Updated September 13, 2005
September 13, 2005
Earlier this afternoon, the Federal Reserve
announced the availability of final and aggregate 2004 Home Mortgage
Disclosure Act data.
www.ffiec.gov/hmcrpr/hm091305.htm The Fed also put forth its spin on
the data, in the form of 51-page study by staff members Bob Avery, Glenn
Canner and Robert Cook.
www.federalreserve.gov/pubs/bulletin/2005/3-05hmda.pdf While
the prose of the Fed's study is typically dense, here's the conclusion
the Fed reaches on the final page of its study:
…”black and Hispanic
borrowers taken together are much more likely than non-Hispanic white
borrowers to obtain credit from institutions that report a higher
incidence of higher-priced loans. On the one hand, this pattern may be
benign and reflect a sorting of individuals into different market
segments by their credit characteristics. On the other hand, it may be
symptomatic of a more serious issue. Lenders that report a lower
incidence of higher-priced products may be either less willing or less
able to serve minority neighborhoods. More troubling, these patterns may
stem, at least in part, from borrowers being steered to lenders or to
loans that offer higher prices than the credit characteristics of these
borrowers warrant. Reaching accurate determinations among these
alternative possible outcomes is one goal of the supervision system.”
What the Fed doesn’t say in this is that
these disparities are most stark some of the largest conglomerates in
the country, including in their headquarters cities (where they have
Community Reinvestment Act duties). As two example, with the largest
bank and thrift in the United States:
Citigroup in the
New York City Metropolitan Statistical Area in 2004 confined African
Americans seven times more frequently than whites to higher cost, rate
spread loans. The largest savings bank in the country,
Washington Mutual,
confined African American couples to high cost loans 4.5 times more
frequently than white couples, on nationwide basis. How could such
patterns be plausibly described as “benign” or as reflecting “a sorting
of individuals into different market segments”?
Where the rubber will meet the road will be in
how the Federal Reserve and other agencies act on specific disparities
at specific lenders, including as these are formally raised to them in
timely comments on merger applications. See, Inner City Press / Fair
Finance Watch's other studies of the 2004 HMDA
data: first second third fourth fifth. For or
with more information, contact us.
May 9, 2005
Inner City Press / Fair Finance Watch Completes
Analysis, by Gender as well as Race and Ethnicity, of Ten Large Lenders’ Mortgage
Disparities
May 9 -- ICP has
now comprehensively reviewed the 2004 Home Mortgage Disclosure Act data of the ten largest
lenders, by gender as well as race and ethnicity. ICP has compared each of these,
including not only denial rates but also the new information concerning which loans are
subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on
a subordinated lien, below referred to as subprime or high cost loans), and has found the
following:
At Washington Mutual, African American men were confined to high cost
loans 3.34 times more frequently than white men -- the largest disparity for this
comparison.
At Royal Bank of Canada / Centura, African American women were
confined to high cost loans 4.52 times more frequently than white men -- the largest
disparity. Wells Fargo was second most disparate to African American women, confining them
to high cost loans 4.31 times more frequently than white men.
At Bank of America, Hispanic men were confined to high cost loans
2.10 times more frequently than white men. White women were confined to high cost loans
2.04 times more frequently than white men -- the largest disparity for this comparison.
Again at Washington Mutual, Hispanic women were confined to high cost
loans 2.53 times more frequently than white men -- the largest disparity for this
comparison.
At Citigroup, for home purchase loans, African American
women were confined to high cost loans 4.06 times more frequently than white men. Hispanic
men were confined to high cost loans 2.15 times more frequently than white men; at Wells
Fargo, the disparity between Hispanic and white men was 1.78.
ICP has also provided evidence of
Citigroup’s violation of its commitment to have stopped, from January 2003
onward, making loans covered by the Home Ownership and Equity Protection Act of 1994
(eight full percent over Treasuries on a first lien mortgage, ten percent over Treasuries
on a subordinate lien). In the 2004 data, ICP
found that Citigroup reported fully 837 HOEPA loans. ICP
raised this to Citigroup’s senior management at the April 19 shareholders’
meeting at Carnegie Hall in Manhattan. Neither Citigroup chairman Sandy Weill nor CEO
Charles Prince would directly answer the question. Citigroup chief operating officer
Robert Willumstad directly denied that Citigroup had reported HOEPA loans in its 2004
data. Finally,
the New York Times of May 4, 2005, reported that “Citigroup lenders made
hundreds of high-cost home loans to customers with poor credit histories in 2004, even
though the company had adopted a policy a year earlier to no longer issue such loans, the
bank acknowledged yesterday.” ICP has now submitted
the specifics of Citigroup’s 837 HOEPA loans to the attorneys general in the states
in which these super high cost loans were made. See, www.innercitypress.org/citi.html
“The
largest bank is also the most duplicitous,” said ICP’s executive director
Matthew Lee. “Predatory and discriminatory lending are central to Citigroup’s
compliance problems, and we have asked for enforcement actions in more than twenty five
states.”
