Hudson City Facing Federal Probe

The Record ( — Thursday, April 16, 2015

The Record

The sale of Hudson City Bancorp Inc. to M&T Bank Corp. may face a new obstacle: a government investigation into whether the parent company of Paramus-based Hudson City Savings Bank violated the Fair Housing Act by discriminating against protected minorities when making loans.

The Justice Department and the Consumer Financial Protection Bureau are examining whether Hudson City ran afoul of the federal housing discrimination law, Bloomberg News reported Wednesday.

"A preliminary CFPB review concluded that the firm denied loans to people in minority communities, including those in the New York area," said the report, which attributed that information to "two people familiar with the matter."

The acquisition by M&T, valued at $3.7 billion when it was announced in August 2012, has been delayed several times in part because of a federal regulator's concerns about the strength of M&T's anti-money-laundering defenses. Hudson City said this month that it had been advised by Buffalo, N.Y.-based M&T that the deal would not close on May 1, the previously announced target date.

Hudson City Chief Executive Officer Denis Salamone and Susan Munhall, head of the bank's investor relations, did not respond Wednesday to requests for comment on the Bloomberg report.

Representatives of the consumer board and the U.S. Attorney's Office in New Jersey said they had no comment.

Jumbo-mortgage lender Hudson City makes a majority of its loans in New Jersey and New York and focuses on the higher-end real estate market. It has received an overall "satisfactory" rating on its latest Community Reinvestment Act exam and a "low satisfactory" rating on the community lending subsection of the exam.

The Record reported in 2012 that fair-lending watchdogs in New York City and New Jersey had asked the Federal Reserve Board to hold hearings on M&T's merger application. They were concerned that Hudson City's black and Hispanic loan-denial rates were higher than those for whites and that the bank made very few conventional home purchase loans to black borrowers. No hearings have been held, but the acquisition has been delayed amid regulatory concerns, and the Federal Reserve has not ruled on the merger application.

According to an analysis by New York City-based Inner City Press/Fair Lending Watch, which looked at 2011 government lending data in New York City and surrounding counties — including Bergen, Passaic, Hudson and Essex — Hudson City denied home loans to black borrowers 3.21 times more frequently than whites.

"They did little outreach to minority communities," said Phyllis Salowe-Kaye, executive director of New Jersey City Action, another group that challenged the acquisition in 2012. "This was the bank that said, 'The doors are open, tell them to come in,' " she said.

Salowe-Kaye said Wednesday that her group has been in discussions recently with M&T about post-merger lending in minority communities in New Jersey and she is pleased with its cooperation.

"We hope the merger will proceed and we get a bank that wants to be in the community and wants to lend to the minority community," she said.

M&T will gain nearly 100 retail bank branches in New Jersey, where it now has none, if the deal goes through.

Hudson City's stock slid 4 cents to $9.38, and M&T Bank shares gained 72 cents to $123.98 in Wednesday trading.

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