New York lender settles Justice Department mortgage suit

To settle Justice Department claims of lending discrimination, Albank, a New York-based thrift, agreed to provide $55 million in discounted mortgage loans to minority applicants in August. Albank will also contribute $700,000 to a home ownership counseling program, and advertise their mortgage loans and other banking products in minority areas. The August settlement agreement will cost Albank about $9 million.

The Department of Justice lawsuit filed against Albank alleged that the lender, who does business in New York, Connecticut, and parts of the Midwest, had engaged in the practice of redlining in violation of the Fair Housing Act and the Equal Credit Opportunity Act. Albank had refused to make loans in certain areas of cities in New York and Connecticut. Specifically, the Justice Department pointed to minority neighborhoods in the Connecticut cities of Hartford, Waterbury, Bridgeport, New Haven, New Britain, Stamford and Norwalk. The Justice Department further alleged that Albank gave instructions to brokers to not write loans in the southern part of Westchester County in New York. Westchester County is divided by an Interstate highway. Areas south of the Interstate were not being served by Albank.

Mortgage brokers were given explicit instructions to not write loans in minority areas Albank did not have offices in the areas in question, but did make loans in surrounding areas through independent mortgage brokers and other agents. The brokers and agents who worked with Albank were given explicit instructions concerning where Albank would make loans.

Paul Hancock, the Department of Justice's acting deputy assistant attorney general for civil rights, said that federal investigators had uncovered documents written by Albank executives that instructed mortgage brokers to engage in redlining. According to Hancock, there were "explicit instructions, in writing, not to make loans in these areas."

"Banks can define the area that they intend to serve," Hancock told an Associated Press reporter. "However, they must make that decision without regard to race or national origin. What's unusual here is that the lender decided to serve a geographic area but then made exceptions to that by carving out enclaves within the geographic area that were determined to be off-limits."

Hancock went on to say that there was no risk-related justification for Albank's alleged redlining practices. Areas were not excluded because applicants living there had poor credit or because the bank had lost money in them. Claims by Albank that they had pulled out of these areas because of a recession were also unfounded, according to the Justice Department. The exclusion of minority neighborhoods had taken place since the late 1980s, before the recession began.

Bank only accepted 16 applications from minority borrowers in four years
The bank's own records showed that an overwhelming majority of their applicants for mortgage loans were white. In their Connecticut service area from 1992 through 1996, Albank accepted 550 applications for mortgages from white applicants. Nine applications were submitted by applicants who were either African-American or Hispanic. During the same time period in Westchester County, New York, Albank took 196 applications from whites, but only seven from African-Americans or Hispanics.

According to Attorney General Janet Reno, when Albank did write loans in excluded areas, it did so "almost exclusively for whites, and it could offer us no business justification for this behavior." Reno went on to say that the settlement will open up more home owning opportunities in the Northeast.

Settlement hailed by New York governor
George Pataki, New York's governor, also praised the settlement. "This is a significant settlement that will lead to much-needed lending in minority communities," he said. The New York State Banking Department had also filed suit against Albank. Albank settled that suit in July.