The struggle against mortgage lenders that exploit poor and minority New Yorkers has intensified in recent weeks, as one of the area’s most prominent banks purchased the nation’s largest — and most controversial — lender to homeowners with spotty credit. The reaction among local anti-predatory lending activists has been split: Some vow to block the buyout, charging that it will only make things worse for poor borrowers, while others are optimistic that the bank’s wealth could help save victimized homeowners.
HSBC, a worldwide bank based in London, announced on November 14 that it would pay $14.2 billion for Household International, a mortgage lender run out of Illinois. This came as good news for Household: After nearly a decade of complaints from customers, attorneys general from 20 states reached a settlement with Household in October that left the company owing up to $486 million to borrowers who were victims of fraud.
Some groups representing wronged consumers hope the deal with HSBC will expedite payments that they argue Household owes to tens of thousands of additional borrowers. “We hope that being a company much larger, HSBC will shoulder the cost of some of Household’s practices,” said Don Baylor of ACORN, which currently has $8 billion in class action suits against Household pending in Illinois, California and Massachusetts.
Baylor also hopes HSBC will bring policies to Household that will temper Household’s tendency to aggressively offer expensive loans: “Having somewhat of a different corporate culture,” he says, “HSBC could be better for the borrower.”
Given HSBC’s own mixed lending record, however, another consumer advocate wonders what kind of example the bank can really set.
According to federal Home Mortgage Disclosure Act data, the bank has denied minority New Yorkers its business much more often than it has white New Yorkers. For example, over the last two years, HSBC denied mortgage refinance loans to 22.1 percent of black applicants and to 20.3 percent of Hispanics — but to just 9 percent of whites.
“Their presence in the low income parts of New York City is worse than other banks,” said Mathew Lee of Inner City Press (ICP) in the Bronx. In the last two weeks, ICP has filed challenges with numerous state regulators about the merger, pointing out HSBC’s lack of success in serving minority borrowers. (ICP also hopes to challenge the purchase under the Community Reinvestment Act, which allows for public input whenever a bank buys another financial institution, but it’s not yet clear if the HSBC deal will require approval under that act.)
HSBC wouldn’t respond directly to questions about its mortgage lending practices, saying only in a written statement that it “has a worldwide reputation for integrity, honesty and fairness in its dealings with customers.”