Draper & Kramer Accepts 5-Year Ban, Fine in Redlining Case

A federal investigation into discriminatory lending practices has resulted in a significant legal settlement for a prominent Midwest lender.

Draper & Kramer Mortgage Corporation has agreed to a five-year ban from lending and a $1.5 million civil penalty to resolve federal redlining allegations, Crain’s reported. The settlement is subject to court approval.

“Draper illegally excluded homeowners and engaged in redlining across the Chicago and Boston metro areas,” said Rohit Chopra, director at the Consumer Financial Protection Bureau, the agency behind the federal probe.

Redlining refers to discriminatory practices in which financial institutions deny services to certain neighborhoods based on racial or ethnic demographics. Such practices are illegal under the Fair Housing Act and the Equal Credit Opportunity Act.

The bureau filed a complaint and proposed consent order on Jan. 17, accusing the Downers Grove-based company of limiting access to mortgage loans in minority communities by strategically placing its offices in majority-white neighborhoods and focusing marketing efforts in those areas.

By doing so, the bureau determined the company was discouraging residents of predominantly Black and Hispanic neighborhoods from applying for loans, resulting in a disproportionately low number of mortgage applications and approvals in those communities.

The agency claimed that Draper & Kramer, led by president and CEO Todd Bancroft, failed to provide adequate training or incentives for loan officers to support applicants in underserved areas. Regulatory findings noted that comparable lenders generated applications for properties in two communities at rates significantly higher than Draper & Kramer.

Draper & Kramer denied the allegations, calling them “meritless.”

A spokesperson for the company said it chose to settle, in order to resolve the matter quickly, saying the allegations were “based on a quota analysis from an undisclosed set of competitors to manufacture the perception of discriminatory conduct” by the firm.

This case follows a similar regulatory action in 2020 against Townstone Financial, another Chicago-area lender accused of discouraging Black applicants through marketing practices. Townstone agreed to pay a $105,000 penalty and comply with fair lending laws.

— Andrew Terrell