A DIFFERNT KIND OF FAIR LENDING LAWSUIT

Recently the City of Providence, Rhode Island filed a federal lawsuit alleging that Santander Bank, N.A. has discriminated against Providence’s minority communities by refusing to make prime mortgage loans available in minority neighborhoods as required under the Fair Housing Act. Providence is seeking millions in damages from Santander, Mayor Angel Taveras said, and hopes that federal regulators open investigations into potential redlining.
Santander denied the allegations. Santander is owned by Spanish banking giant, Banco Santander SA, and has its US headquarters in Boston.
 
So What’s Different
A lawsuit alleging redlining; a fairly common occurrence. A lender denying the allegations of redlining; a typical occurrence. A lawsuit filed by a city rather than the federal regulatory agencies or the Department of Justice; not at all typical.
 
Details
Providence officials first contacted John Relman, a Washington, D.C.-based lawyer last year to look into lending practices that may have led to high numbers of foreclosures in their city. Instead, Mayor Taveras said he was surprised to learn that the more pressing problem was a drop-off in lending to minority residents since 2006.
Providence officials accused the bank of changing lending strategies after it was bought by Banco Santander in 2009. Santander was formerly known as Sovereign Bank. Relman and city officials studied home mortgage loan data that banks report to regulators and found gaps in applications originating in African-American and Latino neighborhoods for Santander in Providence and throughout the Boston region.
Specifically, in Providence, city officials said they found that applications to Santander for prime loans from minority neighborhoods declined by 61 percent, while those of other leading banks dropped by 37 percent. In the Boston region, which includes Providence, the average number of mortgage originations by Santander after 2009 in minority neighborhoods declined by 36 percent, according to the lawsuit. Other leading lenders reported a drop of 7 percent. Meanwhile, lending by Santander in white neighborhoods increased by 34 percent during that time frame, according to the lawsuit.
 
The Other Side of the Coin
According to Thomas Callahan, the executive director of the Massachusetts Affordable Housing Alliance, Santander has been a welcome supporter of lending programs that benefit minority borrowers; for example, the bank increased to $50 million, from $40 million, the money it provides to a program that helps first-time, low- and moderate-income homebuyers get mortgages. About 51 percent of the homebuyers in the program are members of minority groups, Callahan said. Santander has “been not just involved, but been a leader,” he said. Callahan added that he has not reviewed the data outlined in the Providence lawsuit.
 
No Comment
The federal Consumer Financial Protection Bureau is aware of the lawsuit and alleged complaints, but would not comment on whether it would investigate.

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