M&T is sued by housing group for racial discrimination in its mortgage lending division

The New York City-based Fair Housing Justice Center is accusing M&T Bank of discrimination in mortgage lending practices on the basis of race and national origin.

On Tuesday, the FHJC filed a lawsuit in federal court in Manhattan based on results of an investigation conducted in 2013 and 2014. The organization used nine women – a combination of white, African-American, Hispanic and South Asian individuals – who posed as married first-time homebuyers when visiting an M&T loan office on Park Avenue in Manhattan. The nine “testers” are also plaintiffs in the suit.

The FHJC said its investigation focused on an M&T program called “Get Started,” which the bank promotes as featuring a low down payment and the ability to finance closing costs.

The center says the minority borrowers were often steered into minority neighborhoods through the program. The FHJC contends that loan officers often encouraged minority testers to use “Get Started” to buy their first home but that white testers were “often not told about the program or were overtly discouraged from using it.”

The organization also says that its testers found differences in the neighborhoods they were advised to move into and the loan amounts they were told they would qualify for. The group said it assigned its minority testers “more income, greater assets, fewer debts and better credit scores than their white counterparts.”

In response to the lawsuit, M&T spokesman C. Michael Zabel said: “We’ve earned the highest possible scores on 18 straight (Community Reinvestment Act) exams going back to 1982.

“In its most recent report on bank reinvestment in New York City, the Association for Neighborhood and Housing Development Inc. reported that we have the highest percentage of African-American home purchase borrowers and dedicated the highest percentage of its deposits to community development lending.

“These facts reflect our deep commitment to fair lending and to serving all of our neighbors in all of our communities.”

One of the lawsuit’s contentions is that “Get Started” offered favorable terms if the buyer agrees to locate a home in federally designated low to moderate income areas that are part of a community revitalization effort or in a neighborhood that is not (low to moderate income), but is more than 50 percent minority.

The criteria described in the lawsuit do not appear in M&T’s description of the program on the bank’s website. But Diane L. Houk, an attorney representing the plaintiffs, said the testers were told of that criteria when they met with loan officers. “This is criteria solely based on race,” Houk said.

Zabel was asked whether M&T applied that alleged criteria to the program. He responded that the FHJC’s contentions get into “the substance of the lawsuit” and pointed out what the M&T website says about the program. The only restrictions mentioned on the website are “maximum income by household size, 80 percent of area median income unless property is located in a low/moderate income census tract, then no income applies. Available in select counties.”

FHJC’s Executive Director Fred Freiberg said in a statement: “The bottom line is that race and national origin appears to be infecting the policies and practices of this lender in a way that limits housing choice, provides unequal information based on race and national origin, and fosters residential segregation.”

Houk said the FHJC received a grant from the U.S. Department of Housing and Urban Development for lender “testing.” M&T was one of the banks tested and was the first one the group sued, she said.

When the FHJC finds cases of suspected discrimination, she said, the group’s practice is to take a formal action such as an administrative complaint or lawsuit, Houk said. “It wants to make sure everything is done in the open light of day,” as well as try to bring about changes, she said.

The FHJC said its lawsuit seeks to “stop the discrimination and ensure future compliance with fair housing and fair lending laws, in addition to damages, costs and attorney’s fees.”

The organization describes itself as a nonprofit civil rights organization “dedicated to ensuring that all people have equal access to housing opportunities in the New York City region.”

Two other banks with a Western New York presence have faced allegations of lending discrimination in recent months.

The state Attorney General’s Office sued Evans Bancorp over alleged redlining in certain Buffalo neighborhoods. Evans is challenging those allegations in court.

And the state Attorney General’s Office last month announced an agreement with Five Star Bank’s parent company, stemming from his office’s investigation of “racially discriminatory mortgage lending practices” in the Rochester area.