A recent investigative report by Reveal News examined fair housing lending in major markets across the U.S.
The year-long project was reportedly based on 31 million Home Mortgage Disclosure Act (HMDA) records analyzed by Reveal from The Center for Investigative Reporting. The overall findings showed that blacks and Latinos were routinely denied conventional loans far more often than whites.
However, the Mortgage Bankers Association (MBA) quickly refuted the report. MBA Chief Economist Mike Fratantoni was cited in the story, but MBA said in a statement that the investigation was lacking.
“There is no place in our society for discriminatory lending practices and MBA and its members continue to support policies that ensure fair and equal access to mortgage credit regardless of race or ethnicity,” MBA said. “The story released today by Reveal News is deeply flawed and does a disservice to the important issues of access to credit and fair lending. Most importantly, Reveal fails to take into consideration several key components that form the backbone of lending decisions: a borrower’s credit history, debt-to-income (DTI) ratio and loan-to-value (LTV) ratio. These are the most important components lenders consider when underwriting a loan.”
MBA said it shared concerns with Reveal over the story before it was published, but they were ignored. In one case the report stated that credit score was not included in its review because the data was not publicly available under HMDA (credit score is among the new HMDA collection points being taken by the industry following the new rule which was effective Jan. 1).
However, the authors stated the reason it was not public was “because lenders have deflected attempts to force them to report that data to the government, arguing it would not be useful in identifying discrimination.”
MBA saw the situation differently.
“The Federal Reserve and other regulators have been clear in saying that denial disparities in the HMDA data are not in themselves determinative with respect to assessing fair lending. Fair lending examinations include a much richer set of information regarding loans and borrowers,” the association said in its statement. “While Reveal acknowledges these factors were not included in their analysis, it suggests it is because banks won’t disclose this information. The fact is that federal privacy laws explicitly prevent banks from doing so. It is important to know, however, that federal regulators do have access to all necessary information when reviewing discriminatory lending patterns.”
Another area of concern with the report was the organization’s decision to limit the analysis to conventional loans, excluding Federal Housing Administration-backed loans.
“The FHA program is designed specifically to help borrowers with lower credit scores and small downpayments. By excluding FHA loans from its analysis, the authors purposefully ignored a sizeable share of the home lending market that provides homeownership opportunities for lower income and traditionally underserved borrowers,” MBA stated.