Hudson City Settles Discriminatory Lending Charges for About $33 Million -- 4th Update
September 24 2015 - 4:45PM
Dow Jones News
By AnnaMaria Andriotis And Rachel Louise Ensign
The Justice Department and Consumer Financial Protection Bureau
reached a settlement with Paramus, N.J.-based Hudson City Bancorp
Inc. on Thursday over allegations that the lender intentionally
withheld giving mortgages to minorities.
Regulators described the $33 million settlement as part of a
larger effort under way to stop discriminatory lending.
Between 2009 and 2013, the bank avoided locating branches and
loan officers in areas with large African-American and Hispanic
populations and excluded these groups from marketing strategies, a
practice the Justice Department and CFPB described as
redlining.
They also alleged the bank intentionally avoided inner-city
areas in New York, New Jersey and Connecticut with high minority
populations and instead focused on setting up locations in affluent
suburbs with a predominantly white population.
Hudson City didn't immediately respond to requests for comment,
though the Justice Department in a conference call said the bank
neither admitted nor denied wrongdoing. If the settlement is
approved by the U.S. District Court in New Jersey, Hudson City will
pay nearly $33 million, including about $27 million for loan
subsidy and outreach programs to minorities and a $5.5 million
penalty.
The agreement represents the largest residential mortgage
redlining settlement in the Justice Department's history and is the
first redlining action for the CFPB, which was launched by the Dodd
Frank financial law of 2010.
According to the Justice Department's announcement Thursday,
"redlining" is the discriminatory practice by banks or other
financial institutions to deny or avoid providing credit services
to a consumer because of the racial demographics of the
neighborhood in which the consumer lives.
"Redlining is not a vestige of the past," said Vanita Gupta,
head of the Justice Department's Civil Rights Division on the
conference call. The Justice Department said it has increased the
number of active mortgage-redlining investigations to its highest
level in the past six years.
"Banks and lending institutions should be on notice that the
Justice Department continues to focus on discriminatory conduct in
mortgage lending and that such conduct won't be tolerated," said
Ms. Gupta. "Banks continue to build and structure their lending
operations in a way that avoids or fails to meaningfully serve
communities of color."
"Discriminatory practices in the mortgage market undermine
people's ability to buy a home and build long-term wealth," added
CFPB director Richard Cordray. "Rooting out discrimination to
ensure fair and equal access to credit for all qualified borrowers
remains a priority."
Hudson City expects to find out by the end of this month whether
banking regulators will allow it to be bought by Buffalo,
N.Y.-based M&T Bank Corp. The $3.7 billion tie-up was first
announced more than three years ago and is now the longest-delayed
U.S. bank deal on record valued at more than $100 million,
according to Dealogic.
Regulators have so far declined to bless the merger, initially
citing concerns about M&T's anti-money-laundering systems,
which that bank then spent millions of dollars to bolster.
The two banks have said they expect the Federal Reserve to make
a decision either approving or denying the deal by Sept. 30. The
chief executives of Hudson City and M&T in April said that the
deal remains a good one for both parties.
If the acquisition happens, M&T would become responsible for
fulfilling some of the terms of the agreement, the settlement
said.
The CFPB has been expanding its scope of discriminatory
allegations against lenders. The bureau has been investigating
car-loan lenders since it opened its doors in 2011, alleging, along
with the Justice Department, that some lenders' pricing policies
are leading to car dealers charging minorities more in interest
rates than other borrowers
The findings of Hudson City's alleged wrongdoings first emerged
in March 2014 during an examination by the CFPB. The CFPB says the
investigation looked at branch development dating back to 2004 to
determine what effects it had on cutting off minority borrowers
from credit between 2009 and 2013, the time period the settlement
covers. Between 2004 and 2010, the bank opened or acquired 54
branches and hasn't opened one since, according to court papers
filed Thursday.
Using census data, the CFPB and Justice Department found that of
the 135 branches Hudson City operates, nearly 90% are located
outside majority black and Hispanic areas. Between 2009 and 2013,
the bank didn't accept mortgage applications at all of its branches
and referred applicants to one of seven loan officers in branches
"outside of and not in proximity to majority-Black-and-Hispanic
areas," according to court papers. The complaint adds that none of
the seven loan officers were black or Hispanic or spoke
Spanish.
Lisa Beilfuss contributed to this article.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
September 24, 2015 16:30 ET (20:30 GMT)
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