RISMEDIA, Sept. 17, 2007-The 2006 Home Mortgage Disclosure Act (HMDA) data released today by the Federal Reserve Board suggests that an increase in high-cost lending has increased mortgage delinquencies and is a significant contributor to the mortgage meltdown.
The data confirms that stubborn, persistent, and significant racial differences in the level of high-cost lending have continued across the country. The Federal Reserve’s analysis also suggested that the rise of exotic lending and prominent role of mortgage brokers have fueled an unsafe and unsound marketplace featuring a lack of accountability.”Dangerous lending practices are placing minorities, working class, and even middle-income borrowers at risk of losing their home,” said NCRC President & CEO John Taylor. “Once again, the HMDA data shows that racial differences in lending are getting worse, and they’re fueling increased delinquencies. The Federal Government needs to make sure that the mortgage industry is properly regulated.”
Dangerous lending practices loomed ominously in the housing market in 2006. Twenty two percent of home purchase loans in 2006 had “piggyback” or junior lien loans. The significant growth in piggyback lending since 2004 has left many borrowers highly leveraged in debt and in unaffordable housing situations. After controlling for economic factors, the Federal Reserve also found that the increase in high-cost lending increased serious delinquencies. Areas of the country with the highest levels of serious delinquency were the Midwest (Ohio, Indiana, Michigan), the south Atlantic region, the Gulf Coast; and portions of Texas, Oklahoma, and Colorado.
Meanwhile, after controlling for borrower and lender characteristics, the Federal Reserve found that 30.3% of the home purchase loans to African- Americans were high cost. In contrast, only 17.7% of the purchase loans received by whites were high-cost in 2006. This difference of 12.6 percentage points in 2006 was higher than the difference (10 percentage points) in 2005. Likewise, Hispanics received a much higher portion of high-cost loans after controlling for borrower and lending characteristics; 24% of the home purchase loans received by Hispanics were high-cost in 2006.
“Unsound loan underwriting has saddled working borrowers with too much debt. In the housing boom of recent years, lenders layered risk upon risk in a mad rush to out-compete their peers. Now, the damage is becoming clear and evident. Federal agencies must crack down on discriminatory and abusive lenders. To date, the Department of Justice has not settled one discrimination case using the home loan data with pricing information. In the final analysis, only a national anti-predatory lending bill with
comprehensive protections for consumers can create uniform and responsible practices,” concludes John Taylor.
National Community Reinvestment Coalition (NCRC) is a national non-profit membership organization that promotes economic justice and equal access to credit, capital and financial services to traditionally underserved communities.
For more information on NCRC, visit http://www.ncrc.org or call 202-628-8866.