Thank you. Today the Consumer Financial Protection Bureau and the Department of Justice are announcing a joint action against Hudson City Savings Bank for illegal redlining. We are filing a complaint which alleges that Hudson City structured its mortgage business to provide unequal access to credit products in majority-Black-and-Hispanic neighborhoods in New York, New Jersey, Connecticut, and Pennsylvania. I want to make it a point to thank our colleagues at the Department of Justice for their close collaboration with us on this matter, which represents the largest federal court settlement for redlining in history as measured by loan subsidies provided to consumers. Together we are asking the court to order Hudson City to pay $25 million in loan subsidies to make mortgage loans accessible to qualified borrowers in neighborhoods that the company had illegally redlined.
It is apparent to everyone that discriminatory practices in the mortgage market undermine people’s ability to buy a home and build long-term wealth. Without access to affordable credit to buy or improve a home, without a mortgage broker nearby, without a bank branch to offer basic services, neighborhoods deteriorate in the long shadow cast by discriminatory practices. The integrity of the consumer financial marketplace is diminished. If entered by the court, the order we have proposed will hold Hudson City accountable to the laws of the land, laws that enforce basic American ideals of fairness and equality for all.
In 2012, Hudson City generated over 90 percent of its mortgage loan applications for properties within three metropolitan statistical areas. The first area includes New York City, Long Island, and New Jersey. The second area includes Philadelphia, Camden, and Wilmington. The third area includes Bridgeport, Stamford, and Norwalk in Connecticut.
Through an initial Bureau examination, which was followed by a joint investigation, the Consumer Bureau and the Department of Justice filed a complaint alleging that, from at least 2009 to 2013, Hudson City engaged in illegal redlining and systematically discouraged consumers in majority-Black and Hispanic neighborhoods from applying to the bank for mortgage credit in violation of the Equal Credit Opportunity Act. Among other things, the complaint alleges that the bank placed its branches and loan officers principally outside of those neighborhoods. The complaint also alleges that nearly all of the mortgage brokers selected by the bank were located outside of those same neighborhoods. In addition, Hudson City’s limited marketing efforts occurred in neighborhoods with relatively few Black and Hispanic residents.
The Department of Justice also alleges that Hudson City’s practices violated the Fair Housing Act, which prohibits discrimination in residential mortgage lending. An official from the Justice Department will be speaking with you about those issues momentarily.
Today’s consent order, subject to court approval, requires Hudson City to take corrective action and provide fair access to credit for those creditworthy residents who live in the Black and Hispanic neighborhoods that it had previously redlined. Specifically, the order requires Hudson City to pay $25 million to a loan subsidy program, which will help residents obtain mortgages on a more affordable basis in majority-Black-and-Hispanic neighborhoods in the bank’s principal service areas.
The consent order will require Hudson City to take other remedial steps as well. The bank will open two new full-service branches within majority-Black and Hispanic neighborhoods. It must also improve its fair lending compliance and training to help ensure that it does not engage in future redlining. It will spend $750,000 to partner with local community-based organizations in the redlined communities. It will hire a consultant to assess the credit needs of Black and Hispanic neighborhoods, and it will hire a full-time Director of Community Development to oversee the continued development of its lending in Black and Hispanic neighborhoods.
Hudson City is required to address its lack of marketing to Black and Hispanic consumers by spending $1 million over five years on a targeted advertising and outreach campaign to generate applications for mortgage loans from qualified residents in the affected neighborhoods. The bank will also spend $500,000 over five years to provide financial literacy events for residents of affected majority-Black and Hispanic neighborhoods. Finally, Hudson City will pay a civil penalty of $5.5 million.
Unfortunately, we can see that illegal redlining is still a reality for certain neighborhoods in the consumer financial marketplace. Rooting out discrimination to ensure fair and equal access to credit for all qualified borrowers remains a priority for the Consumer Bureau. Borrowers should never be discouraged from obtaining a mortgage product because of the racial makeup of their neighborhood. That is un-American, plain and simple; it weakens our communities as well as our entire economy.
I now welcome the Department of Justice’s Head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta, to share some remarks.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.