Luther Burbank Savings Settlement

Luther Burbank Savings Minimum Loan Amount Settlement
On September 12th the Department of Justice announced a settlement with Luther Burbank Savings regarding the setting of minimum loan amounts for home mortgages.
·         The case originated as an OTS referral to DOJ.
·         DOJ alleged that through mid-2011 Luther had a minimum loan amount policy in its wholesale single family mortgage loan program.  The minimum loan amount was $400,000.  Luther has lowered that minimum loan amount to $20,000.

·         To offset the negative effects of this residential loan policy, Luther will spend $2 million in areas such as consumer outreach, consumer education, partnerships with community-based organizations.

·         Part of the complaint compared Luther’s mortgage loan market share to African-American and Hispanic borrowers to that of comparable lenders.

So What
·         Institutions should review their minimum loan amount policies.  While this case involved mortgage loans, there is anecdotal evidence that regulators are looking more carefully at minimum loan amount policies for other credit products.  In one instance that I am aware of, the regulator indicated to the institution that it should eliminate all minimum loan amount policies.

·         Increasingly the regulators are comparing a bank’s performance in a given area such as loans originated to that of other banks in the same geography or to national averages.  You should know how your institution compares on multiple levels of comparison as well as along multiple dimensions (denial rates, loans originated, withdrawn/incompletes, loans with rate spreads, high cost loans, etc.).
Preiss&Associates has been doing custom fair lending analyses for more than 20 years.  If you have fair lending questions, want to talk about your fair lending issues or have need for us to assist you with your fair lending program give us a call at 847-295-6881 or drop us an email at



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