Opening Acts: February 3, 2015

Photo © by Bernard Kleina

February 3, 2015

Lawsuit Alleges M&T Bank Promotes Segregation

Investigation Finds Racial Bias in Bank’s Mortgage Lending Policies and Practices

Today, the Fair Housing Justice Center (FHJC) and nine (9) African American, Hispanic, South Asian and white testers filed a federal lawsuit alleging that the M&T Bank Corporation discriminates in its mortgage lending practices on the basis of race and national origin. M&T Bank (formerly Merchant & Traders Trust Company founded in 1856 in Western New York and headquartered in Buffalo, New York) is believed to be the 17th largest commercial bank in the United States.  As of 2014, M&T Bank had $134.4 billion in assets and more than 700 branches in New York, New Jersey, Pennsylvania, Maryland, Delaware, Florida, Virginia, West Virginia, and Washington, D.C.

A two-year testing investigation, conducted by the FHJC, centered around two issues.  One focus of the investigation was a first-time home buyer program operated by the bank. The program, called Get Started, offers first-time home buyers favorable mortgage terms (e.g. lower downpayments, the ability to finance closing costs, etc.) if the buyer agrees to locate a home in federally designated low-moderate income (LMI) areas that are part of a community revitalization effort or in a neighborhood that is not LMI, but is more than 50% minority.  The FHJC strongly supports community reinvestment strategies in LMI areas, but objects to the use of neighborhood racial criteria by the bank. Loan officers told some testers and not others about the racial criteria associated with the program.  While minority testers were often encouraged by loan officers to consider using the Get Started program to buy their first home, white testers were often not told about the program or were overtly discouraged from using it.  In addition to the impermissible racial criteria attached to a loan product offered by the bank, the investigation yielded evidence of loan officers treating FHJC testers differently in a variety of ways based on race and national origin. 

The nine individual plaintiffs in this lawsuit were assigned to pose as married households looking to purchase their first home. In these pre-application tests, the testers asked the lender to help them figure out how much they could afford to purchase before beginning their search and prior to working with a real estate professional. It is common for real estate agents to ask home buyers to contact a lender prior to beginning their search for housing. Minority testers were assigned more income, greater assets, fewer debts, and better credit scores than their white counterparts.

Here are a few examples of the differences in treatment and information that were documented and recorded in the FHJC testing investigation: 

· An M&T loan officer informed a South Asian tester that she would likely qualify to purchase a $400,000 home with a maximum loan amount of $320,000 and she was encouraged to use the Get Started program.  The same loan officer told a lesser qualified white tester that she could afford a higher priced home, up to $450,000, she would qualify for a larger conventional mortgage of $405,000, and she was not told about the Get Started program. 

· An M&T loan officer informed an African American tester about the option of using the Get Started program, with its advantageous terms, to purchase a home and was encouraged to consider predominately minority neighborhoods of Harlem, Springfield Gardens, St. Albans, and Ozone Park.  The same loan officer never mentioned using the Get Started program to the white tester and instead recommended that she look at purchasing her first home, using conventional financing, in the predominantly white neighborhoods of Murray Hill, Middle Village, and Maspeth, or parts of Rego Park.  When the loan officer discussed Rego Park with the white tester, she cautioned the tester that a certain section of that Queens neighborhood is “all Russian” and added “you don’t want that.”

· An M&T loan officer told a Latina tester that she would likely qualify for a conventional loan of $405,000 to purchase a $450,000 home, while the same loan officer told a lesser qualified white tester that she would likely qualify for a higher conventional loan of $530,000 to purchase a home up to $550,000.  The loan officer briefly mentioned the Get Started program to the white tester but stated that “I highly doubt that you’re gonna buy in an area where you’re a min…more minority than majority.”  Later in their conversation the loan officer again reminded the white tester that if she used the Get Started program she would have to buy in a majority minority area and added “if you get what I mean.”   

· An M&T loan officer informed an African American tester that she could not provide the tester with a possible home price or loan amount because it was premature for her to buy anything until she saved more money for a downpayment.  The same loan officer told a lesser qualified white tester that she could purchase a condominium for up to $210,000 or a co-op for up to $350,000.  While both testers were told about the Get Started program, the white tester was told that she might want to consider an area where French people are moving into Harlem.  Also, the loan officer encouraged the African American tester to consider an FHA loan because of the amount of money she had available for a downpayment, but the same loan officer told the white tester, who had less money available for a downpayment, that she should not consider FHA because the closing costs and fees were too high. 

· On another test, the same M&T loan officer told both testers, one African American and one white tester, about the Get Started program and conventional financing.  But after the loan officer explained to the white tester that with Get Started she would have to move to a LMI area or to an area where the “demographics are changing,” she told the white tester that the only loan she could get was a conventional mortgage.

FHJC Board President Gene Capello commented, “Too often, ordinary home buyers are unaware of how consumers of other races and national origins are being treated. Using testers as “proxies” for real home buyers afforded us a unique opportunity to learn whether everyone is being afforded the same information and service. This investigation demonstrates that testing can be effectively employed to document unfair and discriminatory lending practices.”  FHJC Executive Director Fred Freiberg added, “The disparate treatment, unequal information, and steering based on race and national origin, combined with the illegal use of racial criteria in a Bank sponsored loan program, is discriminatory and serves to reinforce patterns of residential racial segregation in New York City. These discriminatory policies and practices are precisely the type of conduct that the federal Fair Housing Act was intended to prohibit and prevent.” Freiberg added, “Throughout a significant part of the last century, it was common for many lenders to refuse to serve minority neighborhoods at all and/or to make financing available to minority homebuyers for home purchases only in minority or integrated neighborhoods. What this case presents is a contemporary twist on an old and familiar story. The bottom line is that race and national origin appears to be infecting the policies and practices of this lender in a way that limits housing choice, provides unequal information based on race and national origin, and fosters residential segregation.”

The lawsuit seeks injunctive relief to stop the discrimination and ensure future compliance with fair housing and fair lending laws, in addition to damages, costs, and attorney’s fees. The FHJC is represented by Diane L. Houk and R. Orion Danjuma of Emery Celli Brinckerhoff & Abady, LLP.