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Subprime Racial Disparities By Banks in NY State Worse than at
Countrywide, Which Settled Predatory Lending Charges Here in 2006
New York, April 10 -- In the first study
of New York lending using the just-released 2006 mortgage lending data,
Fair Finance Watch has compared the statewide disparities by race and
ethnicity in the higher-cost lending of some of the nation's largest
banks to that of Countrywide Mortgage, which then-Attorney General Eliot
Spitzer settled with for predatory lending last year. Coupled with the
chaos roiling the subprime industry, the comparison raises concerns for
regulators, and calls out for enforcement actions against the banks.
2006 is the third year in which the data distinguishes which loans are
higher cost, over the federally-defined rate spread of three percent
over the yield on Treasury securities of comparable duration on first
lien loans, five percent on subordinate liens.
Countrywide in 2006 in New York
State confined African Americans to higher-cost loans above this rate
spread 1.7 times more frequently than whites, according to Fair Finance
Watch. Citigroup
was more disparate than Countrywide, while denying 35.5% applications of
African Americans, and 33% of applications from Latinos, versus only
21.5% of application from whites.
Other banks with Community
Reinvestment Act responsibilities in New York were also more disparate
than Countrywide. In New York State in 2006, Countrywide confined
Latinos to higher-cost loans above this rate spread 1.38 times more
frequently than whites.
JP Morgan Chase
was more disparate, confining Latinos to higher cost loans 1.63 times
more frequently than whites.
Washington Mutual
was even more disparate, confining Latinos to higher cost loans 1.99
times more frequently than whites.
Wells Fargo was
slightly less disparate to Latinos, with a disparity of 1.3, similar to
HSBCs, while being more disparate to African Americans, disparity of
2.43. Over 35% of HSBC's
mortgages to African Americans in New York State in 2006 were
subprime, over the rate spread. Nationwide in 2006, HSBC made 6295
super high-cost loans subject to the Home Ownership and Equity
Protection Act (HOEPA) -- that is, at least eight percent over
comparable Treasury securities -- more than HSBC made in 2005.
Predatory lending in New York
State has grown and not diminished, at Citigroup, Chase, Washington
Mutual and other companies. The disparities in this new data, at the
nation's largest bank and thrift and on down the line, alongside the
chaos that Wall Street's greed has caused, call out for immediate action
by the public and private sectors, from governmental enforcement
agencies and private attorneys general to grassroots consumers and
community groups. Despite corporate claims of best practices, the
problem is just getting worse.
In New York State, Banking
Superintendent Neiman was chosen by the governor from TD Banknorth. The
FFW study has found noteworthy that nationwide in 2006 at TD Banknorth,
on admittedly low subprime lending volume, African Americans were
confined to higher cost loans over the rate spread 16 times more
frequently than whites, and Latinos 12 times more frequently than
whites.
The Fair Finance Watch report
also casts its glance locally. The nation's largest bank, Citigroup, was
most disparate in the lowest-income borough its headquarters city.
Citigroup in 2006 confined borrowers in Bronx County to higher cost
loans 19.6 times more frequently than borrowers in Manhattan. The
disparity between Manhattan and Brooklyn at Citigroup in 2006 was 14.77.
Bank of America,
which thus far like just-bankrupt
New Century
has still refused to provide its 2006 data despite a requirement that it
be available on March 31, also assists other subprime lenders in 2006,
the report says, by securitizing loans for Ameriquest, which last year
settled predatory lending charges with state attorneys general including
in New York for $325 million. The settlement only required reforms at
Ameriquest Mortgage and two affiliates, but not its largest affiliate,
Argent Mortgage, which Citigroup now has an option to buy. The 2006 data
show that Argent made 117,328 mortgages, of which 107,530 or 91.65% were
higher cost loans over the rate spread.
