanic neighborhoods, was intended to deny, and had the effect of denying, equal access to home loans for those residing in, or seeking credit for properties located in, majority- and high -Black and Hispanic neighborhoods in the Chicago and Boston MSAs and discouraging those individuals from applying to DKMC for credit.
DKMC’s Loan Officers Exchanged Emails Indicating Racial Bias and Discriminatory Animus
90.
From at least 2019 through 2021, some DKMC loan officers sent and received emails via their DKMC email accounts containing racist content or otherwise reflecting Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 20 of 26 PageID #:20
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discriminatory animus.
91.
For example, in one email exchange, a DKMC loan officer stated: “Maybe if blacks didn’t have such a propensity to kill each other whites wouldn’t be afraid of them. Maybe if blacks would scream at each other for killing their own and children, their cries of racism would carry more weight. As it is, their latest martyrs were convicted felons and using a misplaced guilt trip BLM are bringing in millions of dollars and giving these convicted criminals funerals with golden caskets.”
92.
In a different email exchange, this same DKMC loan officer stated: “Blacks have the highest rate of illegitimate births . . . . These Black teenage girls think it’s a status thing to have a baby and don’t realize that it is the surest path to a lifetime of under achievement and poverty . . . . Inner city schools are controlled by Black teacher unions. They have the power to improve their schools but why doesn’t it happen. Why is New Trier High School better than Bowen High School? You have parents who make sure kids do their work.” New Trier High School is in a majority-white census tract where only 2.5% of residents are Black or Hispanic. Bowen High School is in a high-Black and Hispanic census tract where 99.1% of residents are Black or Hispanic.
93.
Another DKMC loan officer forwarded an email to two other DKMC loan officers that described a speech by Russian President Vladimir Putin in which he stated in part, “In Russia, live like Russians. Any minority, from anywhere, if it wants to live in Russia, to work and eat in Russia, it should speak Russian, and should respect all Russian laws. If they prefer Sharia Law, and wish to live the life of Muslims, then we now clearly advise them to go and live in those places where that’s the state law. Russia does not need Muslim minorities. Minorities need Russia, and we will not grant them special privileges, or try to change our laws to fit their desires, no matter Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 21 of 26 PageID #:21
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how loud they yell ‘discrimination’!” When forwarding the email, the DKMC loan officer wrote, “I know I am preaching to the choir,” indicating his agreement with the messages conveyed in the speech and his belief that his colleagues would agree. 94.
Additionally, in response to an article circulated by one DKMC loan officer comparing how President Obama and Vice-President Biden treated the death of a United States soldier, as compared to Michael Brown, a Black man who was killed by police in 2014, another DKMC loan officer stated “Hang the Kenyan.”
95.
The applications received by the loan officers involved in the racist email exchanges were overwhelmingly for properties located in majority-white areas. DKMC Intentionally Failed to Address Known Redlining Risks
96.
Beginning in July 2019, if not earlier, DKMC was on notice that its internal compliance program was inadequate to prevent, detect, and correct redlining and that these inadequacies created a risk of redlining.
97.
In 2019, the Bureau issued a Supervisory Letter to DKMC identifying a number of deficiencies with DKMC’s internal compliance program with respect to redlining, including its policies and procedures, employee training, and internal monitoring. The Supervisory Letter also identified that DKMC’s compliance program deficiencies contributed to an elevated risk of redlining in the Chicago MSA, noting consistently low levels of marketing communications, applications, and originations in majority- and high-minority census tracts within that MSA. The Supervisory Letter contained Supervisory Recommendations to address these problems. In July 2019, the Supervisory Letter was distributed to DKMC’s Board of Directors. 98.
DKMC did not adequately address the deficiencies raised by the Bureau. 99.
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adequately address redlining and contained only general prohibitions against discrimination. 100.
From 2019 through 2021, DKMC did not adequately train its employees with respect to redlining. Certain relevant training materials did not even contain a definition of redlining.
101.
From 2019 through 2021, DKMC did not perform any internal analyses to monitor for redlining.
102.
DKMC did not analyze its mortgage lending data for redlining risk until 2022. 103.
