CFPB, DOJ Nab Another Mortgage Lender For Redlining

Posted by Patrick Barnard on September 25, 2015 No Comments
Categories : Residential Mortgage

Hudson City Savings Bank will pay more than $32 million to settle allegations of redlining brought by the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ).

The CFPB and DOJ allege that from 2004 to 2010, when Hudson City Savings Bank expanded into Staten Island, Long Island and the area north of New York City, as well as southern Connecticut, it avoided locating branches and loan officers in areas with high concentrations of minorities. About 94% of the branches the bank opened were outside of minority neighborhoods, as were practically all of its loan officers, CFPB officials say in a release.

During this time, Hudson City generated 80% of its mortgage applications through mortgage brokers, who were heavily concentrated outside of minority areas, the CFPB says. In 2011 and 2012, 94.5% of the bank's top 50 brokers' offices were located outside of minority areas.

For example, none of the 47 brokers utilized by Hudson City in the Philadelphia and Camden area were headquartered in minority communities, despite minorities representing 22.6% of the area's census tracts, the bureau says in its release.

In addition, Hudson City is accused of excluding minorities from its marketing strategy. CFPB and DOJ officials reportedly found that the bank was only targeting certain areas with its advertisements.

The bank is also accused of failing to include minority neighborhoods in its credit assessment areas, as required under the Community Reinvestment Act. In doing so, the bank excluded most or all minority neighborhoods in the areas selected. For example, Hudson City's assessment area near Philadelphia and Camden excluded all 337 neighborhoods with a majority of Black and Hispanic residents, the CFPB says in its release.

Specifically, the bank will pay $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million in community programs and outreach, and a $5.5 million penalty.

In agreeing to the settlement, the bank has admitted no wrongdoing.

‘This case should send a message to lenders throughout the country that the Justice Department will not tolerate racial discrimination in the extension of credit,’ says Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, in a statement. ‘A lending institution must treat all potential borrowers equally, regardless of their race or the racial composition of their neighborhood, when deciding to offer its loan services. We encourage all lenders to proactively identify responsible lending opportunities that exist in predominantly minority neighborhoods within their lending areas.’

The action is the result of an investigation that began in March 2014, authorities say.

In May, the U.S. Department of Housing and Urban Development (HUD) announced that Associated Bank NA would pay approximately $200 million to resolve allegations that the bank discriminated against African-Americans and Hispanics who applied for mortgages from 2008 to 2010.

It was reportedly one of the largest-ever settlements resulting from an investigation into redlining at a mortgage lender. What's more, it was the largest settlement of its kind HUD had ever reached, the agency said in a news release.

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