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4/4/07-- "Banks Prone to Sell Minorities Pricy Loans," Reuters / Washington Post

Some old HMDA coverage:

“Citigroup Units Kept Making Loans That Violated Policy,” by Eric Dash, New York Times, May 4, 1005, Pg. C9

New York’s Minority Loan Practices Draw Interest: Bank data report reveals major rate disparity on city's home mortgages,” by Tom Fredrickson, Crain’s New York Business, May 2, 2005, Pg. 1

“Given Credit Where It’s Due,” New York Daily News (editorial, by Beverly Weintraub), May 2, 1005, Pg. 34

Royal Bank of Scotland Pursued by U.S. Consumers,” Dow Jones, May 1, 2005.

Spitzer Is Urged to Probe Royal Bank of Scotland,” by Dominic Rushe, Sunday Times (London), May 1, 2005

“New York's attorney general seeks data to assess whether lenders are targeting minorities,” by Annette Haddad, Los Angeles Times, April 29, 2005

“With New Data, Attorney General Looks at Mortgage Rates,” by Tami Luhby, New York Newsday, April 29, 2005

AP re ICP's first study (of 2004 data)


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Fair Finance Watch: Subprime Racial Disparities Grew Worse in 2006 at Citigroup, HSBC, Chase, Wells Fargo & Other Banks

   New York, April 4 -- In the first study of the just-released 2006 mortgage lending data, Fair Finance Watch has identified worsening disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. Coupled with the chaos roiling the subprime industry, the trend raises concerns for regulators: 2006 is the third year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

            Citigroup in 2006, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread 4.41 times more frequently than whites, according to Fair Finance Watch. Citi's disparity to Latinos was 2.38. Meanwhile Citigroup has propped up and taken an option to buy Argent Mortgage, 91.65% of whose loans in 2006 were subprime. At HSBC, over 63% of 2006 mortgages were subprime, including 6295 super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities -- more than HSBC made in 2005.

           "Alongside the chaos in the subprime industry, predatory lending has grown and not diminished at Citigroup, HSBC and other companies," said Matthew Lee, the executive director of Fair Finance Watch. "The disparities in this new data call out more than ever for immediate action by the public and private sectors, from governmental enforcement agencies and private attorneys general to grassroots consumers and community groups. Despite corporate claims of best practices, predatory lending is getting worse, and is now being exported overseas."

            Redlining and continued disproportional denials to people of color are also evidenced in the new 2006 data. Nationwide for home purchase loans, Citigroup denied the applications of African Americans 2.10 times more frequently than those of whites, and denied the applications of Latinos 1.84 times more frequently than whites. Wells Fargo, 19.23% of whose 2006 mortgage were subprime, denied the applications of African Americans 1.72 times more frequently than whites, while denying those of Latinos 1.57 times more frequently than whites. Wells Fargo in 2006 made 889 super high-cost HOEPA loans.

         JP Morgan Chase, 19.28% of whose 2006 mortgages were subprime, was particularly disparate in the New Orleans MSA, where Chase confined African Americans to higher-cost loans 2.74 times more frequently than whites. In a cover letter accompanying the data, Chase's Robert Meusel acknowledges that "Chase is concerned that African-Americans and Hispanic borrowers may be paying above-threshold rates more often that whites." FFW shares this concern.

   Citigroup was most disparate in the lowest-income borough its headquarters city. Citigroup in 2006 confined borrowers in Bronx County to higher cost loans 19.6 times more frequently than borrowers in Manhattan. The disparity between Manhattan and Brooklyn at Citigroup in 2006 was 14.77.

  Citigroup was disparate in Metropolitan Statistical Areas all over the country in 2006. In Los Angeles in 2006, Citigroup confined African Americans to higher cost rate spread loans 1.70 times more frequently than whites; its disparity for Latinos was worse, at 1.90. Citigroup's African American to white disparity in the Chicago MSA in 2006 was 2.44. Nationwide at Citigroup in 2006, 59.24% of African American borrowers were confined to higher cost loans over the rate spread, versus only 31.62% of whites. At HSBC, half of white borrowers were confined to rate spread loans, versus 68.97% of African Americans and 63.27% of Latinos.

       HSBC, which bought Household International in 2002 just after its predatory lending settlement with state attorneys general for $484 million, in 2005 made some five thousand super high-cost loans subject to HOEPA. This rose to 6295 HOEPA loans by HSBC in 2006, even as HSBC gave earnings warnings.

           Nationwide at Royal Bank of Scotland's Charter One Bank unit, African Americans were confined to higher cost loans over the rate spread 1.49 times more frequently than whites. And at Countrywide and its higher-cost Full Spectrum, upper income African Americans were confined to higher cost loans over the rate spread 1.92 times more frequently than whites. In 2006, 24.70% of Countrywide's total mortgages were subprime. Combining General Electric's two mortgage units, GE Money Bank and WMC Mortgage, fully 86.89% of 2006 GE mortgages were subprime.

            Bank of America, which thus far like New Century has refused to provide its 2006 data despite a requirement that it be available on March 31, also assists other subprime lenders in 2006, the report says, by securitizing loans for Ameriquest, which last year settled predatory lending charges with state attorneys general for $325 million. The settlement only required reforms at Ameriquest Mortgage and two affiliates, but not its largest affiliate, Argent Mortgage, which Citigroup now has an option to buy. The 2006 data show that Argent made 117,328 mortgages, of which 107,530 or 91.65% were higher cost loans over the rate spread.

  Several large lenders have sought to avoid being scrutinized by refusing to provide their data in computer analyzable form.  Institutions insisting on providing their data in paper or PDF form have included Lehman Brothers, AIG, Delta Funding, Fremont Investment & Loan and other large subprime lenders, as well as banks such as Whitney Bank, Fifth Third Bank, New York Community Bancorp, Regions Financial and EquiFirst, the subprime lender which Barclays just bought. Further studies of the 2006 HMDA data should be expected.

            "Even with the downturn, predatory lending is a still-growing problem, impacting not only homebuyers but also consumers who take out payday, car title and tax refund anticipation loans," Mr. Lee concluded. "Fair Finance Watch will be redoubling its efforts to reign in the predatory lenders, using this data as a road map."

    The Federal Reserve has said that

”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.” See, www.federalreserve.gov/pubs/bulletin/2005/3-05hmda.pdf

   What the Federal Reserve, with its reflexive defense of large banks, hasn't yet acknowledged is that these disparities are most stark at the largest conglomerate in the country, Citigroup, including in its headquarters city's lowest-income borough. Citigroup in 2006 confined borrowers in Bronx County to higher cost loans 19.6 times more frequently than borrowers in Manhattan. The disparity between Manhattan and Brooklyn at Citigroup in 2006 was 14.77.

  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. 

 Click here for FFW’s Ameriquest Watch.

A book on these topics, "Predatory Bender"   CL Review  order / Amazon

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