The totality of DKMC’s acts, policies, and practices described in this complaint constitute unlawful discrimination, discouragement, and redlining of majority- and high-Black and Hispanic census tracts in the Chicago and Boston MSAs. 104.
DKMC engaged in acts or practices that, together and separately, discriminated against applicants and prospective applicants on the basis of the race, color, or national origin of the residents of majority- and high-Black and Hispanic census tracts in the Chicago and Boston MSAs, including by redlining and discouraging them, and others seeking credit to purchase property in those census tracts, from making or pursuing an application for credit from DKMC. 105.
DKMC’s discriminatory practices as described in this complaint were intentional and had the effect of discriminating on the basis of race, color, or national origin. COUNT I: VIOLATIONS OF THE EQUAL CREDIT OPPORTUNITY ACT
106.
The Bureau incorporates all prior paragraphs of the complaint as if fully set forth herein.
107.
DKMC’s acts, policies, and practices as alleged herein constitute unlawful discrimination against applicants and prospective applicants, including by redlining majority- and high-Black and Hispanic communities in the Chicago and Boston MSAs and engaging in acts and Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 23 of 26 PageID #:23
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practices directed at prospective applicants that would discourage a reasonable person from applying for credit on the basis of race, color, or national origin in violation of ECOA and Regulation B. 15 U.S.C. § 1691, et seq.; 12 C.F.R. § 1002.4(a)-(b). 108.
DKMC’s policies and practices as alleged herein constitute a pattern or practice of discrimination and discouragement and resistance to the full enjoyment of rights secured by the Equal Credit Opportunity Act, in violation of ECOA. 15 U.S.C. § 1691 et seq. 109.
DKMC’s pattern or practice of discrimination was intentional and willful and was implemented with reckless disregard for the rights of individuals based on their race, color, or national origin.
110.
Persons who have been victims of DKMC’s discriminatory policies and practices are aggrieved and may have suffered damages as a result of DKMC’s conduct in violation of the Equal Credit Opportunity Act, as described above.
COUNT II: VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT
111.
The Bureau incorporates all prior paragraphs of the complaint as if fully set forth herein.
112.
Section 1036(a)(1)(A) of the CFPA prohibits a covered person from offering or providing to a consumer any financial product or service not in conformity with “Federal consumer financial law” or otherwise committing any act or omission in violation of a “Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).
113.
The Equal Credit Opportunity Act is a federal consumer financial law. 12 U.S.C. §§ 5481(12)(D), 5481(14).
114.
DKMC’s ECOA violations, described above in Count I, constitute violations of Section 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A); 15 U.S.C. § 1691c(b). Case: 1:25-cv-00605 Document #: 1 Filed: 01/17/25 Page 24 of 26 PageID #:24
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Furthermore, Section 704(b) of ECOA states that “a violation of any requirement imposed under [ECOA] shall be deemed a violation of a requirement imposed under” subtitle E of the CFPA. 15 U.S.C. § 1691c(b).
DEMAND FOR RELIEF
The Bureau request that the Court enter an order that: (1) Declares that DKMC’s acts and practices violated ECOA, 15 U.S.C. §§ 1691- 1691f;
(2) Enjoins DKMC, its agents, employees, successors, and all others in active concert or participation with DKMC, from:
A.
Discriminating on account of race, color, or national origin in any aspect of their lending business practices;
B.
Discouraging applicants or prospective applicants on account of race, color, or national origin;
C.
Failing or refusing to take such affirmative steps as may be necessary to restore, as nearly as practicable, the victims of DKMC’s unlawful practices to the position they would be in but for the discriminatory conduct; and D.
Failing or refusing to take such affirmative steps as may be necessary to prevent the recurrence of any discriminatory conduct in the future and to eliminate, to the extent practicable, the effects of DKMC’s unlawful practices, and providing policies and procedures to ensure all segments of DKMC’s market areas are served without regard to prohibited characteristics; (3) Awards damages, restitution, equitable, and other monetary relief, under 15 U.S.C. §§ 1691c(a)(9) and 12 U.S.C. § 5565;
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(4) Assesses a civil penalty against DKMC in an amount authorized by 12 U.S.C. § 5565(c); and (5) Awards the Bureau such additional relief as the interests of justice may require. DEMAND FOR JURY TRIAL
The Bureau demands trial by jury in this action on all issues so triable.
