Mass. Sues H&R Block Over Minority Mortgages

Tuesday, June 3, 2008 12:24 PM

BOSTON (Reuters) - Massachusetts authorities sued H&R Block on Tuesday, charging that its mortgage unit discriminated against black and Latino borrowers and escalated a crisis over property foreclosures in the state.

The lawsuit is the first by a U.S. state to accuse a subprime-mortgage lender of civil rights violations following a wave of foreclosures of homes in poor, often black, neighborhoods nationwide.

The complaint, filed in Suffolk Superior Court, accuses H&R's subprime-lending subsidiary, Option One Mortgage Corp, of engaging "in unfair and deceptive conduct on a broad scale."

H&R Block was not immediately available for comment.

Martha Coakley, the state's attorney general who filed the suit, said that H&R Block, the country's biggest tax preparer, and its mortgage unit sold "extremely risky loan products" and helped escalate the foreclosure crisis in Massachusetts.

The complaint said the H&R Block unit charged black and Latino borrowers higher points and fees to close their loans than similarly situated white borrowers and targeted black and Latino consumers with marketing "that pushed the sale of predatory loan products."

"Marketing loan products that were designed to fail not only harms individuals and families who are struggling to afford their homes, but also has a negative impact on neighboring homeowners and the community at large," Coakley said in a statement.

The companies often agreed to finance homes even though the borrower put no money down, Coakley said.

The lenders also did not require supporting documents to prove how much borrowers earned, which would ultimately dictate what they could afford to pay for loans.

H&R Block recently said it is refocusing on tax preparation after incurring about $1 billion of losses at Option One, which made home loans to people with poor credit. It no longer offers mortgages.

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