Mortgage data from the Home Mortgage Disclosure Act (HMDA) allows researchers and advocates to examine trends in the mortgage and housing market and, more importantly, detect patterns of discrimination.
HMDA requires most depository and non-depository financial institutions to report their mortgage lending activity and releases the data to the public. Recently, the Consumer Financial Protection Bureau (CFPB) issued new, proposed rules that would expand the reporting requirements of HMDA and promote greater transparency in the mortgage market. Woodstock submitted comments today in support of these proposed rules. For example, the CFPB proposes to collect data on the age and credit scores of borrowers, essential data that would make it easier to detect patterns of discrimination.
Woodstock Institute is a strong advocate for responsible access to mortgages for credit-worthy borrowers and has shown repeatedly that race and age discrimination persists in the mortgage and housing market. Discrimination in mortgage lending has been covered by news outlets such as the New York Times, Wall Street Journal, and Los Angeles Times, in addition to Woodstock’s reports and blogs. Lenders have argued that advocates can’t prove that discrimination is occurring; that is because we lacked data on borrowers’ credit score and other underwriting criteria. Having data on the credit score and age of the mortgage applicants would allow researchers and advocates to understand whether loan origination decisions for people who are part of protected classes have a legitimate business justification, or merit investigation as discriminatory practices.
Woodstock advocated for an expansion of HMDA reporting in 2010. Around the same time, Woodstock published a report on the decline of mortgage lending in communities of color. The report found that mortgage lending in communities of color was shrinking at a much faster rate than in predominantly white communities. A more recent report in 2013 found that women were less likely than men to receive a mortgage if they applied with another person. Disparate access to credit and banking services has a long history in the Chicago region, and people of color and women, as well as borrowers in majority-minority communities, were most apt to be harmed.
The mortgage market has already experienced significant changes in lending criteria. In reaction to the Great Recession, many mortgage lenders tightened up requirements for borrowers so that there would be less risk for the lenders. Now that the economy has shown signs of improvement, however, lenders have started to relax underwriting and down payment standards for borrowers, although the recovery is not picking up as quickly in underserved communities. The new underwriting and down payment standards may help stimulate the housing market by making mortgages more accessible to more credit-worthy homebuyers. As mortgage activity picks up, the expanded HMDA reporting is crucial to help researchers and advocates determine whether all communities reap the benefits of the mortgage market recovery.
In addition to expanded HMDA data reporting, Woodstock also supports CFPB’s proposals to include loan pricing information, a new threshold that would require more non-depository institutions to report their mortgage lending activity, and, eventually, new data on loan performance and modifications. Mortgage lending discrimination can take many forms and affect entire communities. Expanded reporting under HMDA would give the public, policymakers, and researchers more insight into lending practices and more information to address discrimination.