Dated: January 17, 2025 Respectfully submitted,
ERIC HALPERIN Enforcement Director
DAVID RUBENSTEIN Deputy Enforcement Director
ADAM E. LYONS Assistant Deputy Enforcement Director
/s/ Johanna M. Hickman
Johanna M. Hickman
CHARLES NIER Special Counsel for Fair Lending ALICIA FERRARA JOHANNA M. HICKMAN Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Telephone: 202-603-0581 [email protected] [email protected] [email protected]
Attorneys for Plaintiff Consumer Financial Protection Bureau
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Consent order ()
PDF of this document (13 pages)
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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
DRAPER & KRAMER MORTGAGE CORPORATION,
Defendant.
) ) ) ) No. 25-cv-00605 ) ) ) CONSENT ORDER ) ) ) ) INTRODUCTION The Consumer Financial Protection Bureau (Bureau) commenced this civil action to obtain injunctive relief and civil penalties from Draper & Kramer Mortgage Corporation (“DKMC”). The Complaint alleges violations of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f; Regulation B, 12 C.F.R. part 1002; and the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536(a)(1)(A), in connection with DKMC’s mortgage lending in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area (Chicago MSA) and the Boston-Cambridge-Newton, MA-NH Metropolitan Statistical Area (Boston MSA). The Bureau alleges that DKMC unlawfully discriminated by redlining Majority-Black and Hispanic Census Tracts in the Chicago and Boston MSAs in its residential mortgage lending. In 2024, DKMC voluntarily ceased originating mortgage loans and has wound down its mortgage-lending business in order to pursue alternative lines of business.
The Bureau and DKMC (together, the Parties) agree to entry of this Consent Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
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FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action, and venue in this district is proper.
2.
DKMC neither admits nor denies the allegations in the Complaint, except as specified in this Order. For purposes of this Order, DKMC admits the facts necessary to establish the Court’s jurisdiction over DKMC and the subject matter jurisdiction related to the Lawsuit Subject Matter.
3.
DKMC waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees. 4.
Entry of this Order is in the public interest. DEFINITIONS 5.
The following definitions apply to this Order: a. “Assist Others” includes, but is not limited to the following services performed for or on behalf of a company providing residential mortgages: i.
consulting;
ii.
providing paralegal or administrative support services; iii.
performing customer-service functions, including but not limited to receiving or responding to consumer complaints or running a call center to enroll consumers;
iv.
formulating or providing, or arranging for the formulation or provision of any advertising or marketing material;
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v.
providing names of, or assisting in the generation of, potential customers;
vi.
performing marketing, billing, or payment services of any kind; and vii.
acting or serving as an owner, officer, director, manager, or principal of any entity that provides residential mortgage-lending services. b. “Board” means DKMC’s duly-elected and acting Board of Directors. c. “Boston MSA” means the Boston-Cambridge-Newton, MA-NH Metropolitan Statistical Area.
d. “Bureau” means the Consumer Financial Protection Bureau. e. “Chicago MSA” means the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area.
f. “DKMC” means Draper & Kramer Mortgage Corporation and its successors and assigns.
g. “Effective Date” means the date on which the Order is entered by the Court. h. “Lawsuit Subject Matter” means the allegations in the Complaint filed by the Bureau against DKMC in this matter.
i. “Majority-Black and Hispanic Census Tract” or “Majority-Black and Hispanic Neighborhood” means a census tract where more than 50% of the residents are identified as either “Black or African American” or “Hispanic or Latino” by the United States Census Bureau.
j. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 3 of 13 PageID #:67
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brought against DKMC based on substantially the same facts as alleged in the Complaint.
CONDUCT PROVISIONS I.
Prohibited Conduct IT IS ORDERED that:
6.
DKMC, and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from engaging in any act or practice that discriminates on the basis of race, color, or national origin in violation of the Equal Credit Opportunity Act, 15 U.S.C. § 1691-1691f; Regulation B, 12 C.F.R. part 1002; or the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5536(a)(1)(A). Nothing else in this Order will be read as an exception to this Paragraph. 7.
