Housing Enforcement Group sues M&T Bank for discrimination – ProPublica
One of the country’s largest banks discriminates against black, Latino and Asian homebuyers by offering less qualified white borrowers higher loan amounts and using racial criteria hidden in one of its loan programs, according to a lawsuit filed this week in federal court in Manhattan. The lawsuit also accuses the bank of directing homebuyers to certain neighborhoods based on their race or ethnicity.
The lawsuit claims M&T Bank violated the landmark Fair Housing Act, a 1968 law that sought to end discriminatory lending practices and limit the historic segregation of many cities across the country. The complaint was lodged by the Fair Housing Justice Center, a New York-based nonprofit funded by the US Department of Housing and Urban Development to enforce federal law that prohibits discrimination in housing.
Between 2012 and 2014, the Fair Housing Justice Center conducted a series of tests in which it sent qualified actors to determine whether white and non-white homebuyers would be treated differently when trying to pre-qualify for a mortgage. . All of them followed a similar scenario, telling bank agents that they were married with no children and that they were buying a first home. Black, Latino and Asian testers have slightly superior qualifications when it comes to income, credit, and complementary financial assets.
In nine separate interactions recorded with a camera or audio device, workers at M&T Bank’s New York loan office can be seen or heard treating white applicants differently from others, according to the lawsuit. In one case, a black candidate was told she did not have enough savings to buy a house. A white applicant with a slightly lower income and credit score and $ 9,000 less in savings was pre-approved for a loan. In another case, a Latina candidate was told that she would be entitled to a mortgage of $ 125,000 less than the white candidate on the test with lower income, lower credit and less money.
“The conduct of the Respondent, as described above, constitutes discrimination in the provision of residential real estate transactions and in the terms and conditions of such transactions on the basis of race or national origin. in violation of the Fair Housing Act, “says the lawsuit.
A complaint against a lender based solely on secret testing is quite unusual. Many fair housing experts could not think of another case. Since lawsuits against banks typically result from statistical disparities, whistleblowers or consumer complaints, this case could open up a new legal avenue to prosecute discriminatory lenders.
M&T Bank spokesman Michael Zabel did not answer questions about the allegations in the lawsuit. He sent a one-paragraph statement stating that the bank had “the highest percentage of African-American borrowers to buy a home and spent the highest percentage of its deposits on community development loans.” These facts reflect our deep commitment to equitable lending and to serving all of our neighbors in all of our communities, ”according to a report from the Association of Neighborhood Housing and Development. He also wrote that “This matter is of the utmost importance to us, and we have started taking action immediately to investigate and address this claim.”
New York-based M&T Bank is the 17th largest holding company of commercial banks in the United States, according to the lawsuit. The regional bank operates more than 700 branches in New York and seven other states and in Washington, DC The Fair Housing Organization believes the case draws the curtain on how discrimination still occurs in loans, even though the kind of overt fanaticism that prevailed generations ago is rarely seen. It turns out that the trial comes as the The Supreme Court is actively studying the scope of the 1968 decision Federal Fair Housing Act.
Fred freiberg, Executive Director of the Fair Housing Justice Center, has worked in the field of fair housing law enforcement for nearly four decades and heads one of the most prolific fair housing assessment agencies in the country. He also designed the United States Department of Justice’s Fair Housing Assessment Program.
Among the tests the organization has conducted with M&T, Freiberg said: “We would expect people to receive equal treatment or minority testers to get slightly higher loan amounts because they were slightly better. qualified. But a lot of the time, we found a different treatment that favored the white testers. “
The lawsuit claims that in addition to the favored white testers, the bank implemented a first-time homebuyer loan program that used the racial makeup of the area where the home would be purchased as a criterion, and that agents of Credit used the program to direct non-white home buyers to largely non-white neighborhoods.
“It was a bit shocking,” Freiberg said.
In some cases, the lawsuit claims, loan officers have turned white testers away from this loan and advised them to search for homes in very white areas while advising non-white testers to search in very black and Latino areas.
“I highly doubt that you are buying in an area where you are a minority … more than the majority,” a loan officer told a white tester.
It is illegal under the Fair Housing Act for lenders or real estate agents to suggest neighborhoods to clients based on their race.
Greg squires, a professor of public policy at George Washington University and a financial services expert who has written extensively on lawsuits over housing segregation and industry discrimination, said evidence presented in the lawsuit involving nine attempts pre-qualifying for a mortgage is troubling.
“It’s very striking,” he said. “When you have as many cases as they’ve had here, I think it’s hard to try to explain it like a bad apple.”
Squires said what M&T is accused of is not as bad as when Wells Fargo employees were accused of targeting subprime loans as “ghetto loans” for “mud people.” But the effect, he says, is the same. “It’s going to perpetuate segregation,” Squires said.
Also, he argued, when minority homebuyers get lower loan amounts than they are qualified for, it means they are not able to buy such a beautiful home. or to live in a neighborhood as pleasant as more qualified or even less qualified white buyers. And since better-off neighborhoods tend to have access to better schools, amenities, and services, this kind of discrimination has significant consequences.
Over the past several years, US Housing and Urban Development has consistently found that the racial orientation – leading black and Latino housing seekers away from whiter areas and white housing seekers away from more diverse areas – is the one of the most common forms of housing discrimination. In fact, pilotage has increased even as other forms of housing discrimination have declined, studies show.
“You see less evidence that the proverbial door is open to minorities. Rather, it is the door that is more open to whites,” Squires said. HUD studies found that “black and Hispanic buyers weren’t necessarily denied service, but showed fewer homes in fewer neighborhoods.”
Modern discrimination is more difficult to detect. It is unlikely that any of the Justice Center testers would have known that they had been offered different terms if they did not have the experience of another tester to compare it to. In the records, loan officers are friendly, polite, and appear helpful and concerned. They did not turn down the loans but offered different loans or lower amounts.
That’s why fair housing advocates argue that secret testing of landlords and real estate agents is often the only way to eradicate housing discrimination. Even then , testing is rarely done, as an earlier investigation by ProPublica found.
Credit market tests are even rarer. Loan transactions are much more complicated than simply asking an owner if an apartment is available, and therefore this type of testing requires more training and is more expensive. In addition, federal law prohibits putting false information on loan applications. Therefore, testing is hardly ever done unless a home buyer who has applied for a loan files a complaint.
Freiberg, considered the nation’s foremost expert on fair housing testing, had to devise a way to test lenders during the pre-qualification phase where borrowers give information about their income, credit and loans. assets in order to get pre-approved for a home loan, but don’t actually complete the application.
Freiberg said his organization has also tested a number of other New York City subway banks and is currently working through the records.