1H Ii"enter for Investigative Reporting Mai] Journalist Inquiry: Raeial Disparities in Mortgage Lending

Aaron Glantz 

 

Journalist Inquiry: Racial Disparities in Mortgage Lending
Sarah Grano

Aaron,

Thu. Jan 25,2[113 at Alvl

 

 

BesL

Sarah

ABA Statement

Without the ability to review your speci?c HllelA analysis, we cannot comment on the ?ndings directly, however, 
?rmly believes that discrimination has no place in the mortgage market. We continue to work closely with our members,
regulators and other groups to make sure creditworthy Americans have access to the ?nancial products they want, with
the protections they deserve- Bankers are in the business of making loans, and they want to provide mortgages to as
many quali?ed borrowers as possibleway that encourages a positive future relationship. Like many
other businesses, banks understand that reaching out to every segment of the community also makes good business
sense.

ABA also ?rmly believes that any meaningful review of mortgage lending practices, as regulators and the courts have
articulated previously, must go beyond statistical analyses and consider individual factors such as a borrower?s credit
history, debt-to-income and loan-to-value ratios as well as their ability to repay. Unfortunately that sometimes means
hard working Americans seeking a mortgage may not qualify under current rules. ABA remains committed to working
with policymakers to ensure those deserving borrowers eventually get the opportunity to obtain a mortgage appropriate
for them.

In addition, we think the following points are critical to include in any thoughtful assessment of mortgage lending
practices by banks:

1} HMDA Data Alone is Insufficient to Conclude Racial Discrimination in Mortgage Lending:

DA is a tool that helps bankers, regulators and others understand the ?ow of mortgage credit in their communities.
While the data can help bankers and regulators identify areas for further investment or examination, the HMDA
numbers alone are not dispositive of bank fair lending performance- HMDA data can only determine if a disparity
exists; it cannot be used to explain why it exists. Generally, the most important factors in the decision to lend is a
borrowers' credit score and history, their income and debt-to-income ratio, and the loan to value fLT?v?] ratio, and
that information is not included in HMDA data you analyzed. Again, that does not mean the HlleA information is not
important. It simply means the data cannot paint a complete picture.

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ll'l {'cetcr l'er Investigative Hepertjeg Mai] -Jeunta jst Inquiry: Racial Disparities in Mertgagc Lending

It?s impertant te keep in mind a signi?cant Supreme Eeurt decisien- As peinted cut by Justice Kennedy in 2D15,
statistics alene de net demenstrate a fair lending vielatien. There must be mere than simple statistical analysis. That's
why HlleiA data can enly serve as a starting peint and net a cenclusien.

2} Regulaters De Have the lnfermatien Needed te Assess Whether Discriminatien is Taking Place:

Federal regulaters regularly review net enly the HiyiDA data but else the ether relevant infermatien needed te assess
whether discriminatien is taking place. The Federal Reserve's latest Residential lyiertgage Lending repert which we
have attests that bank examiners use pricing data and lean applicatien eutcemes. "in cenjunctien
with ether infermatien and risk facters that can be drawn directly frem lean files er electrenic recerds maintained by
lenders-" te scrutinise mertgage lending practices te make sure illegal discriminatien is net eccurring- Banks alse use
the HiyiDA data internally te make sure there is he disparity based en any pretected class. such as race. Banks test
files internally te cenfirm that denials are based equally en the same criteria. such as credit histeries and ether critical
infermatien te make sure they are in cempliance with fair lending requirements. As yeu heard an eur call. that werk is
shared with their examiners. Federal examiners alse retest the data te ensure cempliance. Such multi-tiered centrels
pretect against the pessibility ef "systematic denials" fer any pretected class. and makes it unlikely that any
discriminatien eccurs in banks' lending pregrams-

3} Ability te Repay:

A very impertant peint te censider in relatien te industry practice is that banks are required by federal law te assess and
reasenably assure an applicant?s ability te repay- We have alse attached these and urge yeu te reviewthem.
Federal regulatiens set ferth cemprehensive legal standards te gevern the underwriting ef residential mertgage leans,
requiring crediters te fellew precise guidelines regarding the censideratien and evaluatien ef berrewer repayment
capacity. Yeur reasenable inquiries abeut what we can de te expand lending te speci?c cemmunities is therefere
dependent en what is pessible under law. We suggested that this legal envirenment sheuld be part ef the breader
stery inte why banks are in a delicate pesitieh when altering lending standards, and why it may be mere dif?cult fer
seme Americans te ebtaih a mertgage.

4} Net All Lenders Are the Same:

The mertgage market includes mere than just banks. In 2MB. banks 8: thrifts cellectively acceunted fer abeut 38
percent ef all repel-ted mertgage eriginatiens. Unlike these ether players. banks face additienal regulatery
requirements- When examining lending practices, we urge yeu te keep in mind the distinctiens between lenders.

 



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