M&T To Take On Hudson City Fair-Lending Pledges

The Record ( — Thursday, October 1, 2015

staff writer | The Record

M&T Bank said it will assume fair-lending and community-reinvestment obligations agreed to by Hudson City Savings Bank, its Paramus-based acquisition target, after federal regulators Wednesday approved the deal valued at $5.4 billion. The bank deal would be the biggest in New Jersey in seven years.

The obligations under Hudson City's $33 million settlement include a promise to spend $25 million on loan-mortgage subsidies in black and Hispanic areas, $1 million on advertising and outreach, $750,000 to partner with community-based or governmental organizations, and $500,000 on consumer education.

The Federal Reserve Board said Wednesday in its 40-page merger approval that it expects Buffalo-based M&T "to fulfill all outstanding obligations of [Hudson City] under applicable law and the consent order."

The consent order with Hudson City announced last week by the Consumer Financial Protection Bureau and the U.S. Department of Justice also calls for the opening of two branches in minority neighborhoods within Hudson City's market area.

The approval of the deal by regulators after a three-year review does not specify where the two branches will be, but suggests they could be located in any of the cities within Hudson City's market area, from New York City to Philadelphia.

"Where we will locate those two new branches, that has not been determined yet," Chet Bridger, an M&T spokesman said Thursday in an email.

"I hope it will be in Camden, which is under-banked," said Phyllis Salowe-Kaye, executive director of consumer watchdog and housing counselor New Jersey Citizen Action, a critic of Hudson City's minority-lending record.

Citizen Action originally objected to M&T's proposal based on Hudson City's weak minority lending record, but after discussing community reinvestment plans with M&T officials, withdrew its objection.

"We are pleased M&T will be doing more business in New Jersey and they have the ability and the capacity to do it," Salowe-Kaye said Thursday.

Regulators said last week that from 2004 through 2010, when Hudson City expanded from New Jersey into Staten Island, Long Island, the Lower Hudson River Valley and Fairfield County, Conn., 94 percent of the branches that it opened or acquired were outside of areas where a majority of the population is black or Hispanic. Hudson City also placed all of its loan officers outside of minority areas and avoided using mortgage brokers in those neighborhoods.

Also, the federal agencies said none of the 47 loan brokers used by Hudson City in the Philadelphia and Camden areas were based in black or Hispanic communities.

The federal agencies indicated that Hudson City advertised and offered discounted home-improvement loans only in predominantly white counties, excluding from eligibility the counties with the highest proportions of black and Hispanic neighborhoods.

Banks are required under the Community Reinvestment Act to select a market area and to meet the credit needs of residents in that area. The government accused Hudson City of violating the CRA by excluding most or all black and Hispanic neighborhoods in the areas it selected as its assessment area.

In the Philadelphia and Camden areas, for example, Hudson City had excluded all 337 neighborhoods where the majority of the residents are black and Hispanic, the agencies said.

Hudson City did not admit wrongdoing. During the merger application review process, M&T defended parts of Hudson City's lending record, according to the Fed's approval order.

M&T represented that loans that Hudson City originated, regardless of the borrower's race or ethnicity, were subject to the same credit underwriting and pricing standards used industrywide. M&T also argued that a more accurate picture of Hudson City's mortgage-lending activities emerges when considering loan types other than the conventional home purchase loans on which its critics focused, such as refinance loans and home-improvement loans.

M&T also said that apparent racial disparities in loan denial rates for both M&T and Hudson City were because of the creditworthiness of the applicants, not discrimination. Reasons for denial included inadequate collateral, excessive debt in relation to income, insufficient funds to close and other issues.

According to Ken Thomas, an independent banking consultant and economist based in Miami, Hudson City was fortunate to settle for about $33 million.

"Just about everything Hudson City did just smacked of [Community Reinvestment Act] problems,'' he said. "They made it easy for the DOJ to make their case.

"M&T obviously wants this deal very badly, and Hudson City made the right decision by settling,'' Thomas said.

The acquisition is the biggest bank deal in New Jersey since TD Bank acquired Commerce Bancorp in 2008.

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