Samoh - Samoh AG Lynch Relaunches Janet Reno's 'Redlining' Crusade Vs. Banks

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AG Lynch Relaunches Janet Reno's 'Redlining' Crusade Vs. Banks

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10/07/2015

 

Witch Hunt: The new attorney general has shaken down a large New York-area bank for $33 million in fines and loan subsidies in a redlining settlement that's bigger than anything Janet Reno did in her war on banks.

And Loretta Lynch is just getting started. Several other major banks are under investigation for redlining, the illegal practice of denying loans to residents of certain areas because of their race.

"Based on what is on my docket right now, stay tuned," her civil-rights chief in charge of housing discrimination warned lenders.

If redlining is making a comeback, it's only in the fevered minds of Obama racemongers, whose crackdown on "predatory lending" has backfired. First, they punished banks for "targeting" minorities for mortgages. Now, they complain that banks aren't lending enough in low-income minority areas.

Banks are damned if they do, damned if they don't.

Paramus, N.J.-based Hudson City Savings Bank is the first to feel their schizophrenic wrath. Lynch charged that the $35-billion-in-assets lender discriminated against residents in majority black and Latino neighborhoods by "discouraging" them from getting home loans.

How? By turning them down for mortgages that they otherwise qualified for? No. By turning them away from loan offices? No.

According to court papers in the case, Hudson didn't open enough branches in poor, crime-infested areas where demand for home loans is low and real estate investment is highly risky and probably unprofitable. The bank's only guilt is acting like any risk-averse business.

The government admits having "no factual finding" to prove its racism charges. It based its investigation not on complaints from aggrieved customers but solely on statistics and maps showing "patterns" that Lynch's diversity police didn't like.

Hudson denies discriminating and says that it cooperated only to "avoid contested litigation" and prevent a hold on a pending merger. It notes that it received satisfactory ratings from Community Reinvestment Act examiners who monitor redlining.

Still, Lynch ordered the bank to open new brick-and-mortar branches in Camden, N.J., Philadelphia and the Bronx, and to shell out $200,000 a year in minority media advertising to "target" these markets.

She's also ordering it to apply "more flexible underwriting standards" in approving residents there for home loans, in an acknowledgment that they'd have a hard time meeting normal credit standards, while subsidizing their loans to the tune of up to $18,750 each in "down payment" and "closing cost assistance," acknowledging further that they really can't afford a mortgage on their own.

In other words, the government is forcing banks to take on the same risky mortgages that it forced them to make before the crisis under former Attorney General Reno's reign of terror.

Her war on alleged bank redlining sent banks scurrying to make more and more risky loans. The mortgage industry quickly realized that the only way to guard against civil-rights investigations was to water down lending standards, which of course is what fueled the historic housing bubble and bust.

Difference is, banks today are also in the cross hairs of the powerful, new Consumer Financial Protection Bureau, which has opened its own redlining probes against lenders. The CFPB, moreover, just signed a memorandum of understanding with the Department of Housing and Urban Development to team up on cases.

HUD, for its part, earlier this year declared victory in "one of the largest redlining complaints" that the feds ever filed against a mortgage lender. The agency, which also has enforcement authority, ordered Midwest giant Associated Bank to open four new offices in minority neighborhoods in Chicago and Milwaukee, and to front minority borrowers there $10 million in down-payment assistance.

So now a troika of federal agencies is pressuring banks to greenline risky home loans, doubling down on Reno's disastrous legacy.

Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials/100715-774588-lynch-relaunches-renos-crusade-against-banks.htm#ixzz3o4jqf5Z7
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