Suit: Bank bypassing minorities

As pockets of the real estate market in Rhode Island climb out of the economic sludge of recession, Providence’s minority neighborhoods have been purposely bypassed by Santander Bank’s prime mortgage lending, according to a May 29 lawsuit filed by the city against the U.S. operations of the Madrid-based bank.
And Providence is not the only area the bank is avoiding lending in minority neighborhoods, according to plaintiffs.
“If you look at Santander’s lending … in much of New England, the data is stark and powerful – and indicates that Providence is merely the tip of the iceberg,” said attorney John Relman of the Washington, D.C.-based firm of Relman, Dane & Colfax, who filed the lawsuit for the city.
Santander quickly issued a statement rejecting the accusations. The bank also offered to work with the city “to allay its concerns,” but declined requests from Providence Business News to discuss the U.S. District Court suit and the bank’s approach to minority lending.
For Christopher Samih-Rotondo, a community organizer for Providence-based Direct Action for Rights and Equality, the lawsuit is a welcome response to what he called a longstanding “foreclosure crisis” in the city.
“Based on my work, which is mainly knocking on doors of homes that are scheduled for foreclosure sales, I’d say it’s a long overdue action by the city … considering the amount of abandoned homes and the issues of access to credit and mortgages, and affordable housing,” he said.
The lawsuit alleges that the bank violated the requirements of the Fair Housing Act by discriminating against the city’s minority communities by what is commonly known as “redlining, which refers to a practice of drawing a circle around an area and not lending into that area” because of concerns about creditworthiness of the residents, said Relman.
“We allege that Santander is disinvesting from the minority communities,” he said.
The lawsuit includes testimony from Raymond Neirinckx, who is the housing-commission coordinator at the Office of Housing and Community Development for the R.I. Department of Administration’s Division of Planning. “Coastway, Webster Bank, TD Bank, Bank of America and Citizens Bank are some examples of banks that have been involved in helping underserved, minority communities in Providence,” Neirinckx said in a statement. “In my experience, Santander is absent from the communities I work in.”
The lawsuit claims that in 2006 to 2007 Santander originated an annual average of 68 mortgage loans in Providence census tracts with a majority of minority residents and 51 mortgage loans in predominantly white census tracts.
From 2009 to 2012, Santander originated an annual average of 25 mortgage loans in the majority-minority census tracts in Providence and 64 mortgage loans in predominantly white census tracts.
“This means that Santander’s originations in majority-minority census tracts decreased by 63 percent, while its originations in predominantly white areas increased by 25 percent,” according to the lawsuit.
During the same time periods, mortgage applications to the bank from those neighborhoods followed the same trend, according to the lawsuit.
In its own analysis of data from the federal Home Mortgage Disclosure Act, HousingWorks RI found that in 2012, the number of mortgage applications statewide declined 51 percent from 2006 to 9,079 applications, said Interim Executive Director Nicole Lagace, who declined to comment on the lawsuit.
“For white applicants, the decrease in applications for home-purchase mortgages was 41 percent,” said Lagace. “For Latinos, there was a 75 percent decline in applications.”
The reasons for the decline can’t be determined from the data, she said.
“Across the board, there’s been a general tightening of underwriting criteria, which makes it more difficult for low- and moderate-income homebuyers to qualify for a mortgage,” said Rhode Island Housing Deputy Assistant Director Michael Milito. “It’s beginning to ease a little bit now.” Providence Mayor Angel Taveras and Relman say the legal action against Santander, which seeks unspecified monetary damages, could spur similar lawsuits in other cities. The complaint includes mortgage-lending information on the Boston Combined Statistical Area, which includes Providence, some areas in eastern Massachusetts, including Boston and Worcester, as well as Manchester, N.H.
“What I’d like to see happen is for banks to make loans to people who are eligible and have the credit,” said Taveras, a candidate for governor. “I hope this is a wake-up call to other cities across the country to really examine what’s going on in their neighborhoods.”
Jim Campen, professor emeritus of economics at the University of Massachusetts Boston, told PBN a recent report he authored, “Changing Patterns XX: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Boston, Greater Boston and Massachusetts 2012,” showed that “blacks and Latinos in Boston received far less than their proportionate share of conventional loans, and they were underserved by mortgage lenders.” The report was prepared for the Massachusetts Community & Banking Council.
But others working on homeownership issues in the region and nationally insist homebuyers in minority communities do have access to good mortgages.
“I don’t see that the issue of banks not lending in minority and low-income communities is prevalent in our region,” said Mullen Sawyer, executive director of Oak Hill Community Development Corporation in Worcester, Mass., which is the central Massachusetts partner for NeighborWorks America, a national organization that supports homeownership.
“Communities of color, in general, have less access to traditional banks,” said Marietta Rodriguez, vice president for homeownership and lending at NeighborWorks America headquarters in Washington, D.C.
But, if a person “gets as much information as possible to make a good decision, a good mortgage is available,” she said. •

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