Regarding
Wells Fargo, ICP has received more and more complaints about Wells Fargo, including about
Wells’ stealth America’s Servicing Company unit. Wells Fargo is also a major
funder of payday lenders, including targeters of military personnel like Armed Forces
Loans. ICP has raised this directly to Wells Fargo, and to the Federal Reserve on Wells’
proposal to acquire First Community Capital Corp., which was announced back on September
2, was challenged by ICP on November 1, and which still remains pending, more than five
months later.
Regarding HSBC,
ICP’s filings with the states have also asked them to expand their $486 million
predatory lending enforcement action against HSBC / Household International to cover HSBC’s
Decision One unit, which made more subprime loans in 2004 than either HFC or Beneficial,
which are covered by the states’ settlement. ICP
has asked the attorneys general in more than thirty states to reopen their $486 million
predatory lending settlement with Household, and for example to make sure that it expands
to cover and require reforms from Household’s, now HSBC’s, Decision One subprime
lending unit.
ICP has also
now analyzed, because of the disparities identified above, the nationwide lending of he
Royal Bank of Canada:
Whites: 74,387
applications, leading to 5740 denials (7.72% denied) and 58,173
originations; 1971 [or 1.84 percent] exceeded rate spread.
African Americans: 4767 applications, leading to 612 denials (12.84% denied, 1.66
times higher than whites) and 3451 originations; 255 [or
7.39 percent] were at rate spread [3.99 times higher / more likely to be over rate spread
than whites].
Latinos: 8376 applications, leading to 870 denials (10.39% denied, 1.35 times
higher than whites) and 6105 originations; 163 [or 2.67
percent] at rate spread [1.45 times higher / more likely to be over rate spread than
whites].
ICP’s Matthew Lee said, “Royal Bank of
Canada bungled into buying Centura Bank, then a mortgage company based in Illinois, but
now runs both of them in a clearly disparate fashion.”
ICP has also
produced and submitted upon request to to New York State elected prosecutorial officials a
list of the largest subprime lenders in New York State, including among others New
Century, H&R Block / Option One, American Home Mortgage as well as the belownamed,
KeyCorp and other banks. Number one on the list is Ameriquest. ICP has also specifically
analyzed Ameriquest’s lending to Native Americans. Ameriquest confined over sixty
percent of Native American home purchase borrowers to higher cost subprime loans.
The
fact that Ameriquest, the increasingly discredited subprime lender admittedly under
investigation by twenty five states, in 2004 made the most loans to African Africans, both
over the high cost rate spread and overall, is a reflection of a two-tier financial
system, one which is separate and unequal, including as to interest rate. We have asked
for more than twenty five states to take action on Ameriquest.”
ICP has provide
this and other analysis to the regulators and state attorneys general, demanding
investigation and action. ICP has also requested action, from federal regulators and now
fifty state attorneys general, on lenders who have refused to provide data, and who
otherwise enable predatory lenders: Royal Bank of Scotland
and other subprime facilitators and securitizers (as reported in the London Sunday Times
of May 1), Lehman Brothers, Fifth Third, Delta Funding and AIG / American General (these
four and others have refused to provide their data in analyzable form), as well as Fremont
Investment and Loan, which is trying to require ICP to sign a confidentiality agreement to
view its public data. ICP has refused, and has filed complaints.
