Hello, LOs!
Today, the Office of the Comptroller of the Currency put the final nail in the coffin for last year's proposed Community Reinvestment Act rule, setting the stage for further reform.
Many have argued that the anti-redlining statute needs to explicitly address race in order to effectively address the legacy of redlining. New data gives some insight into just how behind the banking industry is when it comes to lending to minorities.
In a panel on race and the CRA, hosted by the National Association of Affordable Housing Lenders, the Urban Institute's Laurie Goodman and Ellen Seidman shared some research findings that Goodman described as "jaw-dropping."
The two researchers found that the share of recent bank purchase loans to minority borrowers actually lags the existing share of minority homeowners. While 24% of homeowners are minority homeowners, just 23.2% of recent bank purchase loans were made to minority homeowners.
That finding took Goodman by surprise, who said she expected the share of recent bank loans to minority borrowers to be slightly higher, "because the homeowners share reflects the history of redlining."
"We spend a lot of time looking at the credit box, the average FICO score for banks versus non-banks, debt-to-income ratios, loan-to-value ratios — and you find that bank credit in every channel is a little more constraining than non-bank," Goodman said.
"This actually translated it into what impact it has on minority borrowers."
The share of non-bank lending to minority homeowners, on the other hand, exceeded the existing share of minority homeowners, at 28.5%.
Depositories in recent years have fled the Federal Housing Administration market over concerns of compliance risk. In 2014, Jamie Dimon, CEO of JPMorgan Chase, after it agreed to pay $600 million for defective FHA and Department of Veterans Affairs loans, questioned why the bank should be "in the FHA business at all."
"Until they come up with a safe harbor or something, we are going to be very, very cautious in that line of business," Dimon said at the time.
HUD Sec. Marcia Fudge said in October at an industry conference that she was interested in bringing depositories back to FHA. Industry stakeholders say a recent draft defect taxonomy would instead keep them away.
LOs, does the bank mortgage lending lag surprise you? The CRA, an anti-redlining statute, doesn't contain any racial language. Should it?
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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