Hudson City Savings to Settle Federal 'Redlining' Complaint

By BARBARA HEINS (Patch Staff)

Hudson City Savings Bank, which has several branches in Fairfield and Westchester counties, has settled a Justice Department and Consumer Financial Protection Bureau complaint that it engaged in a pattern or practice of “redlining” in predominantly black and Hispanic neighborhoods in its residential mortgage lending practices.

The “redlining’’ allegedly occurred from at least 2009 to 2013, when Hudson City failed to serve the credit needs of majority black and Hispanic neighborhoods throughout its major market areas, including the Bridgeport area, New Jersey, New York City and surrounding counties, and the Philadelphia area, according to the Justice Department. Hudson City has agreed to settle the complaint without contested litigation; invest more than $25 million in minority lending programs and pay more than $2 million in penalties.

“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. This resolution represents the Justice Department’s largest residential mortgage redlining settlement in its history.

The settlement, which is subject to court approval, was filed in conjunction with the agencies’ complaint in the U.S. District Court for the District of New Jersey. The complaint alleges that Hudson City violated the Fair Housing Act and Equal Credit Opportunity Act (ECOA), which prohibit financial institutions from discriminating on the basis of race, color or national origin in their mortgage lending practices.

“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,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, said 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.”

Hudson City’s Fairfield County branches are in the Cos Cob neighborhood of Greenwich, Stamford, Darien, Norwalk, Fairfield, Bethel, Monroe, Ridgefield. In Westchester County, the bank is located in Larchmont, Harrison, White Plains, Mamaroneck and Yorktown Heights.

“Hudson City Savings Bank structured its business operations to systemically avoid providing credit services in predominantly minority neighborhoods,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “There is no room for such behavior in our banking system. In addition to paying $25 million for a loan subsidy program, today’s settlement agreement will require the bank to take a number of concrete steps to ensure that they improve access to responsible and affordable credit to qualified borrowers in Black and Hispanic neighborhoods.”

“We allege that Hudson City’s redlining practices illegally cut off opportunities for consumers in predominantly Black and Hispanic neighborhoods to get a mortgage and achieve the dream of homeownership,” said CFPB Director Richard Cordray. “Without access to affordable credit, neighborhoods deteriorate in the long shadow cast by unfair lending. (Thursday’s) action seeks to remove the redline by bringing $27 million in mortgage subsidies and outreach programs, along with new bank branches to the communities who should have had access from the beginning.”

The lawsuit originated from a joint investigation with the CFPB that commenced in March 2015.

Under the terms of the proposed settlement, Hudson City will invest $25 million in a loan subsidy fund to increase the amount of credit the bank extends to majority-Black-and-Hispanic neighborhoods across its market areas. In order to make residential mortgage loans available to residents of minority neighborhoods that were not adequately served by Hudson City, the bank will further invest $2.25 million in advertising, outreach, financial education, and community partnership efforts and open two full-service branches in these neighborhoods.

The settlement will require Hudson City to further develop robust internal controls to ensure compliance with fair lending obligations, provide fair lending training to its employees, senior management, and the Board of Directors, and create a comprehensive long-term plan to increase lending in previously redlined areas. Hudson City will further pay a civil monetary penalty of $5.5 million.

Photo: Hudson City Savings Bank in Yorktown. Credit: Googlemaps.