Receiving Wide Coverage ...

Concern About Redlining Settlement: Some observers expressed concern over the $33 million settlement Hudson City Savings Bank reached with federal regulators over alleged redlining. The Paramus, N.J., thrift's deal with the Department of Justice and Consumer Financial Protection Bureau sets a “disturbing precedent,” because more redlining settlements are probably on the horizon, said Guggenheim analyst Jaret Seiberg.

“This raises a risk for all banks that they’re going to have to deal with the DOJ even more broadly than they already have to deal with them now,” he said. The Consumer Bankers Association stood up for Hudson City and its other members, saying banks and thrifts work hard to avoid discrimination. “Lenders work very hard to ensure there is no discrimination in their lending practices and maintain robust compliance systems to protect against it,” said Steve Zeisel, general counsel.

M&T Bank in Buffalo, N.Y., has an agreement to acquire Hudson City and would be responsible for some of the financial terms of the DOJ/CFPB settlement if the acquisition receives regulators' blessings.

Prosecutors created maps they argue pinpoint the exact locations where Hudson City discriminated against minority and low-income borrowers. Prosecutors argued Hudson City didn't just deny loans to minority and low-income applicants, or charge them excessively high interest rates, but outright avoided opening branches in neighborhoods where those groups lived, didn't place loan officers in those communities and didn't work with mortgage brokers in those areas.

Hudson City went to unusual lengths to exclude low-income and minority borrowers, prosecutors said. The thrift advertised a program that offered home-improvement loans to low or moderate-income families. But the fine print stated closings for those loans could only occur in one branch, in the upper-class, mostly white city of Fairfield, Conn.

The result: Hudson City rarely received mortgage applications from neighborhoods with large groups of minorities and low-income residents. Hudson City claimed it treated all customers and potential customers fairly.

Wall Street Journal

Homebuilders are giddy about the pace of new home sales. But the looming interest-rate hike should chill some of their excitement; furthermore, the overall housing market may weaken due to FHA-backed mortgages because of a dispute between mortgage lenders and the FHA. Homebuilder sentiment has reached heights not seen in a decade, the National Association of Home Builders said. KB Home said it had a 19% increase in orders, on a yearly basis, in its fiscal quarter that ended Aug. 31. Lennar reported a 10% gain for the same time period.

Sales of new, single-family homes rose 5.7% to a seasonally adjusted rate of 552,000 in August, according to the Commerce Department. That was higher than economists' forecast of 515,000. The positive signals, however, could work against homebuilders as they may give comfort to the Federal Reserve to raise interest rates later this year. And the overall housing market has problems. One is the dispute between the Federal Housing Administration and mortgage bankers over lender certification. Lenders want more protection from lawsuits from defective loans, but FHA's recently announced changes didn't give them those protections. As a result, lenders may pull back from making loans for FHA-backed mortgages, the “Heard on the Street” team opined.

Two former Capital One Financial data analysts don't have to hand over their smartphone passcodes to the Securities and Exchange Commission, a federal judge ruled. The SEC wants the ex-Capital One employees to surrender their passcodes after they were accused of violated insider-trading laws. They’re accused of making stock trades based on Capital One's confidential database of consumer information.

The judge ruled that, although the phones were owned by Capital One, the two employees never disclosed the phones' passcodes to Capital One. Thus, the passcodes are personal information and the ex-employees can lawfully invoke their Fifth Amendment rights. The SEC declined to comment on the ruling. But the defendants' lawyer said the SEC's attempt to obtain the passcodes was just a fishing expedition anyway. “The SEC is just guessing that there’s something there on the phone,” Greg Morvillo said.

Elsewhere ...

Business Insider: Banks are lowering the amount of money they'll lend to energy companies. Whiting Petroleum's CEO said it expects banks will cut its maximum borrowing capacity to $3.75 billion from $4.5 billion. Banks expect a decline in “borrowing base redeterminations,” or the value of a company's assets that can be used as collateral, according to a survey by the Haynes Boone law firm.

Krebs on Security: Secret online cybercrime forums are serving as matchmakers between cyber criminals and employees inside corporations who have access to data. In some cases, cyber thieves have posted specific requests for employees who have access to data at banks, including HSBC, Citibank, Bank of America and Wells Fargo.

Reuters: A legal battle has ensued over who gets to use the name Rothschild for its banking business. Edmond de Rothschild Group, an investment bank and private banking group, has sued Paris Orleans, after the company said it would change its name to Rothschild & Co. “We deplore this decision, which is tantamount to appropriating the use of the Rothschild family name, without any distinguishing element, and adds to confusion between the groups,” Edmond de Rothschild Group said in a statement. Paris Orleans is the parent company of the Rothschild Group investment bank.

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