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Federal Court Throws Out Trump-Era Anti-Transparency Rule For Mortgage Lenders

A federal judge has sided with community groups to restore key mortgage lending transparency requirements, finding that the Trump-era Consumer Financial Protection Bureau acted unlawfully in issuing a 2020 rule exempting many mortgage lenders from reporting obligations designed to help combat redlining and other fair lending and fair housing violations. 

The ruling, in National Community Reinvestment Coalition (NCRC) et al v. Consumer Financial Protection Bureau (CFPB), issued Sept. 23, 2022, vacated a portion of a 2020 rule that exempted 35% of all mortgage lenders from reporting key data under the Home Mortgage Disclosure Act (HMDA). Public Citizen Litigation Group represented NCRC and its co-plaintiffs in the suit, Montana Fair Housing, Texas Housers, Empire Justice Center, the Association for Neighborhood and Housing Development, and the City of Toledo, Ohio, all of which use HMDA data in their work around the country.

This ruling partially overturns a Trump-era rule that blocked a significant portion of the mortgage industry from reporting information about who they were approving and denying for loans,” NCRC President and CEO Jesse Van Tol said. “Public data on home mortgage lending is crucial to combatting modern-day redlining and other forms of illegal discrimination that contribute to the savage inequalities plaguing our country. By recognizing that the prior administration had been arbitrary and capricious, and bringing sunlight back into mortgage lending data, the court helps to vindicate the federal government’s longstanding efforts to deliver equality of opportunity.”

Chief US District Judge Beryl A. Howell held that CFPB acted arbitrarily and capriciously when it issued the rule in 2020, as it overstated the costs to lenders associated with HMDA reporting requirements for closed-end loans, such as 20 and 30-year fixed rate mortgages, and failed to adequately explain what the court referred to as a “decision to essentially undo Congress’s carefully selected balance.” The court also found the agency acted unlawfully by failing to adequately account for the negative impact that the loss of data would have for communities and research and advocacy groups, and totally ignoring that that impact would disproportionately fall on the communities HMDA was designed to serve.

Congress has recognized that the burden of HMDA disclosure requirements is outweighed by the benefits that result from transparency as to lending activity. It was clear to us, and to the court, that CFPB ignored those benefits, and Congress’s wishes, in increasing the threshold for no other reason than to increase lender profit. We look forward to CFPB’s prompt implementation of the decision,” said Public Citizen’s Adam Pulver, the lead attorney on the case.

Nearly 50 years since HMDA and the anti-redlining Community Reinvestment Act (CRA) were passed and communities and neighborhoods of color continue to face a widening racial wealth gap and modern-day redlining,” said Barika X Williams, Executive Director of The Association for Neighborhood and Housing Development (ANHD). “The Trump administration’s unlawful decision to raise reporting thresholds to shield lenders from scrutiny weakened HMDA and undermined efforts to identify disparities in lending. We are pleased that the court set aside that decision as to closed-end loans and restored access to this important data. Comprehensive local data, disaggregated by race, is critical for ANHD’s work identifying and documenting ongoing disparities and advocating for race-conscious policies marginalized communities need to combat redlining, speculation, and displacement.

The HMDA data – as intended —  shines a light on disparities in lending to Black, Latinx, Asian and white borrowers, and the disparities between Black and Brown and white neighborhoods,” said Ruhi Maker Esq., Senior Attorney at Empire Justice Center, which has been analyzing HMDA data for thirty years and is the host of the Rochester, NY CRA coalition. “The data is the backbone of our advocacy work with and around fair lending and fair housing work. We use it to work with banks to craft lending solutions, and as a basis for our comments to federal regulators. We are thrilled that this data will continue to be collected; continuity is critical to our ability to identify and analyze long term trends.”

For more on how HMDA data is utilized by NCRC and other community advocates to track, expose and combat discriminatory and unequitable lending practices, click here.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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