A national community reinvestment advocacy group has challenged M&T Bank Corp.’s proposed purchase of Hudson City Bancorp in New Jersey, criticizing both banks’ records of lending to low-income and minority borrowers but especially that of the smaller bank being acquired.
Inner City Press/Fair Finance Watch, a Bronx-based group led by longtime activist Matthew Lee, filed a protest letter against the merger with the Federal Reserve Bank of New York under the federal Community Reinvestment Act, calling for public hearings and rejection of the merger.
Citing mortgage lending data collected under the Home Mortgage Disclosure Act, the group contended that Hudson City “disproportionately” rejects black and Hispanic mortgage applicants in metropolitan New York City, Long Island and the tony suburbs of Connecticut. And it said M&T had a poor record in Baltimore, Philadelphia and Washington, D.C., as well as New York City and Long Island.
“On this record, the merger should not be approved,” the group said in a news release. “M&T should not be allowed to buy Hudson City Savings Bank.”
M&T defended its lending record, citing its string of “outstanding” ratings from regulators when they evaluate its performance under the federal lending law.
“M&T Bank has long record of commitment to the communities we serve,” said bank spokesman C. Michael Zabel. “We support community-based organizations, we lend responsibly to individuals, families and businesses and we have received the highest possible scores on every CRA exam since 1982.”
Buffalo-based M&T agreed in late August to buy Paramus-based Hudson City for $3.7 billion in stock and cash, expanding its retail branch business into New Jersey for the first time and instantly gaining the No. 4 market share in the Garden State. The deal for New Jersey’s largest savings institution brings M&T $43.6 billion in assets, $28 billion in loans, $25 billion in deposits and 135 branches in three states. But it’s still subject to approval by the Fed, as well as New York and New Jersey regulators. The merger applications have been submitted.
“This is a large, too large, acquisition for M&T … given its weak marketing and lending to Hispanics in its current markets,” Lee wrote Sunday in a letter to the Fed.
Known as CRA, the 1977 law and subsequent revisions to it require banks to make loans and investments in communities in which they take deposits, to prevent discrimination and redlining of neighborhoods. That refers to what used to happen when a bank accepted money from an area but refused any loan applications from it, effectively drawing a red line around the neighborhood, which was often lower-income or mostly minority.
A related law, the Home Mortgage Disclosure Act, or HMDA, requires banks to report detailed data by census tract about their mortgage lending, including the race and ethnicity of borrowers and whether they were approved or rejected. CRA was later expanded to include small-business lending data, as well.
Under the law, when a bank applies to regulators for permission to make an acquisition or open a new office, the public can submit comments or protests, including based on the bank’s lending record under CRA. And regulators can reject an application based on those comments, although that rarely happens. The public comment period for this merger extends to Oct. 27.
Indeed, Inner City Press, which has protested every major banking industry merger for the last two decades, said its latest protest “will be a test of the Federal Reserve’s seriousness” about enforcing the law and protecting consumers.
“ICP has been troubled by the lending patterns of Hudson City,” Lee wrote in an email to The Buffalo News.
According to the group, Hudson City is a much larger mortgage lender for home purchases in the New York City area, even though M&T is better known. That’s because Hudson City predominantly makes mortgages as a traditional savings bank, while M&T is more of a commercial lender and full-service bank.
But based on mortgage data from 2011 included in the ICP report, Hudson City made 765 conventional home purchase loans to white borrowers in the New York City area, but only 14 to Hispanics and just five to black borrowers. And it rejected the applications of black borrowers 3.21 times more often than those of white borrowers.
M&T “cannot make up for this,” Lee said. The company made 119 loans to white borrowers, but just 17 to Hispanics, who were denied 1.91 times more often than white borrowers.
“Today, we don’t have a strong retail banking presence in the metropolitan, tri-state area around New York City, but when our merger with Hudson City is finalized, we will bring that same level of commitment to those new communities, and we will also bring a broader, more diverse set of banking products and services as well,” Zabel said.
On Long Island, Hudson City made 294 loans to white borrowers, but just two to black customers and seven to Hispanics. M&T similarly made 48 loans to white borrowers, three to black borrowers and none to Hispanic customers, while denying black applicants 2.92 times more often than white borrowers.
In Bridgeport, Stamford and Norwalk, Conn., Hudson City made 288 loans to white borrowers, but only six to Hispanic customers and one to a black borrower.
In the Washington area, M&T made 34 loans to white borrowers, but six to black borrowers and none to Hispanic customers, and it denied black borrowers 2.92 times more often. In Baltimore, it approved 88 loans to white borrowers, but 14 to black customers and one to a Hispanic. It denied black and Hispanic customers 3.67 times and 16.6 times more often than whites, respectively.
In Philadelphia, M&T made 85 loans to white customers, but one to a black customer and none to Hispanics.