M&T Bank Corporation (MTB) became the latest major regional bank to face the charge of discriminatory mortgage lending practices. Fair Housing Justice Center Inc. (“FHJC”) sued the company for using racial criteria to direct potential borrowers toward certain neighborhoods and determine their eligibility for loans in New York City.
FHJC hired several women (between 2013 and 2014), presenting them to M&T Bank loan officers as prospective first-time home buyers who were married without children. Majority of these non-white testers were steered by the bank to apply for loans through its "Get Started" program.
This program is limited to homes in neighborhoods (mainly Harlem in Manhattan and St. Albans in Queens) where more than 50% is minority population. Notably, the program offers several advantageous terms including low down payments.
Nevertheless, M&T Bank loan officers discouraged white testers from using this program, while steering them toward majority-white neighborhoods. Further, these testers were told that they could afford larger loan amount despite being less qualified than non-white testers.
The lawsuit, filed in U.S. District Court, Southern District of New York, accuses M&T Bank of violating the federal Fair Housing Act along with state and city human rights laws. Fred Freiberg, executive director of FHJC, said in a statement that such activity "serves to reinforce patterns of residential racial segregation in New York City."
The lawsuit seeks order to prohibit such racial discrimination by monitoring M&T Bank’s lending practices and proper training of loan officers. Additionally, the lawsuit claims an unspecified amount of money as compensatory and punitive damages.
Of late, M&T Bank has been at cross-roads with regulators and law enforcement agencies. The company’s proposed merger deal with Hudson City Bancorp Inc. (HCBK), announced in 2012, is repeatedly getting delayed owing to issues related to its money-laundering practices.
Though several other major banks including JPMorgan Chase & Co. (JPM), Citigroup Inc., Bank of America Corp. (BAC) and Wells Fargo & Company (WFC) had been sued over similar charges, these cases were eventually dismissed by the courts. Hence, the fate of the above-mentioned case remains to be disclosed. Also, we believe that the lawsuit will likely further hinder M&T Bank’s chance to come clean on various fronts.
Currently, M&T Bank carries a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment