New HMDA data shows need to strengthen CRA, close loopholes, apply to more institutions

Just hours before the start of the Labor Day long weekend, the Consumer Financial Protection Bureau (CFPB) released 2018 Home Mortgage Disclosure Act (HMDA) data. It is the most complete record of mortgage lending in the United States. The data showed non-banks extended their dominance of home lending and that banks essentially dropped out of the government-backed FHA program that helps low- and moderate-income (LMI) borrowers. The data also revealed that while 42% of Americans meet the qualifications of being LMI, only 28.1% of mortgage loans went to LMI borrowers in 2018. A more detailed analysis of the data from the National Community Reinvestment Coalition (NCRC) can be found and linked / cited here: 

https://ncrc.org/2018-hmda-overview-banks-fell-further-behind-non-banks-dominated-home-lending/

Jesse Van Tol, CEO of NCRC, made the following statement: 

“A market shift is clearly underway, and the rise of non-banks as the dominant source of credit for mortgage borrowers adds urgency to the need for stronger rules and broader enforcement of the Community Reinvestment Act. The law was intended to end redlining and discrimination against LMI communities and borrowers. But more than half of all mortgages are now issued by non-bank mortgage firms, and CRA rules and enforcement don’t apply to them. 

“The data shows dramatically why we need to strengthen CRA, close loopholes and apply it to more institutions. Enduring disparities in lending to borrowers of color also shows why we need to strengthen fair lending and community reinvestment laws.

“To make matters worse, banks have all but eliminated the use of FHA, VA or RHS lending programs, which are still a primary source of lending for minority homebuyers. This leaves minority borrows disproportionality served by non-banks. Without CRA protections extended to non-banks, these borrowers are once again exposed to issues such as steering, redlining or other predatory behavior that CRA examinations take into consideration.

“The way the CFPB is handling HMDA data is also alarming. In the past, the agency produced detailed reports and analysis of HMDA trends. Those reports were helpful for small community groups, municipalities and concerned individuals. Without them, the general public is left in the dark about the nation’s mortgage lending. It is just another example of how the Trump Administration is working to hide public data rather than encourage transparency and public understanding. 

“That’s a dangerous step backward. Free, public and easily understood data is essential to advance racial and economic equality throughout the economy and especially in home mortgage lending, a foundation of personal wealth-building and a key lever of discrimination that has profoundly worsened racial wealth inequality over decades.

“As regulators consider updates to CRA rules, this new data makes it clearer than ever that the law should be modernized and strengthened to ensure that all lending institutions meet the needs of LMI communities and borrowers.”

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