By Raising Reporting Thresholds, CFPB Rule Blocks Access to Data That is Critical to Uncovering Housing Discrimination
WASHINGTON, D.C. – Today, the National Community Reinvestment Coalition and a group of community organizations, represented by Public Citizen Litigation Group, filed a lawsuit against the U.S. Consumer Financial Protection Bureau (CFPB) to overturn a new rule that exempts thousands of financial institutions from reporting data that is key to uncovering housing discrimination.
The lawsuit, filed in the U.S. District Court for the District of Columbia, explains that the CFPB rule reverses transparency into housing discrimination required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
In addition to NCRC, the other plaintiffs in the lawsuit are Montana Fair Housing, Texas Low Income Housing Information Service, the City of Toledo, Empire Justice Center and the Association for Neighborhood and Housing Development – groups that depend on the data for their research into illegal lending discrimination and advocacy to promote fair housing and lending.
“The CFPB used its rule-making power to undermine data reporting that’s essential for the public to detect and stop discrimination in lending and housing,” said Jesse Van Tol, NCRC’s CEO. “The CFPB should use its data-gathering powers and other tools for what the agency was designed to do – to ensure that consumers are treated fairly. This rule does the opposite – it helps a group of lenders hide data from the public.”
The Home Mortgage Disclosure Act (HMDA) requires financial institutions to publicly report data about mortgages and other home loans they extend. However, a May 2020 rule from the CFPB dramatically increased the threshold for required reporting.
“CFPB’s new rule reduces the availability of data that the public and public officials have used to combat redlining and other fair lending and fair housing violations, and makes identifying such practices more difficult,” said Michael Kirkpatrick, the Public Citizen attorney serving as lead counsel on the case. “The loss of information will be felt most acutely in distressed urban areas, rural areas, tribal areas, communities of color and neighborhoods with a high number of immigrants. Raising the reporting thresholds will compromise enforcement work against unfair and predatory lending, because there will be less data publicly available to monitor such activity.”
Among other flaws, the CFPB’s new HMDA rule:
- Exempts 40% of financial institutions that currently report data about their closed-end mortgages from having to do so beginning in 2021
- Reflects the CFPB’s refusal to consider public comments on the impact of its 2020 rule on visibility into lending practices in traditionally underserved communities
- Cuts off the source of data that has fueled groundbreaking investigative reporting into redlining and housing discrimination, from the Atlanta Journal-Constitution’s Pulitzer Prize-winning 1988 “Color of Money” series to the 2018 “Kept Out” exposé in Reveal
- Reverses much of the increased transparency into housing discrimination that resulted from new disclosure provisions in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act
- Contradicts previous findings by the CFPB itself that higher thresholds would preclude effective monitoring of housing discrimination
Congress enacted HMDA in 1975 in response to widespread concerns about “redlining” and inadequate access to credit in certain urban areas, particularly urban areas inhabited predominantly by people of color. As a sunshine statute, HMDA seeks to hold lending institutions publicly accountable for making loans responsibly to traditionally underserved populations. HMDA requires certain financial institutions to collect, record and report specific information about their mortgage lending activity. Its main purposes are to provide the public with loan data to assess whether financial institutions are meeting the housing needs of their communities, to inform public-sector investment decisions, to identify discriminatory lending patterns and to enforce anti-discrimination statutes.
“With little effort, financial institutions can provide data to demonstrate services are available throughout a community on a non-discriminatory basis. Rolling back requirements of HMDA data reporting at a time in our history fraught with distrust by long disenfranchised peoples, will, at the least, send a message of ignorance about the need and usefulness of the data. At the worst, the change in HMDA data reporting requirements sends a message that some never intended to end discrimination in our country,” said Pam Bean, Montana Fair Housing.
“Texas Housers and the community partners we work with depend on HMDA data to make sure that banks are serving the entire community, especially people of color who continue to face housing and lending discrimination. The minimal effort it takes for a bank to report its lending data is nothing compared to burden placed on borrowers of color who will face greater obstacles to obtain home mortgages if this rule change is to remain in place,” said Adam Pirtle, Advocacy Co-Director, Texas Housers or Texas Low Income Housing Information Service.
“HMDA data is important to communities like Toledo because it allows us to determine where financial institutions are investing in our community and affords us the opportunity to advocate, redirect, and leverage those investments in areas of greatest need. A neighborhood’s strength is driven by homeownership, which drives other amenities and provides much needed resources to strengthen our education system. Without adequate mortgage lending information, we cannot effectively advocate for Toledoans,” said Catherine Crosby, Chief of Staff, City of Toledo.
