ARLINGTON, Va. — NAFCU Director of Legislative Affairs Brad Thaler wrote key members of Congress that credit unions are better serving those of modest means and minorities than for-profit financial institutions.
"Credit unions play an important role in providing important financial services to underserved individuals. Many of these consumers are members of the low income and minority populations of our society," he said. The letter was sent on the eve of a hearing, Rooting Out Discrimination in Mortgage Lending: Using HMDA as a Tool for Fair Lending Enforcement, in the House Subcommittee on Oversight and Investigations; NCUA was slated to testify (See related story, page 6).
He cited the latest Home Mortgage Disclosure Act data as evidence of credit unions' commitment to these consumers. "An analysis of the recently released 2005 HMDA Data shows that credit unions are making smaller mortgage loans than banks and thrifts and have a higher percentage of their mortgage loans going to low- and moderate-income borrowers," Thaler stated. "Credit unions make a higher percentage of their mortgage loans (97%) under the conforming loan limit than banks (90%) and thrifts (86%). Furthermore, an analysis of the HMDA data show that 18.8 percent of credit unions' loans went to households with less than $40,000 in income compared to 16.1 percent at banks and 12.4 percent at thrifts."
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He added that the data show credit unions are much more likely to put low- and moderate- income and minority borrowers into lower interest loans than banks and thrifts. Twenty-one percent of mortgages from banks and 24% from thrifts to households under $40,000 were at least 3% higher than an applicable Treasury yield of a product with a comparable maturity. In contrast, just 3.6% of credit union loans were outside that 3% range.
For minority low-income households, the difference is even more pronounced, Thaler continued. "Banks charged at least 3% higher than the Treasury yield on 32.9% of those loans, while thrifts did on 37.2% of them," he wrote. "Credit unions, on the other hand, were only outside of the yield spread on 4.4% of their loans. So while the banks and thrifts claim that they are making mortgage loans to low- and moderate-income and minority households, what they don't tell you is that they are happy to charge those populations more as well." He thanked the committee for holding the hearing and stated that credit unions are part of the solution to affordable financial services for low-income and minority households.
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