NATIONAL
COMMUNITY REINVESTMENT COALITION
April 13, 2004
Public Information Room
Office of the Comptroller of the Currency
250 E Street, S.W.
Mailstop 1-5
Washington, D.C. 20219
Docket Number 04-05
Ms. Jennifer J. Johnson
Secretary, Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Docket No. R-1180
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments, Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Docket Number 2003-67
Attention: Comment regarding the Economic Growth and Regulatory
Paperwork Reduction Act of 1996
To Whom It May Concern:
The National
Community Reinvestment Coalition, the nation’s
economic justice trade association of more than 600 community organizations,
is sending this comment in response to the Notice of Regulatory Review
as required by the Economic Growth and Regulatory Paperwork Reduction
Act (EGRPRA) of 1996. In response to the second series, “Consumer
Protection: Lending—Related Rules,” we respectively request
that the federal banking agencies retain their regulations concerning
Fair Housing, Equal Credit Opportunity Act (ECOA), Home Mortgage
Disclosure Act (HMDA), Truth in Lending Act (TILA) and Unfair or
Deceptive Acts or Practices.
NCRC favors expanding
data reporting requirements that will assist in achieving the goals
of these fair lending statutes and substantially
benefit consumers with little regulatory burden. Under EGRPRA, the
federal agencies must identify “outdated” regulations.
The incomplete data collection under HMDA and ECOA is outdated and
frustrates the purpose of these statutes to prevent discrimination.
While increasing data reporting requirements, the federal agencies
must not limit the consumer protections currently available under
these regulations. Any streamlining of these protections would interfere
with the agencies’ ability to fulfill their statutory obligations.
A series of federal statutes including the Fair Housing Act, the
Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, and
the Truth-in-Lending Act have established a solemn Congressional
intent and purpose of eliminating abusive and discriminatory lending.
In light of the recent decision by the Office of the Comptroller
of the Currency to preempt all state anti-predatory lending legislation,
these protections have become even more important to consumers. NCRC
does not believe these statutes provide enough protection, therefore
any regulatory streamlining would further put consumers at risk.
Home Mortgage Disclosure Act
Enacted by Congress
in 1975, the Home Mortgage Disclosure Act (HMDA) requires banks,
savings
and loans associations, credit unions, and
other financial institutions to publicly report detailed data on
their home lending activity. In the HMDA statute (12 USC Section
2801), Congress found that financial institutions contributed to
the decline of certain geographical areas by their failure to provide
adequate home financing on reasonable terms and conditions. Accordingly,
a major purpose of HMDA was to provide citizens and public officials
with sufficient information to determine whether institutions are
filling their obligations to serve the housing needs of communities
and neighborhoods in which they are located. Banker suggestions to
exempt more institutions from data reporting will thwart HMDA’s
purpose of determining if institutions are serving credit needs.
In the HMDA statute,
Congress expressed its will that institutions must provide loans
on reasonable
terms. As a step towards this Congressional
objective, regulators need to update HMDA to include pricing information
on all loans, critical loan terms (existence of prepayment penalties,
for example), and key underwriting variables such as loan-to-value
ratios and debt-to-income ratios. HMDA is becoming increasingly “outdated” as
the industry adopts automated underwriting and risk-based pricing.
At the same time, HMDA lacks key variables that enable the general
public to assess if lenders are applying their sophisticated technology
to provide credit that is priced fairly and has reasonable terms.
The regulators should also end the exemptions of certain lenders
from HMDA and improve the existing data. Currently, small lenders
(with assets under $33 million) and lenders with offices in non-metropolitan
areas are exempt from HMDA data reporting requirements. Data for
rural areas is also incomplete, particularly information on the census
tract location of loans. If banks and thrifts have assets under $250
million dollars (or are part of holding companies under $1 billion
dollars), they do not have to report the census tract location for
loans in metropolitan areas in which they do not have any branch
offices nor do they have to report the census tract location for
loans rural, non-metropolitan areas. In addition, demographic information
on the race, income level, and gender of borrowers is missing from
loans that lenders purchase.
Technology has
improved to such an extent that even small lenders would be confronted
with
minimal burden in collecting HMDA data.
Also, all lenders would be able to readily collect additional data
items. Overall, the benefits of expanded HMDA data requirements would
greatly outweigh the burdens and would be true to HMDA’s statutory
purpose of assessing the extent to which credit needs are met.
Equal Credit Opportunity Act
The Equal Credit
Opportunity Act and Regulation B prohibits discrimination against
an applicant
because of the applicant’s race, color,
sex, religion, national origin, marital status, age or receipt of
public assistance. Currently, the Federal Reserve’s Regulation
B prohibits lenders from collecting demographic data including race
and gender of business owners seeking small business loans, expect
for limited self-assessment purposes. The Federal Reserve has asserted
that their regulation guarantees that the loan process remains colorblind
for all applicants. In reality, however, this regulation has become
a shield behind which some banks hide their lack of serving women
and minority-owned businesses. The publicly available data provided
by HMDA has been instrumental in increasing access to home loans
for formerly neglected borrowers. Likewise, the federal agencies
would achieve ECOA’s statutory purpose of combating discrimination
if they allowed banks to voluntarily collect and report information
on the demographics of their small business borrowers.
The total number of small business loans increased 24 percent from
2001 to 2002. However, despite the overall increase, the number of
small business loans made to businesses with revenue under $1 million
continues to plummet. Lenders issued about 31 percent of their loans
to businesses with revenues under $1 million in 2002. This is a substantial
decrease from 40 percent in 2001 and 60 percent in 1999. Similarly,
lending to businesses in low- and moderate- income census tracts
remains stagnant as the percent of loans made to businesses in these
communities either decreased or remained the same over the last few
years. NCRC believes that just like improvements to HMDA, enhancements
to ECOA that allows lenders to collect demographic data will expand
lending to traditionally underserved communities and borrowers.
In Conclusion
Finally, in 2001,
the Federal Reserve Board made valuable improvements to their regulation
implementing the Home Ownership and Equity Protection
Act (HOEPA), which amended TILA. Among other benefits, the changes
applied HOEPA’s protections to more subprime loans, including
most loans with single premium credit insurance. Since abusive lending
continues to increase, the federal agencies must preserve the changes
to HOEPA. The regulatory agencies must also preserve the critical
right of rescission under TILA. This right empowers borrowers at
the closing table, enabling them to bargain with lenders and eliminate
onerous terms and conditions in their loans. The right of rescission
provides vital protection in the event that a borrower desires to
cancel an abusive loan up to three days after closing.
Likewise, the agencies must not weaken HMDA, ECOA, TILA, or protections
in regulations implementing the Fair Housing and Unfair and Deceptive
Practices Acts. Data disclosure under these laws must become more
comprehensive in order to identify and uproot discrimination.
Please feel free to contact myself or Josh Silver, Vice President
of Research and Policy, on (202) 628-8866 if you have any questions.
Thank you for your attention to this critical matter.
Sincerely,
John Taylor
President and CEO
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