The American Civil Liberties Union (ACLU) [official website] on Monday filed a lawsuit [complaint, PDF; press release] against Morgan Stanley [corporate website] over allegedly discriminatory practices leading up to the housing crisis of 2008. According to the ACLU, between 2004 and 2007 Morgan Stanley and its affiliates, including New Century Mortgage Company, violated the Fair Housing Act [HUD backgrounder], Equal Credit Opportunity Act [FTC backgrounder] and Michigan Elliot-Larsen Civil Rights Act [text, PDF] by targeting communities of color for predatory loans. The lawsuit, which the ACLU claims is the first of its kind, was filed in conjunction with the law firm Lieff Cabraser Heimann & Bernstein [firm website] and the National Consumer Law Center [advocacy website; press release, PDF] on behalf of five African-American Detroit-area residents. The complaint states:
Morgan Stanley's policies and practices have resulted in considerable racial disparities. They caused New Century borrowers in the metropolitan Detroit region to be significantly more likely to receive Combined-Risk Loans, and thus suffer the harms associated with such loans, if they were African American.The ACLU requested that the US District Court for the Southern District of New York [official website] treat the claim as a class action lawsuit because "as many as 6,000 black homeowners in the Detroit area may have suffered similar discrimination."
Several other large financial entities have dealt with accusations of discriminatory mortgage lending practices. In May SunTrust Mortgage [corporate website] agreed to a $21 million settlement [JURIST report] for discriminating based on race and national origin. In December Bank of America [corporate website] agreed to a $335 million settlement [JURIST report] for discrimination by its subsidiary, Countrywide Financial, against Hispanic and African-American home buyers.