No Class Status for Black Borrowers Claiming Bias

     (CN) – A federal judge decertified a class of black borrowers who claim that Option One Mortgage Corp. charged them higher interest rates than it charged white borrowers.
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     Option One allegedly bases part of its loan pricing on a fixed “par” rate that is calculated with the applicant’s credit score and size of the requested loan.
     But black borrowers say Option One also gave its brokers the individual discretion to set interest rates higher than the par rate and to charge loan origination and processing fees.
     Ultimately, the average broker charged black borrowers higher fees, according to the complaint.
     Ian Ayres, a Yale University law professor, testified that black borrowers faced interest rates on Option One mortgages that were 0.086 percent higher than the rates white borrowers faced. In other words, Option One charged black borrowers about $134 more per year than it charged white borrowers, the class claimed.
     Brokers also allegedly earned more for loans set at higher interest rates.
     U.S. District Judge Rya Zobel granted class certification in 2011, but that decision came into question after the Supreme Court’s ruling in Wal-Mart Stores v. Dukes , which decertified a proposed class of 1.5 million female employees found lack of sufficient commonality.
     The statistical analysis used by Ayres was “no longer sufficient to establish commonality,” Zobel wrote. “Wal-Mart establishes that a nationwide policy of granting discretion to local units can only raise a common question if the local units have a ‘common mode of exercising discretion.’ Furthermore, Wal-Mart disapproves the use of aggregate, nationwide statistics to prove a common method of exercising discretion at the local level.”
     In this case, the plaintiffs did not show how Option One’s brokers exercised their discretion in a unified manner, the ruling states.
     “If plaintiffs claimed that Option One’s brokers uniformly exercised their discretion by considering specific attributes that produce disparate impact – such as ‘scores on general aptitude tests or educational achievements,’ – they would state a common question justifying class treatment,” Zobel wrote. “But without some such claim, the Supreme Court tells us, ‘demonstrating the invalidity of one [broker’s] use of discretion will do nothing to demonstrate the invalidity of another’s.’ Because plaintiffs do not claim that all of Option One’s brokers exercised their discretion in the same way, they do not raise a single question common to all plaintiffs in the class.” (Brackets in original.)

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