Washington, DC – Today, in reaction to the release of the 2016 Home Mortgage Disclosure Act (HMDA) data, the National Community Reinvestment Coalition (NCRC) President and CEO John Taylor made the following statement.
“Home ownership is the primary means by which America built the largest and wealthiest middle class in the world, a legacy that is endangered today. This data illuminates that all our banks, but especially the biggest banks, must be held more accountable as they continue to restrict access to fair and safe loans for low and moderate-income families. The 9% reduction in loans to blue-collar America since 2010 is bad enough, but the 17% reduction among the three biggest banks (who combined are 1/3 of the market) is cause for serious concern. I think the fact that 98% of banks pass their CRA exams is a message from regulators to banks that they can get away with this sort of behavior. And this has a real impact on families, who need help getting started on the property ownership ladder. It locks out buyers from the wealth building opportunity offered to previous generations.”
“Despite small gains in 2016, this data highlights that credit remains very tight, especially for minority borrowers. This is one of the main causes of our widening racial wealth gap. Really, we should call it the racial wealth chasm, as the wealth of the typical black household has declined by an unbelievable 23% in the past two decades.”
“I am also deeply concerned that the number of loans from non-bank entities grew by 3% because they were the main culprits of subprime lending in the run up to the financial crisis. That 3% represents millions of under regulated institutions and under regulated institutions are like water. They float wherever they can until something stops them. This puts your finances at risk, my finances at risk, and our entire economy at risk. We should not take this lightly. These non-bank loans are less transparent and more likely to take advantage of the consumer. They also are not tracked for discrimination and the lenders don’t have to reinvest anything in any community.”
“The Trump administration and Congress can address this in three ways. First, by ending the conservatorship on Fannie Mae and Freddie Mac and allowing them to rebuild their capital reserves with strong oversight and improved housing goals. Secondly, Congress can pass Maxine Waters “Making FHA More Affordable Act”. This legislation reverses the unfair requirement holding FHA borrowers to a double standard that ultimately amounts to a ‘poor tax’. And lastly, it is incumbent upon the regulators to reduce the high risk and noncompliance cultures of non-bank lenders by holding them to the same standards and community obligations as traditional banks.”
The 5 data takeaways:
- Home purchase loans rose from 3.7 million in 2015 to 4 million, while refinance loans rose from 3.2 million in 2014 to 3.8 million.
- Researchers at the Federal Reserve note that over 2010-2016 the rest of the market has reduced their share of lending to LMI borrowers by 9% but three banks which hold 1/3 of all deposits (JP Morgan, Wells Fargo, and Bank of America) averaged a 17% reduction. This is related to these banks transition away from FHA lending, which has also fallen from 43% to just 5% between 2010 and 2016.
- Home purchase loans for single family homes by non-banks increased 3%, accounting for 53% of all loans.
- High cost loans are 21% of FHA lending, reflecting the higher cost of FHA lending driven by upfront mortgage interest fees.
- We saw only slight improvement in loans to minorities since 2015. Black borrowers rose by 0.5%, to 6%. Hispanic borrowers received 8.8% (0.2% increase), Asian received 5.5% of all loans (0.2% increase, and black borrows received 6% of all loans (0.5% increase)
“Unless otherwise noted by a *the data here applies to First-lien mortgages for one- to four-family, owner-occupied, site-built homes.”
###
About NCRC:
NCRC and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business development.
