Lending

CFPB, DOJ fine Hudson City $27M for mortgage discrimination violations

Largest redlining settlement in history

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The Consumer Financial Protection Bureau and the Department of Justice announced a joint action against Hudson City Savings Bank for providing unequal access to mortgage credit in Black and Hispanic neighborhoods.

If the court approves the consent, Hudson City 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.

This represents the largest redlining settlement in history to provide such direct subsidies. And according to the Department of Justice, this won't be the last, with an increased number of mortgage redlining investigations underway. 

However, the DOJ noted that it is hard to say if there is an increase in the violations happening. Instead, the increases are mostly due to the investigations becoming a priority focus.

This complaint alleges that Hudson City illegally provided unequal access to credit to neighborhoods in New York, New Jersey, Connecticut and Pennsylvania.

The bank located branches and loan officers, selected mortgage brokers, and marketed products to avoid and thereby discourage prospective borrowers in predominantly Black and Hispanic communities.

The Equal Credit Opportunity Act prohibits creditors from discriminating against applicants in credit transactions on the basis of characteristics such as race, color, and national origin. 

Additionally, the DOJ alleges that Hudson violated the Fair Housing Act, which also prohibits discrimination in residential mortgage lending.

Hudson City is a federally-chartered savings association with 135 branches and assets of $35.4 billion.  Hudson City focuses its lending on the origination and purchase of mortgage loans secured by single-family properties.

While Hudson did not admit to the act, the DOJ explained that it is typical for lenders to neither admit nor deny actions. 

“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.

“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,” said CFPB Director Richard Cordray.

Hudson City did not have a comment at time of publication.

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