Hudson City Bancorp, Inc. (NASDAQ:HCBK) Settles Redlining Cases with Department of Justice for $33 million

Hudson City Bancorp, Inc. (NASDAQ:HCBK) has reached a settlement of $33 million for redlining cases filed against the company. The lawsuits stated that HCBK discriminated against prospective Hispanic and black home buyers. Meanwhile, the company’s prospective deal to be acquired by M&T Bank Corp. is still on hold, after a delay of 3-years. The deal was initially expected to close by 2H2013. However, the $5.4 billion deal still faces regulatory approvals.

HCBK was accused of the civil charges by the US Department of Justice and Consumer Financial Protection Bureau. The two organizations stated that HCBK tried to avoid opening its branches in neighborhoods with a large Hispanic or black population. Even though the agreement has been reached between the said parties, the payment is still dependant on court approval. If approved, the affected communities would be awarded subsidies, to qualified borrowers only, worth $25 million in total. Furthermore, the bank would also be required to pay $2.25 million to the said communities through outreach programs, while $5.5 million would be imposed as penalty.

In a statement from the company, HCBK revealed that it did not completely agree with the statistical analysis conducted by the government, but it still wants to avoid litigation. The principal Deputy Assistant Attorney General, Vanita Gupta, revealed that this was the largest settlement the department of justice had to handle, both financially and geographically. She also stated that there has been a rise in redlining cases around the country.

M&T recently signed off the agreement, in place of HCBK. Once the pending acquisition is approved, M&T will finally gain presence in the tri-state area. Analysts believe that the deal has been pending because of a long list of requirements put forth by regulators, with which M&T must comply. Even though the improvements have affected the two banks greatly, analysts still believe that the regulatory changes are in the best interest of future mergers.

Hudson City Bancorp, Inc. (NASDAQ:HCBK) added 3.83% to its share value, after trading 12.49 million shares during the September 24 session, to close at a share price of $9.63.

 

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David Barry

David Barry

Barry is a senior journalist at Us Markets Daily. He reports, shoots and edits many of his own stories by himself.