UNITED STATES OF AMERICA
     Plaintiff,

v.

Case No. 97-CV-1206

ALBANK, FSB, and
ALBANK FINANCIAL CORPORATION,
     Defendants.

_______________________________

1. This action is brought by the United States against defendants Albank Federal Savings Bank ("Albank") and Albank Financial Corporation ("Albank Financial") to enforce the provisions of Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act), as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f.

2. This Court has jurisdiction of this action pursuant to 28 U.S.C. § 1345, 42 U.S.C. § 3614, and 15 U.S.C. § 1691(h).

3. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b).

4. Defendant Albank is a federally chartered thrift institution with $3.5 billion in assets, doing business in the states of New York, Connecticut, Massachusetts, Vermont, Kentucky, and Ohio. Albank offers the traditional services of a financial depository institution, including the receipt of monetary deposits, the financing of residential housing, and other types of credit transactions. In 1996, it had home mortgage loans outstanding of $2.1 billion. Albank is subject to the regulatory authority of the Office of Thrift Supervision ("OTS"), and its deposits are insured by the Federal Deposit Insurance Corporation.

5. Defendant Albank Financial, the parent corporation of Albank, is incorporated in Delaware and headquartered in Albany, New York.

6. Albank solicits home mortgage loan applications through its own loan officers and through independent loan brokers and bankers (called "correspondents") that submit applications to Albank for underwriting and, if approved, for funding (or "purchase") by Albank. During the period January 1992 through December 1996, Albank funded 14,634 home purchase and refinance mortgage loans through its loan officers and correspondents combined.

7. Albank's business includes engaging in residential real estate-related transactions and regularly extending credit to individuals. As such, it is subject to the requirements of the Fair Housing Act, as amended, 42 U.S.C. §§ 3601-3619. Albank is also a creditor as that term is defined by section 702(e) of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1692a(e), and is therefore subject to the requirements of the ECOA and its implementing Regulation B, as amended, 12 C.F.R. Part 202. The Fair Housing Act and the ECOA prohibit discrimination on a number of bases, including race, color, and national origin, in making real estate-related lending and credit decisions. 42 U.S.C. § 3605; 15 U.S.C. § 1691(a).

8. In early 1997, the OTS conducted a special examination of the practices of Albank to evaluate its compliance with the Fair Housing Act and the ECOA. Based on information gathered in this examination, the OTS determined that it had reason to believe that Albank had engaged in a pattern or practice of discrimination against African American and Hispanic borrowers by instructing its correspondents not to submit loan applications from specified geographic areas where there are high concentrations of these minority homeowners. On May 12, 1997, OTS referred this matter to the United States Department of Justice pursuant to the ECOA, 15 U.S.C. § 1691e(g). Upon referral from the OTS, the Department of Justice conducted a supplemental investigation.

9. Albank was established in 1820 as a New York State savings bank headquartered in Albany, New York. Initially, it operated only in the Albany area, but it has expanded its home mortgage lending business to other parts of New York and to other states: Connecticut, Massachusetts, Vermont, Kentucky, and Ohio. It does direct mortgage lending through offices in New York, Massachusetts, and Vermont and indirect (or correspondent) mortgage lending in these and the other states listed above. It became a federal savings bank in 1982.

10. Albank serves as a direct lender for purchase, refinance, and home improvement mortgages, for conventional, Federal Housing Administration, and Department of Veterans Affairs loans. These direct loans include both fixed-rate mortgages and adjustable rate mortgages ("ARM's").

11. In addition to direct loans, Albank makes loans through its correspondents. In 1996, Albank made approximately 60% of its home mortgage loans through correspondents.

12. Albank enters into contractual arrangements with its correspondents to fund residential ARM's that meet specific and detailed Albank "policy guidelines." Albank participates in underwriting these transactions, receiving preliminary information regarding individual loans from correspondents prior to the closing of the loan, and noting where prospective loans deviate from its "policy guidelines." Once Albank approves the terms of the prospective loan, the correspondent arranges the consummation of the loan transaction, and Albank acts as mortgage lender either at or immediately after closing. Albank rarely declines to fund a loan arranged pursuant to a correspondent agreement, because it is so closely involved in the underwriting decisions prior to the finalization of the loan terms.

13. In the mid-1980's, Albank entered into agreements to fund correspondent loans on residences located in Connecticut and in Westchester County, New York.

14. Starting in the late 1980's, Albank began informing, and explicitly instructing, correspondents that it would not accept loans originating in specific geographic areas of Connecticut and Westchester County, New York. These restrictions had no sound business justification and, in fact, departed from accepted mortgage banking and loan purchase practices regarding the geographic location of residential properties that secure residential mortgage loans. For example, the restrictions established non-contiguous enclaves within the geographic area that the bank purported to serve, and persons residing within such enclaves were not eligible to seek residential mortgage loans from the defendants. The restrictions were adopted for the purpose of precluding residents of identifiably minority urban areas from seeking mortgage loans from the defendants, without regard to the qualifications of such persons for credit.

15. The adjustable-rate mortgage product that Albank was offering its correspondents' customers in the non-excluded areas was a desirable product that the correspondents wanted to sell throughout the areas in which they conducted their business, and during the period that Albank limited its service area as described in this Complaint, at least some of its correspondents repeatedly asked Albank to eliminate the geographic restrictions.

