FOR IMMEDIATE RELEASE CR WEDNESDAY, AUGUST 13, 1997 (202) 616-2777 TDD (202) 514-1888 ALBANK TO MAKE $55 MILLION IN DISCOUNTED LOANS FOR ALLEGEDLY ENGAGING IN REDLINING, UNDER JUSTICE DEPARTMENT SETTLEMENT WASHINGTON, D.C. - A New York bank that allegedly "redlined" communities within Connecticut and Westchester County, New York, will no longer refuse to make home mortgage loans to residents there and will provide $55 million in discounted loans, under an agreement reached today with the Justice Department. The agreement, filed today with a complaint in U.S. District Court in Albany, New York, resolves allegations that Albank Financial Corporation and Albank FSB violated the Fair Housing Act and the Equal Credit Opportunity Act. The complaint alleged that the bank placed restrictions on mortgages in areas with significant minority populations in Westchester County and seven Connecticut cities. Under the agreement, Albank will implement a nondiscrim- inatory lending policy and will establish a special lending and marketing program for the excluded communities. "Qualified residents of minority communities should have the same chance as anyone else to obtain a home mortgage," said Attorney General Janet Reno. "Today's settlement will help ensure that residents of the redlined areas will have a chance to obtain credit. We commend Albank for moving promptly to resolve this matter in a way that will provide new home ownership opportunities for so many people." Albank, a $3.5 billion thrift institution headquartered in Albany, conducts business in New England, New York, and parts of the Midwest. More than half of its mortgage lending is conducted through "correspondents." These are generally mortgage bankers or other brokers who evaluate loans based on underwriting guidelines set forth by Albank, which then provides the funding for the loan. All of the bank's mortgage lending in Connecticut and Westchester County, New York is done in this manner. According to the Department's complaint, in the late 1980's and early 1990's, Albank instructed correspondents, both orally and in writing, not to lend in certain areas. All of these areas have substantial minority populations. Included in the ban were areas south of I-287 in Westchester County and the Connecticut cities of Hartford, Waterbury, Bridgeport, New Haven, New Britain, Stamford and Norwalk. The Department alleged that Albank deliberately carved out heavily minority enclaves from its business area, without any sound business justification for doing so. When exceptions were made in these areas, according to the complaint, virtually all were for loans to non-minorities. Albank denies the charges, but has agreed to resolve the case through a settlement. As a result of Albank's geographic restrictions, from 1992 through 1996, in the Connecticut areas outside the excluded seven cities Albank took 550 applications from whites, six from African Americans, and three from Hispanics. During that same period, in Westchester County, Albank took a total of 203 loan applications, only seven of which were from African American and Hispanic applicants. "We are not telling banks where to do business, or that they cannot use economic factors to decide where and how to market loans," stated Isabelle Katz Pinzler, Acting Assistant Attorney General for Civil Rights. "But loan marketing decisions should be based on credit risk and other legitimate business considerations, and not on the racial or ethnic makeup of a community." Under the agreement, Albank will: * make at least $55 million in mortgage loans at 1.5 percentage points below the prevailing interest rate to many areas that it redlined; * conduct targeted advertising and public information campaigns on mortgage loan opportunities; * contribute at least $700,000 to a home ownership counseling program, to be divided equally between a company-run program and local community group programs; * provide fair lending education for employees; and, * take steps to ensure that brokers with whom it does business comply with fair lending laws. The below-market lending, coupled with the cash contributions to local community groups, will cost Albank nearly $9 million. The Justice Department's action followed a referral from the Office of Thrift Supervision, which conducted a review of Albank's marketing practices earlier this year. The OTS findings led both to a Justice Department investigation as well as a separate agreement between Albank and the New York State Banking Department (NYSBD) regarding Westchester County only. Some terms of the separate agreement have been incorporated into the Justice Department settlement. "We are committed to working with state and federal regulators to root out lending discrimination," said Reno. "The assistance provided by OTS and the NYSBD was instrumental in today's agreement." # # # 97-334