Rachel L. Swarns, ‘Redlining’ Home Loan Discrimination Re-emerges as a Concern for Regulators. The New York Times, 30 October 2015. “In 2014, Hudson [City Savings Bank] approved 1,886 mortgages in the market that includes New Jersey and sections of New York and Connecticut, federal mortgage data show. Only 25 of those loans went to black borrowers.”
Hudson, while denying wrongdoing, agreed last month to pay nearly $33 million to settle a lawsuit filed by the Consumer Financial Protection Bureau and the Justice Department. Federal officials said it was the largest settlement in the history of both departments for redlining, the practice in which banks choke off lending to minority communities.
Outlawed decades ago, redlining has re-emerged as a serious concern among regulators as banks have sharply retreated from providing home loans to African-Americans in the wake of the financial crisis….
The recent cases illustrate how redlining has evolved. Bankers no longer talk openly about denying loans to black people. Instead, officials said, some banks have quietly institutionalized bias in their operations, deliberately placing branches, brokers and mortgage services outside minority communities, even as other banks find and serve borrowers in those neighborhoods….
Fallout from the excesses of the subprime era in mortgage lending has, in some ways, set the stage for the discriminatory practices of today. As banks have tightened their credit lending standards to avoid risky loans, the percentage of blacks and Hispanics getting approved for mortgages has plunged….
In 2014, black people held 5.2 percent of the nation’s home loans, compared with 8.7 percent in 2006, according to the Federal Reserve Bank. Hispanics have struggled to regain lost ground as well, accounting for 7.9 percent of home loans in 2014, compared with 11.7 percent in 2006….
The issue is also achingly familiar. Until the 1960s, banks openly starved minority communities of home loans with the full backing of the federal government.
For decades, the Federal Housing Administration relied on so-called residential security maps to help decide which mortgages it would insure. The maps ranked and color-coded neighborhoods in cities across the country according to their perceived investment risk.
Affluent white neighborhoods that were “in demand” were typically shaded green. Black neighborhoods were shaded red and shut out of the conventional loan market….
Even after the passage of laws that banned discriminatory lending in the late 1960s and ’70s, redlining persisted. Its modern-day form, though, is far less overt….
Of the 54 branches that Hudson acquired or opened from 2004 to 2010, only three were in predominantly black or Hispanic neighborhoods, according to the lawsuit filed by the Consumer Financial Protection Bureau and the Justice Department. Predominantly black and Hispanic communities accounted for more than a third of its market in the region that included North Jersey and parts of New York, but the bank stationed only 12 of its 162 mortgage brokers in those communities. Last year, blacks accounted for just over 1 percent of Hudson’s mortgage approvals in the market that includes New Jersey and sections of New York and Connecticut; Hispanics accounted for 4 percent.
The government’s analysis of the bank’s lending data shows that Hudson’s competitors generated nearly three times as many home loan applications from predominantly black and Hispanic communities as Hudson did in a region that includes New York City, Westchester County and North Jersey, and more than 10 times as many home loan applications from black and Hispanic communities in the market that includes Camden, N.J….
As part of the redlining settlement, Mr. Salamone, [Hudson City Savings Bank’s] current chief executive, has agreed to open two full-service branches in minority neighborhoods, to increase outreach to those neighborhoods, and to invest $25 million in a loan-subsidy fund to increase the amount of credit extended to black and Hispanic borrowers.