Providence, R.I., Sues Santander Bank, Alleging Mortgage Bias

By | May 30, 2014

Banco Santander SA’s U.S. unit was sued by the city of Providence, Rhode Island, over claims it stopped issuing mortgages in minority neighborhoods after the housing bubble burst, the latest in a series of discrimination lawsuits against lenders by U.S. cities and counties.

Santander Bank, previously named Sovereign Bank, pulled out of the neighborhoods and focused on white communities after being acquired by the Madrid-based lender in 2009, according to a complaint filed today in Providence federal court. The suit seeks millions of dollars in damages.

“It was a conscious decision by those in Madrid to take over this local bank, disregard American fair-lending laws and develop a wealth strategy that targeted white communities for growth and minority communities for disinvestment,” John Relman, the city’s lawyer, said in a phone interview.

The claim follows similar lawsuits filed by municipalities including Los Angeles and Miami, which in December accused Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. of “red- lining” black and Hispanic areas as no-loan zones, and then “reverse red-lining,” flooding the areas with predatory mortgages even when minorities qualified for better terms.

Baltimore, Memphis

Counties encompassing Chicago and parts of Atlanta made similar claims in lawsuits against units of Bank of America and HSBC Holdings Plc. The banks have denied the claims, which allege violations of the Fair Housing Act of 1968.

Yesterday, a federal judge in Los Angeles denied Wells Fargo’s bid to dismiss that city’s lawsuit, saying the claims were “extremely detailed and specific.”

In the Santander case, Providence cited earlier lawsuits filed by Baltimore and Memphis that accused Wells Fargo of targeting minority neighborhoods “for a range of predatory subprime practices during the subprime boom years.”

Mary Ellen Higgins, a spokeswoman for Santander Bank, didn’t immediately return a call for comment on the lawsuit.

Santander is accused of red-lining minority neighborhoods from 2009 to 2012, depriving credit-worthy minorities of mortgages. The practice led to boarded-up homes and other blight that was expensive to maintain and deprived the city of property-tax revenue, according to the complaint.

Reduce Segregation

The practice has also hurt the city’s attempt to reduce racial segregation in the neighborhoods, Relman said, because the spread of blight prevents investment that leads to diversification. The lawsuit involves hundreds of homes and seeks millions of dollars in damages, he said, without elaborating.

“Santander’s practices violate fair lending laws and hurt Providence families,” Providence Mayor Angel Taveras said in a statement. “Many borrowers in minority neighborhoods are qualified for prime loans, but Santander has written them off.”

Before the Santander acquisition, Sovereign had a “reasonable presence” in minority neighborhoods, according to the lawsuit. Maps attached to the complaint show how that changed since 2009, the city said.

“Since the takeover, however, Santander’s lending in minority neighborhoods has declined precipitously while its lending in predominantly white neighborhoods has grown substantially,” the city said in the complaint.

The case is City of Providence v. Santander Bank NA, 1:14- cv-00244, U.S. District Court, District of Rhode Island (Providence).

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