Two judges in New York - one state and one federal - have set a precedent that could mean big headaches for banks involved in mergers, branch sales, and other transactions.

In a hearing scheduled for Wednesday in New York County Supreme Court, Judge Carol Arber will consider a community activist group's protest that state bank regulators failed to enforce the state Community Reinvestment Act when they approved the sale of Home Savings of America's New York branches to GreenPoint Financial Corp.

And on Thursday, in the U.S. District Court for the Southern District of New York, Judge Lawrence McKenna will hear another group's protest that the Federal Deposit Insurance Corp.'s approval of the sale violated the federal CRA.

Judge McKenna issued an order last Tuesday halting the sale. On Wednesday, in the face of GreenPoint's protests that the temporary restraining order would wreak havoc on 135,000 customers to whom it had already sent ATM cards, the judge decided to let the deal go through.

Judge Arber was to hear a request to stop the sale last Friday morning, but GreenPoint's lawyers arrived in her courtroom with the news that they had closed the deal at 12:07 a.m. that day.

The judges' involvement is apparently a CRA first - one that may mean that approval of a deal by bank regulators is no longer the final hurdle.

"It is not even going to be over when the fat lady sings," said Warren Traiger, a New York attorney specializing in community reinvestment law. "Now you've got to wait for the courts to rule as well."

On Sept. 6, the Federal Deposit Insurance Corp. approved the application of GreenPoint, based in Flushing, N.Y., to buy the 60 New York branches owned by Home, a subsidiary of H.F. Ahmanson & Co. of Irwindale, Calif. Both institutions received "outstanding" ratings on their most recent CRA evaluations.

Inner City Press/Community on the Move, a South Bronx activist group that had protested the application on CRA grounds, sued the FDIC. The agency should have turned down the sale, the group said, because GreenPoint plans to exclude the Bronx, the poorest of New York City's five boroughs, from its service area for CRA purposes. Home Savings had no Bronx branches, but included the borough in its service area.

"The transaction hurts the Bronx," said Matthew Lee, executive director of Inner City Press. "It eliminates a bank that used to serve the Bronx, and replaces it with one that does not."

In the state court lawsuit, the Coalition for Sound Community Lending challenged the New York State Banking Department's Aug. 30 approval of the Home-GreenPoint deal on the ground that it violated New York's Community Reinvestment Act. The group claimed that GreenPoint has engaged in discriminatory lending practices.

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