The city of Providence, R.I., has sued Santander Bank, alleging that bank violated the Fair Housing Act by refusing to make prime mortgage loans available in minority communities.

Over the last five years, Santander's lending in Providence's minority neighborhoods has declined swiftly while its lending in predominantly white communities has grown, according to the lawsuit filed on Thursday in U.S. District Court for the District of Rhode Island.

For example, since the Spanish banking giant Banco Santander purchased Sovereign Bank in 2009, Santander's applications and originations have dropped 60% in Providence's minority neighborhoods. Meanwhile, applications and originations are up 14% and 25% respectively in white communities, the lawsuit claims.

The company "categorically reject this accusation and will vigorously defend ourselves against the legal action," a Santander spokeswoman said in an email.

"However, we are willing to work with the City of Providence to allay its concerns" she said. "Santander is proud to actively support the communities in which it operates."

The stark contrast in mortgage lending activity is due to redlining, the lawsuit says, and is a "substantial obstacle to minority neighborhoods' full participation in the housing market recovery."

"Many borrowers in minority neighborhoods are qualified for prime loans, but Santander has written them off," said Providence Mayor Angel Taveras in a news release. "That holds down property values and the broad economic recovery that a healthy housing market can help generate in every neighborhood in Providence."

The city of Providence is being represented by Relman, Dane & Colfax.

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