Methodology, Scope of Review
and Results
ICP Fair Finance
Watch reviewed the 2004 mortgage records (defined by the gender and race / ethnicity of
the primary applicant) of the above-named lenders, including the top five banks:
Citigroup
White men: 169,992 originations of which 37,974 (or 22.34%) were at
rate spread
White women: 67,291
originations of which 21,689 (or 32.23%) exceeded the rate spread (1.44 times higher /
more likely to be rate spread than white men)
African American men: 16,512 originations of which 8499 (or 51.47%)
exceeded the rate spread (2.30 times higher / more likely to be rate spread than white
men)
African American women: 16,116 originations of which 9099 (or 56.46%)
exceeded the rate spread (2.53 times higher / more likely to be rate spread than white
men)
Hispanic men: 22,757 originations of which 7393 (or 32.25%) exceeded
the rate spread (1.44 times higher / more likely to be rate spread than white men)
Hispanic women: 9241 originations of which 3649 (or 39.49%) exceeded
the rate spread (1.77 times higher / more likely to be rate spread than white men)
JP Morgan Chase
White men: 241,337 originations of which 12,594 (or 5.22%) were at
rate spread
White women: 92,764 originations of which 6899 (or 7.44%) exceeded
the rate spread (1.43 times higher / more likely to be rate spread than white men)
African American men: 16,654 originations of which 2306 (or 13.85%)
exceeded the rate spread (2.65 times higher / more likely to be rate spread than white
men)
African American women: 14,684 originations of which 2263 (or 15.41%)
exceeded the rate spread (2.95 times higher / more likely to be rate spread than white
men)
Hispanic men: 32,669 originations of which 2188 (or 6.70%) exceeded
the rate spread (1.28 times higher / more likely to be rate spread than white men)
Hispanic women: 13,490 originations of which 1021 (or 7.57%) exceeded
the rate spread (1.45 times higher / more likely to be rate spread than white men)
Bank of America
White men: 270,5012 originations of which 4854 (or 1.79%) were at
rate spread
White women: 110,816 originations of which 2259 (or 2.04%) exceeded
the rate spread (1.14 times higher / more likely to be rate spread than white men)
African American men: 15,843 originations of which 588 (or 3.71%)
exceeded the rate spread (2.07 times higher / more likely to be rate spread than white
men)
African American women: 14,352 originations of which 561 (or 3.91%)
exceeded the rate spread (2.18 times higher / more likely to be rate spread than white
men)
Hispanic men: 49,884 originations of which 1875 (or 3.76%) exceeded
the rate spread (2.10 times higher / more likely to be rate spread than white men)
Hispanic women: 18,598 originations of which 783 (or 4.21%) exceeded
the rate spread (2.35 times higher / more likely to be rate spread than white men)
Wells Fargo
White men: 554,755 originations of which 36,012 (or 6.49%) were at
rate spread
White women: 196,396 originations of which 21,514 (or 10.95%)
exceeded the rate spread (1.69 times higher / more likely to be rate spread than white
men)
African American men: 29,858 originations of which 6357 (or 21.29%)
exceeded the rate spread (3.28 times higher / more likely to be rate spread than white
men)
African American women: 25,278 originations of which 7067 (or 27.96%)
exceeded the rate spread (4.31 times higher / more likely to be rate spread than white
men)
Hispanic men: 55.126 originations of which 5763 (or 10.45%) exceeded
the rate spread (1.61 times higher / more likely to be rate spread than white men)
Hispanic women: 19,276 originations of which 2843 (or 14.75%)
exceeded the rate spread (2.27 times higher / more likely to be rate spread than white
men)
Wachovia
White men: 92,209 originations of which 3428 (or 3.72%) were at rate
spread
White women: 36,684 originations of which 1806 (or 4.92%) exceeded
the rate spread (1.32 times higher / more likely to be rate spread than white men)
African American men: 9011 originations of which 926 (or 10.28%)
exceeded the rate spread (2.76 times higher / more likely to be rate spread than white
men)
African American women: 7912 originations of which 827 (or 10.45%)
exceeded the rate spread (2.81 times higher / more likely to be rate spread than white
men)
Hispanic men: 7400 originations of which 390 (or 5.27%) exceeded the
rate spread (1.42 times higher / more likely to be rate spread than white men)
Hispanic women: 3462 originations of which 253 (or 7.31%) exceeded
the rate spread (1.97 times higher / more likely to be rate spread than white men)
Beyond its
filings with fifty state attorneys general, ICP is also commenting to, and also litigating
Freedom of Information Act issues against, federal agencies like the Federal Reserve
Board, in connection with Wachovia’s support of payday lenders and other fringe
financial institutions, see, e.g., Dow Jones of
October 25, 2004, “Community Group: Fed Must Reconsider Wachovia-SouthTrust”).
ICP's book on these topics, "Predatory Bender"
CL
Review order / Amazon
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