Opening Acts: November 4, 2016

Suit Alleges Discriminatory Mortgage Lending Practices by Ulster Savings Bank

African Americans and Whites Treated Unequally in FHJC Investigation

Today, the Fair Housing Justice Center (FHJC) and three African American testers filed a lawsuit in federal court (SDNY) alleging that Ulster Savings Bank discriminates in its home mortgage lending practices on the basis of race.  Ulster Savings Bank, founded in 1851 as Ulster County Savings Institution, primarily serves the upper Hudson Valley. The bank maintains branch offices throughout Dutchess, Orange, and Ulster Counties and additionally operates mortgage loan centers in Westchester and Suffolk counties.

Over the past five years, publicly available Home Mortgage Disclosure Act (HMDA) data disclosed that only 2.5% of considered home mortgages made by Ulster Savings Bank went to African Americans.*   A two-year testing investigation conducted by the FHJC involved sending African American and white testers to multiple Ulster Savings Bank loan offices.  The investigation revealed that loan officers repeatedly recommended lower home prices and loan amounts and less favorable terms for African Americans who presented better qualifications—higher incomes, more assets, less debt, and better credit scores—than the white testers with whom they were matched.  Some of the results of these tests are as follows:

  • During a test conducted at the Ulster Savings Bank office in Riverhead, Long Island, a loan officer launched into a description of government loan programs for low and moderate income homebuyers with the African American woman before inquiring about her income. Once the loan officer learned that the tester’s annual income made her ineligible for such financing, he recommended a home price and loan amount that was substantially lower than her white counterpart.  The loan officer recommended a home price range to the African American tester that was $150,000 less than the one suggested to the white tester.   The loan officer stressed the need for the white woman to pick a home where the “best schools” are and suggested she focus on “where do we want to raise our children?”  The loan officer did not advise the African American tester to focus on where the best schools or communities were, but rather mentioned only to the African American tester a town with lower taxes and a higher minority population.
  • During another test conducted at the Riverhead office, a loan officer, after obtaining information about the qualifications of each tester, quoted a maximum loan amount to an African American man that was $200,000 less than the loan amount provided to his white match. The loan officer offered loan options to the white tester that would make it possible for him to put less than 20% down and avoid paying private mortgage insurance, while these options were never mentioned to the African American tester.
  • In a test conducted at the White Plains office, an African American woman was told that she would qualify for a lower maximum loan amount and lower priced home than her white match.   The African American tester was told she would qualify for a loan up to $400,000 and the white tester was informed she would qualify for a maximum $495,000 loan.   The African American tester was informed that closing costs would likely be $20-25,000, while the white tester was told closing costs would only be approximately $15,000.
  • During a test conducted at the Goshen office, an African American man was told he qualified for a lower loan amount and lower priced home than his white tester match. A white woman was told that she could afford to purchase a $500,000 home while the African American man was told about he could purchase up a $400,000 home.  The African American tester was informed he would likely be charged a ½ point at closing, while the white tester was told at the outset that no points would be charged on her loan.  The loan officer suggested the African American tester search for a home in areas which have higher minority populations.
  • In a test conducted at the Poughkeepsie office, an African American woman was told she would qualify for a lower maximum loan amount and a lower priced home than her white counterpart.   The loan officer calculated financing for the African American tester on a $400,000 home while the white tester was told she could afford a $600,000 home.  The African American tester was told she would be charged a fraction of a point if she put down less than 25% down at closing, while the white tester was informed she would not be charged any points.  Finally, the African American tester was quoted $1,800 in bank fees and the white tester was informed that bank fees would amount to $1,000-1,100.

FHJC Executive Director Fred Freiberg stated, “When people prepare to purchase their first home, they have every right to expect that lenders will not treat them differently or provide different information based on their race. Lenders must take steps to ensure that bias does not infect their lending policies and practices.  Lending discrimination diminishes the ability of African Americans to equally and fully share in the benefits of homeownership and makes that cherished American dream more elusive.”  Freiberg added, “Fair housing and fair lending laws, which mandate lenders serve all populations in a non-discriminatory manner, must be vigorously enforced.”

The lawsuit alleges that the defendant’s practices constitute discrimination based on race in violation of the federal Fair Housing Act, the Federal Civil Rights Act, New York State Human Rights Law, and the Suffolk County Human Rights Law.  Plaintiffs are seeking damages as well as injunctive relief to stop these discriminatory practices and bring the bank into compliance with fair housing and fair lending laws. The plaintiffs are represented by Mariann Wang and Alice G. Reiter of Cuti Hecker Wang LLP.

The mission of the Fair Housing Justice Center (FHJC), a regional civil rights organization, is to eliminate housing discrimination; promote policies that foster open, accessible, and inclusive communities; and strengthen enforcement of fair housing laws.

*The HMDA analysis considered first lien home purchase loans for 1-4 family, owner-occupied, site-built homes.