WASHINGTON – The Federal Financial Institution Examination Council released the aggregate data for the national 2004 Home Mortgage Disclosure Act earlier this month, and before the data even had a chance to get warm the Federal Reserve Board and Consumer Federation of America already disagreed on the interpretation of the information. The Fed asserted that the data shows there has been an expanded availability of home loans to all borrowers. It warned against making unwarranted accusations of illegal bias that could discourage lenders from participating in the non-prime segment of the mortgage market. The CFA, though opined that, “Even when borrower and lender characteristics are taken into account, today’s release of the national Home Mortgage Act reveal that African Americans and Latinos are more likely to receive high-cost loans than whites.” According to the report published by the Fed – New Information Reported under HMDA and Its Application in Fair Lending Enforcement – the 8,853 lenders covered by the law as of the end of 2004 are estimated to have accounted for about 80% of home loans extended that year. Of the total HMDA-reporting lenders, 3946 were commercial banks; 1,017, savings institutions; 2,030, credit unions; and 1,860, mortgage companies. Of the mortgage companies, nearly 80% were independent entities that were neither subsidiaries of banks nor affiliates of bank holding companies. Interestingly, lenders reported on approximately 330,000 requests for pre-approvals of home-purchase loans that were either turned down by the lender at the time the pre-approval was sought or granted but not acted on by the applicant. Either way, those 330,000 requests for pre-approval did not reach the stage of an application for a loan for a specific property. The 2004 volume of applications for refinancing fell about one-third from 2003, a drop the report attributed to a rise in interest rates. The 2004 HMDA data includes the revised standards of classification for government collection of information on race and ethnicity as established by the Office of Management and Budget. The report explains that for pre-2004 HMDA data, credit applicants had no opportunity to designate both race and ethnicity but had to categorize themselves as being of Hispanic origin or as being in one of five racial categories – American Indian or Alaskan Native, Asian or Pacific Islander, black, white, or other. Starting in 2004, applicants can designate more than one racial category – American Indian or Alaska Native, Asian, black or African American, Native Hawaiian or other Pacific Islander, or white – and can designate one of two ethnicities – either “Hispanic or Latino” or “not Hispanic or Latino”. According to the report, “Although most borrowers do not have higher-priced loans, the incidence of higher-priced lending varies substantially across racial and ethnic groups. Moreover, both the overall incidence of higher-priced lending and the differences across groups varies substantially across loan product categories.Differences in the incidence of higher-priced lending across loan products make it difficult to identify consistent patterns across all types of lending.” After analyzing the loan data, the authors concluded that, “The foregoing analysis indicates that the information in the HMDA data – that is, adjusting the HMDA data for borrower-related factors plus lender – is insufficient to account fully for racial or ethnic differences in the incidence of higher-priced lending; significant differences remain unexplained.” In a statement released by the CFA from Director of Credit and Housing Policy Allen Fishbein, he stated that the data “indicates that disproportionately larger portions of minority borrowers turn to higher priced lenders. The pricing variations found will reinforce concerns about whether the lack of competition from mainstream prime lenders in these markets increase the changes that borrowers in certain communities pay more for credit.” “In fact,” he added, “The national pricing data may underestimate the likelihood that consumers may receive high-cost loans because the Federal Reserve smoothes out the regional variation of high-priced lending. The CFA has found that there are significant differences between lending patterns in different cities, and the findings stress the need for much more rigorous oversight – especially of the under-regulated independent mortgage companies.” -

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