16. Albank agreed to fund loans through correspondent bankers and brokers for home mortgages on properties in areas of the State of Connecticut west of the Connecticut River ("western Connecticut"), except that it explicitly prohibited mortgage bankers and brokers from offering loans to Albank from five cities located west of the river: Hartford, New Haven, New Britain, Waterbury, and Bridgeport. In three of these cities, African Americans and Hispanics comprise a majority of the population, and in the other two, these groups make up almost a quarter of the population. From 1992 through 1996, Albank took only three loan applications from these five cities combined (two from whites and one from an Asian American).

17. Albank had additional restrictions that affected two other cities in western Connecticut with significant minority populations -- Stamford and Norwalk. Each has an African American and Hispanic combined population of approximately 25%. While Albank did not explicitly exclude loans from Stamford and Norwalk by name, it did inform some correspondents that Albank would not accept loans from the "Long Island Sound area." Albank defined the "Long Island Sound area" as the corridor along Interstate 95 in southern Connecticut, an area that includes Stamford and Norwalk. From 1992 through 1996, Albank took 16 loan applications (14 whites, one African American, and one Hispanic) in Stamford and nine in Norwalk (all whites).

18. Pursuant to these geographic restrictions, Albank took purchase and refinance home mortgage loan applications in Connecticut almost exclusively from white customers, and almost exclusively for properties in white residential areas. From 1992 through 1996, in those areas of Connecticut outside the seven cities described in the two preceding paragraphs, Albank took 550 applications from whites, six from African Americans, three from Hispanics, and 28 from applicants from other minority groups or from applicants who provided no racial/ethnic identification.

19. Beginning in the mid-1980's, Albank entered into agreements to fund home mortgage loans secured by property located in Westchester County, New York, but prohibited its correspondent mortgage bankers and brokers from offering loans to Albank for properties located in any portion of Westchester County lying below Interstate 287 ("southern Westchester County"), which bisects the county in a roughly west-to-east manner. According to the United States Census, the excluded area contains 76.7% of the county's African American population and 66.5% of its Hispanic population.

20. In implementing this exclusionary practice, Albank took mortgage loan applications almost exclusively from white customers, and almost exclusively for properties located in white residential areas of Westchester County. From 1992 through 1996, Albank took 203 loan applications from Westchester County, of which only seven were from African American and Hispanic applicants. Only 10 of the 203 applications were from Census tracts that were not majority white.

21. When Albank made exceptions to its policy of not taking loans from south of Interstate 287, it did so almost exclusively for white borrowers living in white areas. Of 39 Westchester County loan applications it took from 1992 through 1996 on property located south of I-287, none was from an African American or a Hispanic, and only four came from a tract that was not majority white.

22. Albank has engaged in discriminatory redlining with both the purpose and effect of denying residents of identifiable African American and Hispanic communities an equal opportunity to obtain mortgage financing on account of the minority composition of these communities.

23. Albank's actions as alleged herein constitute:
    1. Discrimination on the basis of race, color and national origin in making available residential real estate-related transactions in violation of Section 805 of the Fair Housing Act, 42 U.S.C. §3605(a);

    2. The making unavailable or denial of dwellings to persons, because of race, color, and national origin, in violation of Section 804(a) of the Fair Housing Act, 42 U.S.C. § 3604(a); and

    3. Discrimination against applicants with respect to credit transactions, on the basis of race, color, or national origin, in violation of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1).

24. Albank's policies and practices as alleged herein constitute:
    1. A pattern or practice of resistance to the full enjoyment of rights secured by the Fair Housing Act, as amended, 42 U.S.C. § 3601, et seq.;

    2. A denial of rights granted by the Fair Housing Act, as amended, 42 U.S.C. § 3601, et seq., to a group of persons that raises an issue of general public importance; and

    3. A pattern or practice of resistance to the full enjoyment of rights secured by the Equal Credit Opportunity Act, 15 U.S.C. § 1691e(h).

25. Albank's policies and practices caused harm to the discriminatorily excluded communities and the individuals who sought home mortgage loans in these communities.

26. The discriminatory policies and practices of Albank were, and are, intentional and willful.

WHEREFORE, the United States prays that the Court enter an ORDER that:

1. Declares that the policies and practices of defendants constitute a violation of Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f;

2. Enjoins Albank, its agents, employees and successors, and all other persons in active concert or participation with them, from discriminating on account of race, color or national origin in any aspect of their business practices;

3. Requires defendants to develop and submit to the Court for its approval a detailed plan that: (a) defines a service area for defendants' business without regard to race, color, or national origin and provides policies and procedures to ensure all segments of the defined area are served without regard to race, color, or national origin, and (b) remedies the vestiges of Albank's discriminatory policies and practices;

4. Awards compensatory and punitive monetary damages as authorized by the Fair Housing Act and the Equal Credit Opportunity Act; and

5. Assesses a civil penalty against each defendant, in order to vindicate the public interest.

The United States further prays for such additional relief as the interests of justice may require.

JANET RENO
ATTORNEY GENERAL

ISABELLE KATZ PINZLER
ACTING ASSISTANT ATTORNEY GENERAL

PAUL F. HANCOCK
ACTING DEPUTY ASSISTANT ATTORNEY GENERAL

JOAN A. MAGAGNA
Acting Chief, Housing and Civil Enforcement Section

ALEXANDER C. ROSS
VALERIE R. O'BRIAN
STEVEN J. MULROY
ANTHONY H. GRUMBACH
Attorneys, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
P.O. Box 65998
Washington, D.C. 20035-5998
(202) 514-9821

THOMAS J. MARONEY
UNITED STATES ATTORNEY

WILLIAM H. PEASE
Assistant U.S. Attorney
Bar Roll No. 102338