Lawsuit claims Ulster Savings Bank offered black mortgage applicants worse deals than whites

A fair housing group is suing a local bank, claiming that loan officers engaged in discriminatory practices against black home-buyers the bank’s branch offices in the Hudson Valley and Long Island.

The allegations against Ulster Savings Bank are contained in lawsuit filed in federal court by the Fair Housing Justice Center and three black “testers,” who reported discriminatory treatment ranging from steering them away from white neighborhoods to offering them less attractive loans than less qualified white clients — over the course of a two-year investigation.

“For African-Americans, Ulster Savings Bank is not a ‘lender you can trust,’” reads the complaint filed in the U.S. District Court in White Plains on Nov. 4. “Instead, it is a lender that seeks to court and favor others, and to avoid lending African-Americans money to purchase homes, or at a minimum to avoid making mortgages to African-Americans on the same or equally beneficial terms and conditions as whites.”

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According to the lawsuit, the fair housing non-profit singled out Ulster Savings Bank for investigation after reviewing public records and determining that the Kingston-based lender had a poor track record of making home loans to black clients. The suit contends that out of 1,599 first-lien mortgages for homebuyers issued between 2011 and 2015, just 40, or 2.5 percent, went to African-Americans. Of 112 mortgages written by the bank’s Long Island office, just one went to a black client.

The suit also alleges that the bank has avoided opening lending services in urban areas and, when Ulster Savings opened a branch in racially diverse Newburgh in 2013, it failed to assign a mortgage specialist to the location.

The Fair Housing Justice Center’s probe began in the fall of 2014, using pairs of black and white testers who inquired about loans at Ulster Savings branches in White Plains, Goshen, Poughkeepsie and the Suffolk County town of Riverhead. In each instance, the suit claims, the black tester was assigned a set of household characteristics, like credit score, income and cash savings, that were more favorable than their white counterpart’s. Different testing teams visited each branch once in October and November of 2014. The group sent another testing team back to the Riverhead branch in the summer of 2016.

 

Unequal offers

The suit claims that in each instance, black and white applicants were treated differently with black testers in some cases offered worse terms or lower maximum loans than their less qualified white counterparts. Among the examples cited in the lawsuit:

  • Two testers spoke to USB loan officer David Catalano at the Riverhead office in October and November 2014. The suit claims that when Catalano spoke to African-American tester Lisa Darden, he first pitched her a state-sponsored loan program for first-time homebuyers, even though her income clearly exceeded the program’s limits. He made no such sales pitch to white tester Laurel Devaney; when she brought up the same program, the suit states, “Mr. Catalano dismissed them out of hand.” Catalano also allegedly quoted Darden a lower maximum purchase price and a recommended purchase price $150,000 lower than her white counterpart despite the fact that Darden showed higher income, lower debt, more savings and better credit. The suit alleges that when the testers asked about “points” on the loan, Devaney was told there would be none unless her credit score was below 680. Darden was allegedly told there would be a 0.25 point charge if her credit score was below 740. When a different pair of testers returned to the office in May and June of 2016, they reported similar treatment by Catalano. In fact, the suit alleges, Catalano deviated from a standard calculation to estimate a black tester’s maximum loan at $200,000 less than it should have been.
  • At Ulster Savings Bank’s White Plains branch, the lawsuit alleges that loan officer Margaret O’Connor told a white tester that she qualified for a maximum loan $95,000 higher than a black tester with stronger financial characteristics. The suit alleges that the African-American tester was also quoted an “unrealistic and very high closing cost estimate.” The suit also contends that O’Connor detailed to the white tester how she could borrow money to make a smaller down payment while failing to provide the same information to the black tester.
  • The suit alleges similar disparate treatment by two loan officers at the bank’s Goshen branch in October and November of 2014. A loan officer suggested that a white tester look for a home in the $500,000 range while another loan officer at the branch suggested that a black tester with a stringer financial profile seek a home with a maximum purchase price of $350,000. The suit also alleges that loan officer Susan Boersema discouraged the black tester from looking for a home in Warwick, which is 92 percent white, and instead suggested that he look for houses in communities like Newburgh with higher black populations.
  • At a bank branch in Poughkeepsie, a loan officer told a black tester that she would be charged a fraction of a point if her down payment amounted to less than 25 percent of the purchase price. A white tester with lower financial qualifications was told she would not be charged points. The suit also alleges that the black tester was quoted higher bank fees on a loan and provided “less appealing options … reflecting a lack of desire or effort by the loan officer to affirmatively capture her business as a home mortgage customer.”

The lawsuit seeks unspecified monetary damages for loss of civil rights and humiliation suffered by the testers and resources expended by the Fair Housing Justice Center as well as punitive damages. The suit also seeks a court order prohibiting the bank from engaging in practices documented by the investigation. The nonprofit is also asking the court to order the bank to enact new policies and training and submit to ongoing monitoring of its residential lending practices.

“This is a classic example of how bias can infect the mortgage lending process at the pre-application stage,” said Fair Housing Justice Center Executive Director Fred Freiberg in a prepared statement. “The only way for consumers to know if they are being treated differently based on race is to conduct testing. While this case does not in any way suggest that all lenders are engaged in discriminatory practices, we also know it is not an aberration and that lending discrimination does still occur.”

 

Bank takes allegations seriously

Ulster Savings Bank President William Calderara said Tuesday, Nov. 29 he could not comment on the allegations citing the ongoing litigation. Calderara did say that the nonprofit had never contacted the bank or made any kind of compliant before filing the lawsuit. Calderara also cited the bank’s record of community investment and outreach, including with affordable housing nonprofit RUPCO.

“Obviously we take any allegations of this nature very seriously,” said Calderara. “Ulster Savings Bank is very proud of serving everybody in the community.”

It is unclear how many tests the nonprofit conducted overall during its investigation. The suit mentions one additional test conducted that was not included in the filing. A spokeswoman for the Fair Housing Justice Center declined to comment on the extent of the testing because she was not authorized to discuss matters not contained in the lawsuit. Nor is it clear from the lawsuit if the bank rejects loan applications from black clients at a higher rate than whites. All of the allegations involve misconduct in initial meetings with loan officers and none of the testers actually applied for a loan. The suit claims that the bank’s failure to open branches in areas with significant minority populations and its poor record of lending to African-Americans indicated that bank officials “knew or should have known” that its loan officers were engaged in discriminatory behavior.

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