According to Fair Finance Watch, several
large lenders have sought to avoid being scrutinized by refusing to
provide their data in computer analyzable form. Institutions insisting
on providing their data in paper or PDF form have included Lehman
Brothers, AIG, Delta Funding, Fremont Investment & Loan and other large
subprime lenders, as well as banks such as New York Community Bancorp,
Whitney Bank and Fifth Third Bank. Fair Finance Watch says it will be
pursuing those issues as well, with each lender's regulator.
Even with the downturn, predatory
lending is a still-growing problem, impacting not only homebuyers but
also consumers who take out payday, car title and tax refund
anticipation loans. Fair Finance Watch will be redoubling our efforts to
reign in the predatory lenders, using this data as a road map.
National study:
Fair
Finance Watch: Subprime Racial Disparities Grew Worse in 2006 at
Citigroup, HSBC, Chase, Wells Fargo & Other Banks
South Bronx, NY, USA -- In the first study of
the just-released 2006 mortgage lending data, Fair Finance Watch has
identified worsening disparities by race and ethnicity in the
higher-cost lending of some of the nation's largest banks. Coupled with
the chaos roiling the subprime industry, the trend raises concerns for
regulators: 2006 is the third year in which the data distinguishes which
loans are higher cost, over the federally-defined rate spread of three
percent over the yield on Treasury securities of comparable duration on
first lien loans, five percent on subordinate liens.
Citigroup
in 2006, in its headquarters Metropolitan Statistical Area of New York
City, confined African Americans to higher-cost loans above this rate
spread 4.41 times more frequently than whites, according to Fair Finance
Watch. Citi's disparity to Latinos was 2.38. Meanwhile Citigroup has
propped up and taken an option to buy Argent Mortgage, 91.65% of whose
loans in 2006 were subprime. At
HSBC,
over 63% of 2006 mortgages were subprime, including 6295 super high-cost
loans subject to the Home Ownership and Equity Protection Act (HOEPA) --
that is, at least eight percent over comparable Treasury securities --
more than HSBC made in 2005.
"Alongside the chaos in the
subprime industry, predatory lending has grown and not diminished at
Citigroup, HSBC and other companies," said Matthew Lee, the executive
director of Fair Finance Watch. "The disparities in this new data call
out more than ever for immediate action by the public and private
sectors, from governmental enforcement agencies and private attorneys
general to grassroots consumers and community groups. Despite corporate
claims of best practices, predatory lending is getting worse, and is now
being exported overseas."
Redlining and
continued disproportional denials to people of color are also evidenced
in the new 2006 data. Nationwide for home purchase loans, Citigroup
denied the applications of African Americans 2.10 times more frequently
than those of whites, and denied the applications of Latinos 1.84 times
more frequently than whites.
Wells Fargo,
19.23% of whose 2006 mortgage were subprime, denied the applications of
African Americans 1.72 times more frequently than whites, while denying
those of Latinos 1.57 times more frequently than whites. Wells Fargo in
2006 made 889 super high-cost HOEPA loans.
JP
Morgan Chase, 19.28% of
whose 2006 mortgages were subprime, was particularly disparate in the
New Orleans MSA, where Chase confined African Americans to higher-cost
loans 2.74 times more frequently than whites. In a cover letter
accompanying the data, Chase's Robert Meusel acknowledges that "Chase is
concerned that African-Americans and Hispanic borrowers may be paying
above-threshold rates more often that whites." FFW shares this concern.
Citigroup was most disparate in the
lowest-income borough its headquarters city. Citigroup in 2006 confined
borrowers in Bronx County to higher cost loans 19.6 times more
frequently than borrowers in Manhattan. The disparity between Manhattan
and Brooklyn at Citigroup in 2006 was 14.77.
Citigroup was disparate in Metropolitan
Statistical Areas all over the country in 2006. In Los Angeles in 2006,
Citigroup confined African Americans to higher cost rate spread loans
1.70 times more frequently than whites; its disparity for Latinos was
worse, at 1.90. Citigroup's African American to white disparity in the
Chicago MSA in 2006 was 2.44. Nationwide at Citigroup in 2006, 59.24% of
African American borrowers were confined to higher cost loans over the
rate spread, versus only 31.62% of whites. At HSBC, half of white
borrowers were confined to rate spread loans, versus 68.97% of African
Americans and 63.27% of Latinos.