DKMC, whether acting directly or indirectly, shall not engage or Assist Others in any residential mortgage lending activities, including advertising, marketing, promoting, offering, providing, originating, administering, servicing, selling, or assigning mortgage loans, or otherwise participating in or receiving remuneration from any residential mortgage lending activities for a period of 5 years from the Effective Date.
MONETARY PROVISIONS
II.
Order to Pay Civil Money Penalty
IT IS FURTHER ORDERED that:
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8.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, DKMC must pay a civil money penalty of $1,500,000 to the Bureau. 9.
Within 10 days of the Effective Date, DKMC must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
10.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d). 11.
DKMC, for all purposes, must treat the civil money penalty paid under this Order as a penalty paid to the government. Regardless of how the Bureau ultimately uses those funds, DKMC may not:
a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 12.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, DKMC may not argue that DKMC is entitled to, nor may DKMC benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against DKMC based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, DKMC must, within 30 days after entry of a final order granting such Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 5 of 13 PageID #:69
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offset or reduction, notify the Bureau, and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. III.
Additional Monetary Provisions
IT IS FURTHER ORDERED that:
13.
In the event of any default on DKMC’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of entry of judgment to the date of payment, and will immediately become due and payable.
14.
DKMC relinquishes all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to DKMC. 15.
The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any subsequent action by the Bureau to enforce the Order or its rights to any payment or monetary judgment under the Order. 16.
DKMC acknowledges that its Taxpayer Identification Number, which DKMC previously submitted to the Bureau, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701. 17.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, DKMC must notify the Bureau of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that DKMC paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
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COMPLIANCE PROVISIONS IV.
Role of the Board IT IS FURTHER ORDERED that:
18.
DKMC’s Board has the ultimate responsibility for ensuring that DKMC complies with this Order.
19.
DKMC’s Board must:
a. authorize whatever actions are necessary for DKMC to assess whether DKMC is complying with each applicable paragraph and subparagraph of this Order; b. authorize whatever actions, including corrective actions, are necessary for DKMC to fully comply with each applicable paragraph and subparagraph of this Order; and c. require timely reporting by management to DKMC’s Board on the status of compliance obligations.
V.
Reporting Requirements IT IS FURTHER ORDERED that:
20.
DKMC must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against DKMC; or a Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 7 of 13 PageID #:71
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change in DKMC’s name or address. DKMC must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 30 days after the development. 21.
Within 7 days of the Effective Date, DKMC must:
a. designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with DKMC; b. identify all businesses for which DKMC is the majority owner, or that DKMC directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c. describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. 22.
DKMC must report any change in the information required to be submitted under Paragraph 21 least 30 days before the change or as soon as practicable after the learning about the change, whichever is sooner.
VI.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
23.
Within 7 days of the Effective Date, DKMC must submit to the Bureau an acknowledgement of receipt of this Order, sworn under penalty of perjury. 24.
Within 30 days of the Effective Date, DKMC must deliver a copy of the Complaint and this Order to each of its board members and executive officers. 25.
DKMC must deliver a copy of the Complaint and this Order to any business entity resulting from any change in structure referred to in Section V, and any future board members and executive officers, before they assume their responsibilities. Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 8 of 13 PageID #:72
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26.
DKMC must secure a signed and dated statement acknowledging receipt of a copy of this Order, within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
27.
Ninety days from the Effective Date, DKMC must submit to the Bureau a list of all persons and their titles to whom this Order has been delivered under this Section and a copy of all signed and dated statements acknowledging receipt of this Order under Paragraph 26. VII.
Recordkeeping IT IS FURTHER ORDERED that:
28.
DKMC must create, or if already created, must retain all documents and records necessary to demonstrate full compliance with this Order, including all submissions to the Bureau.
29.
All documents and records must be maintained in their original electronic format. Data must be centralized, and maintained in such a way that access, retrieval, auditing and production are not hindered.
30.
DKMC must make the documents identified in Paragraph 29 available to the Bureau upon the Bureau’s request.
VIII.
Notices IT IS FURTHER ORDERED that:
31.