“Communities of color have been redlined for decades. Empire Justice Center has used HMDA data to demonstrate that African American and Latinx borrowers and neighborhoods have not had access to safe and affordable mortgage loans. Our research has found that Black and Brown applicants disproportionately had higher denial rates or received high cost loans, the bulk of which at the time were predatory loans that stripped wealth and equity. Excluding more institutions from reporting HMDA data, especially when communities of color are disproportionately being harmed by COVID-19 and experiencing loss of wealth and income, is exactly the wrong thing to do. Comprehensive transparency is needed now more than ever to ensure that all communities are being served, particularly those impacted from ongoing systemic racism,” stated Ruhi Maker, Esq., Senior Attorney at Empire Justice Center.
“Black and Latinx communities and neighborhoods continue to suffer from discriminatory housing and lending policies and practices. HMDA was designed to equip communities with the data necessary to identify and combat discrimination and disinvestment. Yet amidst heightened racial tensions and a global pandemic, the CFPB rule to raise reporting thresholds will weaken HMDA and undermine efforts to identify disparities in lending. We cannot allow lenders to hide their unfair and discriminatory practices. Full HMDA data is a critical component for ANHD, our members, and all those committed to ensuring fair housing, an end to discrimination and undoing the systemic racism that continue to plague communities of color,” said Barika X Williams, Executive Director, The Association for Neighborhood and Housing Development (ANHD).
To read the full complaint, visit:
The National Community Reinvestment Coalition 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. NCRC was formed in 1990 by national, regional and local organizations to increase the flow of private capital into traditionally underserved communities. NCRC has grown into an association of more than 600 community-based organizations in 42 states that promote access to basic banking services, affordable housing, entrepreneurship, job creation and vibrant communities for America’s working families. More: www.ncrc.org
Public Citizen Litigation Group is the litigating arm of Public Citizen, a nonprofit consumer advocacy organization that champions the public interest in the halls of power. Public Citizen defends democracy, resists corporate power and works to ensure that government works for the people. Public Citizen works to protect the rights of consumers to access the courts and to stop rollbacks of important consumer, worker and environmental protections.
Montana Fair Housing (MFH) is a private nonprofit full-service fair housing organization whose mission is to promote fair housing throughout Montana, and elsewhere. Among MFH’s specific purposes and goals is the promotion of equal opportunity in all housing related transactions, and to ensure all housing is available on a non-discriminatory basis.
Texas Housers is a 501(c)(3) nonprofit that has worked for over 30 years with low-income Texans to achieve the American dream of living in a quality home in a quality neighborhood. In addition to advocating for affordable, high-quality housing, Texas Housers is committed to improving neighborhood equity by ensuring that all levels of government and industries regulated by the government such as banks provide resources and services fairly in low-income neighborhoods and segregated neighborhoods of color.
Empire Justice Center is a statewide, multi-issue, multi-strategy, public interest law firm focused on changing the “systems” within which poor and low-income families live. Empire Justice protects and strengthens the legal rights of people in New York State who are poor, disabled or disenfranchised through: systems change advocacy, training and support to other advocates and organizations, and high quality direct civil legal representation. Empire Justice has offices in Albany, Rochester, Yonkers, White Plains and Central Islip on Long Island. Empire Justice Center convenes the Greater Rochester Community Reinvestment Coalition (GRCRC) and, in that capacity, has been analyzing HMDA mortgage lending data for 3 decades and CRA small business lending data for 2 decades. The analyses focus on lack of lending to low-moderate income communities and neighborhoods of color. Empire Justice and GRCRC members meet with banks and federal and NYS bank regulators to share the analyses and the lived reality of low-moderate income people and people of color to improve lending.
The Association for Neighborhood and Housing Development builds community power to win affordable housing and thriving, equitable neighborhoods for all New Yorkers. As a coalition of community groups across New York City, we use research, advocacy, and grassroots organizing to support our members in their work to build equity and justice in their neighborhoods and city-wide. ANHD values anti-racism, justice, equity and opportunity. We believe in the importance of movement-building that centers marginalized communities in our work. Since our founding in 1974, ANHD has been helping to make New York City’s community development and grassroots neighborhood-based groups among the most effective in the country by providing high-impact policy research, coalitions and campaigns rooted in the local community, comprehensive training, robust capacity-building and constructive apprenticeship programs.
Texas Low Income Housing Information Service (Texas Housers)
City of Toledo