A New York City civil rights group claims that Ulster Savings Bank discriminates against African-Americans shopping for home mortgages.
The Fair Housing Justice Center in Long Island City on Nov. 4 sued the bank in U.S. District Court in White Plains under the Federal Fair Housing Act and the Civil Rights Act of 1866.
The nonprofit housing group conducted a two-year investigation in which pairs of white and black testers posed as first-time homebuyers seeking loans. The black testers presented stronger financial credentials. Yet black testers were told they qualified for smaller loans than their white counterparts, according to the lawsuit. They also were presented with higher fees and were discouraged from looking for houses in predominantly white towns.
“Determining an African-American customer’s buying power has more to do with the color of her skin than objective financial indicators,” the lawsuit says.
William Calderara, Ulster Saving’s president and CEO, on Nov. 15 said that the bank has not been served yet with the lawsuit and even if it had, he could not comment on pending litigation.
“Overall, the bank is very proud of its history of serving our communities,” he said.
Ulster Savings is based in Kingston and operates 14 branches in the Hudson Valley and on Long Island. It has assets of $790.4 million and deposits of $680 million.
The housing organization targeted the bank because it had extended a small percentage of its loans to African-Americans. Home mortgage disclosure data from 2011 to 2015 shows that it made 1,599 loans for principal home purchases, but only 40, or 2.5 percent, went to blacks.
The housing group employs professional actors to do the testing. They use a concealed digital recorder in the tests.
“They know how to get into these characters,” Fair Housing Justice Center spokeswoman Katie Garcia said. “The testing is about observing the unvarnished practices of housing providers, actually seeing how they operate on a day-to-day basis.”
The testers asked loan officers how much they could afford for a home and a mortgage, based on their financial profiles.
Their profiles included household income, cash savings, monthly liabilities and credit scores. The profiles were similar for white and black testers but in every case the black testers presented stronger finances.
Two years ago, testers were sent on different days to Ulster Savings’ Elmsford office. Both testers met the same loan officer.
The black tester presented a household income of $149,383, cash savings of $101,815, monthly liabilities of $560, and a credit score of 740.
The white tester claimed household income of $145,200, cash savings of $101,119, monthly liabilities of $604, and a credit score of 725.
The black tester was told she could afford a $500,000 home and qualified for a $400,000 loan. The white tester, despite slightly less favorable finances, was told she could afford a $550,000 house and qualified for a $495,000 loan.
The black tester’s closing costs would come to $20,000 to $25,000. The white tester would have to pay about $15,000.
In a test at the Riverhead office of Ulster Saving Bank in Suffolk County, a black tester qualified for a loan that was $200,000 less than discussed with the white tester. The black tester was also told he would have to show income documents to confirm his annual household income, while no such requirement was mentioned to the white tester.
Ulster Savings loan officers at the Goshen office in Orange County told the white tester she would not be charged any points — a percentage of the loan to cover bank costs — on her transaction. The black tester was told she would have to pay half a point on the loan.
The black tester was discouraged from looking for a house in Warwick, a predominantly white community, because the town is very expensive. Instead, he was encouraged to look in Newburgh, which has a larger African-American population.
Loan officers in the Poughkeepsie office of Ulster Savings told the black tester that she qualified for a loan up to $800,000, but he discussed financing for only one option, a $400,000 home. The white tester, who presented a less impressive financial profile, was told she qualified for a maximum loan of $900,000 and was told she could afford a house that cost up to $600,000.
The black tester in Dutchess County was told she would be charged points, according to the lawsuit, if she paid less than 25 percent of the home purchase price at the closing. The white tester was told there was no need to consider points.
The black tester was quoted $1,800 in bank fees. The white tester was quote bank fees of about $1,000 to $1,100.
The housing group spokeswoman would not say whether any of Ulster Savings branch offices or loan officers responded equitably to pairs of testers.
“I’m not at liberty to disclose or comment on any evidence that is not referenced in the complaint,” Garcia said.
The Fair Housing Justice Center says such discrepancies have a profound impact. African-Americans are discouraged from buying better homes. They accumulate less equity and acquire less long-term wealth. They end up in less desirable towns, where schools are not as high-achieving, transportation routes to higher paying jobs are more time-consuming and basic amenities are more limited.
The black testers, the lawsuit says, were debased and humiliated. They were treated as lesser citizens than their white counterparts, as if they were unworthy of being customers.
The housing organization said the very structure of Ulster Savings Bank seems designed to avoid lending money to African-Americans. It has avoided opening offices in towns with large minority populations, and in the one instance where it did, the bank didn’t place a loan officer there.
The housing group wants the court to order the bank to stop discriminating, change its policies and practices, train its employees on fair housing and lending laws, provide new products or incentives to counteract the harm that has been caused, and allow monitoring of its residential lending process. It is also asking for compensation for itself and its testers.