An investigation by a civil rights organization revealed discriminatory lending practices by Ulster Savings Bank, an upstate company that has an office in Riverhead, according to a lawsuit filed last month in federal court.
The complaint alleges that Ulster Savings Bank offered African-Americans customers less favorable loan terms than white borrowers, a violation of the Fair Housing Act — even when African-Americans had better qualifications, such as higher incomes and credit scores. The investigation by the Fair Housing Justice Center, which spanned close to two years, included undercover operations at the Riverhead office on East Main Street starting in 2014.
“Ulster Savings Bank’s entire structure seems pointedly crafted to avoid lending its money to African-Americans to achieve the American dream of buying a home,” the complaint states.
Out of 112 primary loans made across Long Island from 2011 to 2015, only one was to an African-American buyer, the complaint alleges. Across all of the bank’s 18 locations, only 40 out of 1,599 loans, or 2.5 percent, were made to African-Americans, according to the most recent available public data obtained through the Home Mortgage Disclosure Act.
The suit was filed by three African-Americans who served as testers in addition to the Fair Housing Justice Center, a nonprofit founded in 2005 with a purpose of eliminating housing discrimination and promoting inclusive communities. It is based in Long Island City.
William Calderara, who was named president and CEO of Ulster Savings Bank in June, said he could not comment on active litigation.
“We take these allegations very seriously,” Mr. Calderara said in an email. “I can say we are proud of our history of serving everyone in our communities as well as our dedication to service in our communities.”
A request for comment at the Riverhead location was redirected to Mr. Calderara.
A spokeswoman for the FHJC said the nonprofit currently employs 150 actors as part-time testers who pose as ordinary home buyers. Undercover tests have been used to gather evidence in dozens of cases, the spokeswoman said, including one other lending case against M&T Bank.
“Fair housing testing is one of the most important tools we use to identify, document and eliminate housing discrimination,” the spokeswoman said.
On Oct. 28, 2014, a white woman serving as an undercover tester for the FHJC met with a mortgage specialist in Riverhead. She described herself as a first-time homebuyer who was interested in learning what she could afford. A week later, an African-American woman met with the same mortgage specialist to discuss the same scenario, according to the complaint.
The African-American woman provided more favorable information: a household income of $149,300 compared to $145,000; cash savings of $101,815 compared to $94,652; and monthly liabilities of $560 compared to $604. The African-American woman’s credit score with her husband was 740 while the white woman had a 725 and her husband 730.
The white woman was told she qualified for a maximum purchase price of $875,000 while the African-American woman qualified for $781,000 based on the same debt-to-income ratio, the complaint alleges. The mortgage lender recommended to the African-American woman a maximum purchase price of $450,000 while telling the white woman to look for homes up to $600,000, according to the complaint.
The mortgage lender informed the white customer about an Ulster Savings Bank program through which she could receive a loan greater than $625,000, but neglected to inform the African-American customer of that option, according to the complaint. The mortgage lender also “went to great lengths to encourage the white tester to consider where the ‘best schools’ are and ‘what’s the best community’ in which she and her husband could potentially raise a family,” including towns like Wading River and Southold. The lender did not mention schools or the best community to the African-American woman, according to the complaint.
A similar test occurred at the Riverhead office this year, involving the same mortgage lender. A white man made the same inquiries on May 18 and an African-American man followed on June 2. Just as in the previous test, the African-American man was given a higher income, greater cash savings and lower monthly liabilities, according to the complaint.
The African-American was told he would qualify for a maximum loan of $670,000 compared to $870,000 for the white man, according to the complaint.
Similar tests occurred at branches in White Plains, Goshen and Poughkeepsie. It’s unclear if more tests were conducted at the Riverhead location that did not result in a discrepancy. The spokeswoman for FHJC said she could not comment on evidence that is not referenced in the complaint.
The complaint alleges that Ulster Savings Bank should have known its mortgage specialists were engaged in discriminatory behavior and that no steps were taken to correct the actions.
“The discriminatory behavior has wide ranging consequences,” the complaint says. “It guides African-Americans towards lower costing homes and, ultimately, often less desirable villages and towns, with fewer or lesser services and opportunities.”
The defendants are seeking “declaratory and injunctive relief, compensatory damages, punitive damages and an award of costs and attorneys’ fees.” The complaint also asks for the bank to modify its policies, train employees on fair housing laws and implement incentives to counteract prior discriminatory policies, among other changes.
Photo: Ulster Savings Bank in Riverhead. (Credit: Joe Werkmeister)