WASHINGTON — Federal officials Thursday ordered Hudson City Savings Bank to pay more than $27 million to resolve redlining allegations, the largest order of its kind and one that is likely to put larger banks on notice that redlining cases will be aggressively pursued.

The Department of Justice and Consumer Financial Protection Bureau said Thursday that the $34.5 billion-asset bank — involved in a long-running takeover bid by M&T Bank — allegedly built its entire mortgage lending operation around avoiding extending services to black and Hispanic neighborhoods. A majority of Hudson's lending business is related to originating and buying mortgages for single-family properties, and operates primarily in New York City, Philadelphia and southwestern Connecticut.

Paul Fishman, U.S. Attorney for the District of New Jersey, said that Hudson's activities were inexcusable.

"Hudson City Savings Bank structured its business operations to systemically avoid providing credit services in predominantly minority neighborhoods," Fishman said. "There is no room for such behavior in our banking system."

The enforcement action came as the Federal Reserve has been expected soon to sign off on M&T Bank's deal to buy Hudson City's parent company, Hudson City Bancorp. The two banks agreed to the acquisition back in 2012, but the deal has since run into multiple delays. It was not immediately clear how the redlining case against Hudson City would affect the merger.

The order, which is subject to approval by a federal judge, requires Hudson City to provide $25 million in direct loan subsidies to qualified borrowers in the affected communities, as well as an additional $2.25 million in community programs and outreach. The bank also must pay a $5.5 million penalty. The agencies said the order is the largest amount of direct loan subsidies ever paid by a bank to resolve redlining allegations.

CFPB Director Richard Cordray said the order stipulates that Hudson open branches and direct loan subsidies in the neighborhoods where it had previously denied services. The expectation is that the order will jump-start the kind of wealth accumulation that those communities have lacked, Cordray said.

"Without access to affordable credit, neighborhoods deteriorate in the long shadow cast by unfair lending," Cordray said. "Today's action seeks to remove the redline by bringing more than $27 million in mortgage subsidies and outreach programs, along with new bank branches to the communities who should have had access from the beginning."

The bank was not immediately available to comment.

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