Algorithmic Discrimination in Mortgage Lending Continues Redlining by New Means

A 2023 Markup investigation found that lenders using algorithmic underwriting systems denied mortgage applications from Black applicants at rates up to 84% higher than white applicants with similar financial profiles. The Fair Housing Act prohibits discrimination but does not explicitly address algorithmic decision-making. CFPB and DOJ investigations into lenders including Trident Mortgage, Townstone Financial, and Lakeland Bancorp (which paid a $13 million settlement in 2023) found discriminatory lending patterns. Critics argued that algorithms trained on historically discriminatory data would perpetuate and mask redlining. HUD issued guidance in 2023 clarifying that algorithmic discrimination violates the Fair Housing Act.