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Hudson City Savings Bank, NJ, penalty for mortgage redlining

Paramus, NJ
09/24/2015
Fine Amount: 
potentially $32.75 million
Penalty Type: 
Issued by: 

The CFPB and the U.S. Department of Justice have announced a joint action against Hudson City Savings Bank (Paramus, NJ) for discriminatory redlining practices that denied residents in majority-Black-and-Hispanic neighborhoods fair access to mortgage loans. The complaint filed by the CFPB and DOJ 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. If the proposed consent order is approved by the court, 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, according to the CFPB's news release.

The joint action alleges that Hudson City illegally avoided and thereby discouraged consumers in majority-Black-and-Hispanic neighborhoods from applying for credit by:

  • Avoiding locating branches and loan officers in majority-Black-and-Hispanic communities
  • Avoiding using mortgage brokers in majority-Black-and-Hispanic communities
  • Excluding majority-Black-and-Hispanic communities from its marketing strategy
  • Excluding majority-Black-and-Hispanic neighborhoods from its credit assessment areas

The consent order, which is subject to court approval, requires Hudson City to take remedial measures to provide access to credit to the Black and Hispanic neighborhoods that it allegedly redlined. Specifically, the order requires Hudson City to:

  • Pay $25 million to a loan subsidy program
  • Spend $1,000,000 on targeted advertising and outreach
  • Spend $750,000 on local partnerships
  • Spend $500,000 on consumer education
  • Offer full-service banking in majority-Black-and-Hispanic communities
  • Expand assessment areas to include majority-Black-and-Hispanic communities
  • Assess the credit needs of majority-Black-and-Hispanic communities
  • Develop a fair lending compliance and training plan
  • Pay a $5.5 million penalty to the CFPB Civil Penalty Fund

Prepared remarks of CFPB Director Cordray on the Enforcement Action press call.

Maps supporting the CFPB/DOJ complaint against Hudson City Savings

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