Biased lending accusation to benefit originators

by Justin da Rosa03 Nov 2015
A New Jersey-based bank has been accused of discriminatory lending – but it may be indicative of big banks’ desire to take on the easiest possible deals.

Federal regulators are alleging Hudson City Savings Bank – New Jersey’s largest savings bank – avoided predominantly Hispanic and African American neighborhoods when opening branches across New York and Connecticut. They also allege the lender focuses on marketing mortgages in predominantly white neighbourhoods, according to the New York Times.
And there seems to be some evidence of biased lending.

According to the Times, 1,866 mortgages were originated in New Jersey, New York, and Connecticut in 2014 and only 25 of those loans went to African American borrowers.

Hudson denied any discriminatory lending, but agreed to pay $33 million to settle a lawsuit brought forth by the CFPB.

It’s a case that may indicate larger banks’ focus on deals that are easier to fund, according to one industry player.

“Maybe, I really don’t know, but that’s the sense I get from clients; the banks aren’t willing to work with them,” Samir Doski, principal with Horizon Home Mortgage in Connecticut, told Mortgage Professional America. “I’m not sure if there is a bias there or not.”

According to Doski it could be indicative of banks wanting the easiest deals possible.

“They’re not looking to structure difficult deals and work with clients who don’t fit neatly into a box,” Doski said.

Therein lays the value of a mortgage broker. Mortgage brokers pride themselves on finding solutions for even the most difficult situations – and not just for clients with exemplary credit.

And with borrowers and industry players grappling with more stringent lending requirements following the financial downturn, it seems more and more Americans will have to turn to the broker channel.

According to the Times, African Americans held only 5.2% of the nation’s mortgages in 2014, compared to 8.7% in 2006. For their part, Hispanics held 7.9% of home loans in 2014 – down from 11.7% in 2006.


Should CFPB have more supervision over credit agencies?