A New York-area bank has been accused of mortgage lending practices that the Consumer Financial Protection Bureau (CFPB) says amount to red-lining areas with large minority populations.
Hudson City Savings Bank allegedly located its branches and loan offices, as well as marketed its loan products, in the hopes of discouraging prospective borrowers in predominantly black and Hispanic neighborhoods.
If the CFPB's complaint is approved by the court, the bank will be ordered to pay $25 million in direct loan subsidies to qualified borrowers in minority neighborhoods and pay another $7.75 million in penalties and outreach programs.
This represents the largest redlining settlement in history to provide such direct subsidies.
“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.
"Today’s action seeks to remove the redline by bringing more than $27 million in mortgage subsidies and outreach programs, along with new bank branches to the communities who should have had access from the beginning,” he said.
Hudson City is a federally-chartered savings association with 135 branches and assets of $35.4 billion. It focuses its lending on the origination and purchase of mortgage loans secured by single-family properties in the New York, Philadelphia, and Bridgeport metro areas.
The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against applicants in credit transactions on the basis of characteristics such as race, color, and national origin. In the complaint, the CFPB and DOJ alleged that from at least 2009 to 2013, Hudson City violated the law when it engaged in illegal redlining by offering unequal access to credit based on the race and ethnicity of prospective borrowers’ neighborhoods.