Friday, October 5, 2012

Judge Decertifies Class of African-American Borrowers

A federal judge recently decertified a previously certified class action based on the Supreme Court's Wal-Mart opinion that we've discussed previously on the Corporate Justice Blog.  In a real opportunity to examine predatory lending in the wake of the mortgage crisis of 2008, the Supreme Court's limiting Wal-Mart holding has now made it much more difficult for plaintiffs to proceed on claims of discriminatory and predatory lending.

From the National Law Journal:

"A Boston federal judge has decertified a class of African-American mortgage borrowers, finding that evidence of their statistically higher payments isn't enough to establish commonality in light of the Supreme Court's ruling in Wal-Mart v. Dukes.  On September 18, [2012], Judge Rya Zobel of the District of Massachusetts granted the defendants' motion to decertify the class in Barrett v. Option One Mortgage Corp.  [Judge] Zobel had previously certified the plaintiff class of African-American borrowers who obtained a mortgage loan from one of the defendants, in March 2011.

Three months later, in June 2011, the Supreme Court ruled in Wal-Mart. In its 5-4 ruling, the high court held that the plaintiffs in a class action on behalf of more the 1 million female current and former workers failed to prove a companywide policty of discrimination.  Justice Antonin Scalia, writing for the court, found that evidence of such a policy was necessary for the plaintiffs to show the commonality needed to certify a class under Federal Rule of Civil Procedure 23(a)(2).

The borrowers in Barrett sued H&R Block Mortgage Corp. and subsidiaries Option One, Ada Services Corp. and San Canyon Corp. They claimed the defendants' policy, which gave brokers the discretion to add charges unrelated to a borrower's creditworthiness, had a disparate impact on African-American borrowers. Brokers could set a higher interest rate than a borrower's minimum based on creditworthiness and charge loan origination and processing fees."

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