Five Star Bank to End Discriminatory Lending Practices

After a thorough investigation, Five Star Bank has reached an agreement with New York State Attorney General Eric T. Schneiderman, which will end their discriminatory mortgage practices.

“All New Yorkers, regardless of the color of their skin or the racial composition of their neighborhood, must be afforded an equal opportunity to obtain credit,” said Attorney General Schneiderman.

Five Star Bank was found to be excluding all of the Rochester, New York area’s predominantly minority neighborhoods from its mortgage lending area; deeming loans that were secured outside of its lending area to be “undesirable;” and imposing a minimum mortgage amount requirement, which effectively made its mortgage products unavailable to residents of predominantly minority neighborhoods.

The investigation found that Five Star’s lending area map included much of the Rochester area, but excluded the city itself and its predominantly minority neighborhoods. With Rochester being the one of the 30 most segregated large metro areas in the nation, the map effectively excluded minority populations.

Additionally, one of Five Star’s policies discouraged lending to any borrower from a predominantly minority neighborhood. It designated mortgages secured by properties in these neighborhoods as “undesirable loan types.”

The Attorney General’s investigation also found that the bank would not lend to borrowers seeking mortgages of $75,000 or less from seven of its 12 mortgage products. Although each lender does establish its own criteria for down payments — typically requiring a 3.5% down payment on average — Five Star Bank’s requirement made its mortgage products unavailable to people seeking to buy homes in minority neighborhoods, as the typical home sale price in these areas is generally less than $75,000.

Now, under the new agreement, Five Star Bank must open two new Rochester-area branch offices — it had none before — specifically in neighborhoods with that are at least 30% populated by minorities; it must create a Special Financing Program that will supply residents of minority neighborhoods with a total of $500,000 in discounts or subsidies on loans; it must eliminate its minimum mortgage amount requirement; and it must expand its lending area to cover all of Monroe County, including the predominantly minority areas in and around Rochester.

“My office will continue to fight for equal justice under law for all New Yorkers and to ensure that lenders treat people fairly in the marketplace,” said Attorney General Schneiderman. “It’s truly disheartening that in 2015, we are still confronting the systematic racial discrimination that has persisted throughout our nation’s history.”

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