HSBC, which bought Household
International in 2002 just after its predatory lending settlement with
state attorneys general for $484 million, in 2005 made some five
thousand super high-cost loans subject to HOEPA. This rose to 6295 HOEPA
loans by HSBC in 2006, even as HSBC gave earnings warnings.
Nationwide at
Royal Bank of Scotland's
Charter One Bank unit, African Americans were confined to higher cost
loans over the rate spread 1.49 times more frequently than whites. And
at Countrywide and its higher-cost Full Spectrum, upper income African
Americans were confined to higher cost loans over the rate spread 1.92
times more frequently than whites. In 2006, 24.70% of Countrywide's
total mortgages were subprime. Combining General Electric's two mortgage
units, GE Money Bank and WMC Mortgage, fully 86.89% of 2006 GE mortgages
were subprime.
Bank of America,
which thus far like New Century has refused to provide its 2006 data
despite a requirement that it be available on March 31, also assists
other subprime lenders in 2006, the report says, by securitizing loans
for Ameriquest, which last year settled predatory lending charges with
state attorneys general for $325 million. The settlement only required
reforms at
Ameriquest Mortgage
and two affiliates, but not its largest affiliate, Argent Mortgage,
which Citigroup now has an option to buy. The 2006 data show that Argent
made 117,328 mortgages, of which 107,530 or 91.65% were higher cost
loans over the rate spread.
Several large lenders have sought to avoid
being scrutinized by refusing to provide their data in computer
analyzable form. Institutions insisting on providing their data in
paper or PDF form have included Lehman Brothers, AIG, Delta Funding,
Fremont Investment & Loan and other large subprime lenders, as well as
banks such as Whitney Bank, Fifth Third Bank, New York Community
Bancorp, Regions Financial and EquiFirst, the subprime lender which
Barclays just bought. Further studies of the 2006 HMDA data should be
expected.
"Even with the downturn,
predatory lending is a still-growing problem, impacting not only
homebuyers but also consumers who take out payday, car title and tax
refund anticipation loans," Mr. Lee concluded. "Fair Finance Watch will
be redoubling its efforts to reign in the predatory lenders, using this
data as a road map."
The Federal
Reserve has
said
that
”black
and Hispanic borrowers taken together are much more likely than
non-Hispanic white borrowers to obtain credit from institutions that
report a higher incidence of higher-priced loans. On the one hand, this
pattern may be benign and reflect a sorting of individuals into
different market segments by their credit characteristics. On the other
hand, it may be symptomatic of a more serious issue. Lenders that report
a lower incidence of higher-priced products may be either less willing
or less able to serve minority neighborhoods. More troubling, these
patterns may stem, at least in part, from borrowers being steered to
lenders or to loans that offer higher prices than the credit
characteristics of these borrowers warrant. Reaching accurate
determinations among these alternative possible outcomes is one goal of
the supervision system.” See,
www.federalreserve.gov/pubs/bulletin/2005/3-05hmda.pdf
What the Federal Reserve, with its
reflexive defense of large banks, hasn't yet acknowledged is that
these disparities are most stark at the largest conglomerate in the
country, Citigroup, including in its headquarters city's lowest-income
borough. Citigroup in 2006 confined borrowers in Bronx County to higher
cost loans 19.6 times more frequently than borrowers in Manhattan. The
disparity between Manhattan and Brooklyn at Citigroup in 2006 was 14.77.
Where the rubber will meet the road will be in how the Federal Reserve
and other agencies act on specific disparities at specific lenders,
including as these are formally raised to them in timely comments on
merger applications.
Click
here for FFW’s
Ameriquest
Watch.
A book on these topics, "Predatory Bender"
CL
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