John Lewis Community Services, Inc.
April 14, 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:
As a member of the National Community Reinvestment Coalition, John
Lewis Community Services, 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.
John Lewis Community Services (JLCS) 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 Under EGRPRA, the federal agencies must identify “outdated” regulations.
The incomplete data collection under HMDA and ECOA is outdated and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. JLCS
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. JLCS 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.
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.
Sincerely,
Dawn M. Teter,
John Lewis Community Services, Inc.
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