A mortgage lender that allegedly discriminated against minorities by refusing to make loans on row houses valued at less than $100,000 has agreed to end the practice and pay a non-profit group $500,000.

Atlanta-based SouthStar Funding LLC’s lending policies discriminated against African Americans and Hispanics because row houses valued at less than $100,000 are more heavily concentrated in minority neighborhoods, the National Community Reinvestment Coalition alleged. SouthStar was also accused of refusing to back loans on any row houses in Baltimore, where about two-thirds of row houses are located in African American and Hispanic neighborhoods.

The U.S. Department of Housing and Urban Development investigated NCRC’s complaint and negotiated a settlement with SouthStar.

SouthStar agreed to stop excluding borrowers on the basis of property type or minimum property value, and to apply underwriting guidelines used for townhomes and condos to loans secured by row homes. SouthStar will also conduct second reviews of denied loans to ensure that applications are processed without discrimination, and advertise its loan products to media targeted to African American and Hispanic communities.

SouthStar agreed to pay NCRC $500,000 over four years, which will help fund anti-discrimination efforts, including training seminars for housing counselors who serve people who have had difficulty getting loans. NCRC is a coalition of 640 nonprofit organizations that promotes the investment of private capital in underserved communities.

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