Unless otherwise directed in writing by the Bureau, DKMC must provide all submissions, requests, communications, or other documents relating to this Order by email, with Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 9 of 13 PageID #:73
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the subject line “CFPB vs. Draper & Kramer Mortgage Corporation, Case No. [X],”and send them contemporaneously by email to:
[email protected], addressed as follows:
ATTN: Supervision Director Consumer Financial Protection Bureau Supervision Division
ATTN: Enforcement Director Consumer Financial Protection Bureau Enforcement Division
IX.
Compliance Monitoring IT IS FURTHER ORDERED that:
32.
Within 14 days of receipt of a written request from the Bureau, DKMC must submit any requested information related to compliance with this Order, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 33.
DKMC must permit Bureau representatives to interview any employee or other person affiliated with DKMC who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct alleged in the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present. 34.
Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process. ADMINISTRATIVE PROVISIONS IT IS FURTHER ORDERED that:
35.
Except Paragraph 6 where this Order expressly provides that its requirements are permanent, all other provisions of this Order will terminate on the later of 5 years from the Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 10 of 13 PageID #:74
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Effective Date or 5 years from the most recent date that the Bureau initiates an action alleging any violation of the Order, if such motion is filed within 5 years of the Effective Date. If in such action the Court rules that DKMC did not violate any provision of the Order, and the dismissal or ruling is either not appealed or upheld on appeal, then the Order will terminate as though action had never been filed.
36.
Calculation of time limitations will run from the Effective Date and be based on calendar days, unless otherwise noted. If a deadline under this Order falls on a Saturday, Sunday, or legal holiday, the deadline is extended until the end of the next day that is not a Saturday, Sunday, or legal holiday.
37.
Should DKMC seek to transfer or assign all or part of its operations that are subject to this Order, DKMC must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order. 38.
The provisions of this Order will be enforceable by the Bureau. For any violation of this Order, the Court may impose the maximum amount of civil money penalties allowed under §1055(c) of the CFPA, 12 U.S.C. § 5565(c). In connection with any attempt by the Bureau to enforce this Order in federal district court, the Bureau may serve DKMC wherever DKMC may be found and DKMC may not contest that court’s personal jurisdiction over DKMC. 39.
This Order contains the complete agreement between the Parties. The Parties have made no promises, representations, or warranties other than what is contained in this Order. This Order supersedes any prior oral or written communications, discussions, or understandings. 40.
Nothing in this Order may be construed as allowing DKMC, or its Board, officers, or employees to violate any law, rule, or regulation.
Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 11 of 13 PageID #:75
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RETENTION OF JURISDICTION IT IS FURTHER ORDERED that: 41.
The Court will retain jurisdiction over this matter for the purpose of enforcing this Order.
IT IS SO ORDERED.
DATED this 24th day of January, 2025.
_________________________________
United States District Judge
The undersigned hereby apply for and consent to the entry of this Order:
Dated: January 24, 2025 Respectfully submitted,
FOR THE CONSUMER FINANCIAL PROTECTION BUREAU:
ERIC HALPERIN Enforcement Director
DAVID RUBENSTEIN Deputy Enforcement Director
ADAM E. LYONS Assistant Deputy Enforcement Director
/s/ Charles Nier _____________ CHARLES NIER Special Counsel for Fair Lending ALICIA FERRARA JOHANNA M. HICKMAN Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Telephone: 202-603-0581 [email protected] [email protected] [email protected]
Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 12 of 13 PageID #:76
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FOR DRAPER & KRAMER MORTGAGE CORPORATION:
/s/ Matthew Madden MATTHEW MADDEN Partner McDermott Will & Emery LLP 444 West Lake Street Suite 4000 Chicago, Illinois 60606 Tel: 312.372.2000 [email protected]
/s/ Allyson E. Riemma ALLYSON E. RIEMMA Partner McDermott Will & Emery LLP 444 West Lake Street Suite 4000 Chicago, Illinois 60606 Tel: 312.372.2000 [email protected]
Attorneys for Draper & Kramer Mortgage Corporation Case: 1:25-cv-00605 Document #: 14 Filed: 01/24/25 Page 13 of 13 PageID #:77