The Se­nate

is poised to roll back rules meant to root out dis­crim­i­na­tion by mort­gage lenders.

The Washington Post - - FRONT PAGE - BY TRACY JAN tracy.jan@wash­

The Se­nate is poised to pass a bill this week that would weaken the govern­ment’s abil­ity to en­force fair-lend­ing re­quire­ments, mak­ing it eas­ier for com­mu­nity banks to hide dis­crim­i­na­tion against mi­nor­ity mort­gage ap­pli­cants and harder for reg­u­la­tors to root out preda­tory lenders.

The bill rolls back bank­ing rules passed af­ter the 2008 fi­nan­cial cri­sis, in­clud­ing a lit­tle-known part of the Dodd-Frank Act that re­quired banks and credit unions to re­port more de­tailed lend­ing data.

The bi­par­ti­san plan would ex­empt 85 per­cent of banks and credit unions from the re­quire­ment, ac­cord­ing to a Con­sumer Fi­nan­cial Pro­tec­tion Bureau anal­y­sis of 2013 data.

The mort­gage in­dus­try says the ex­panded data re­quire­ments are oner­ous and costly, es­pe­cially for small lenders. But civil rights and con­sumer ad­vo­cates say the in­for­ma­tion is crit­i­cal to iden­ti­fy­ing trou­bling pat­terns that war­rant fur­ther in­ves­ti­ga­tion by reg­u­la­tors.

“The data op­er­ates as a ca­nary in the coal mine, func­tion­ing as a check on banks’ prac­tices,” said Cather­ine Lha­mon, chair of the U.S. Com­mis­sion on Civil Rights. “The loss of that sun­light al­lows dis­crim­i­na­tion to pro­lif­er­ate un­de­tected.”

For decades, banks have been re­quired un­der the 1975 Home Mort­gage Dis­clo­sure Act to re­port bor­row­ers’ race, eth­nic­ity and Zip code to help iden­tify racist lend­ing prac­tices such as redlin­ing.

But dis­crim­i­na­tory prac­tices con­tin­ued, with the fi­nan­cial in­dus­try dis­pro­por­tion­ately tar­get­ing black and His­panic bor­row­ers with sub­prime mort­gages loaded with high fees and ad­justable in­ter­est rates that sky­rock­eted af­ter the stock mar­ket crashed in 2008.

“The ex­pe­ri­ence of the fi­nan­cial cri­sis taught us that we re­ally need to know more about the loan terms and con­di­tions, not just a bor­rower’s race,” said Josh Sil­ver, se­nior ad­viser at the Na­tional Com­mu­nity Rein­vest­ment Coali­tion.

Lenders were sup­posed to start gath­er­ing ex­tra in­for­ma­tion about bor­row­ers’ ages and credit scores, as well as in­ter­est rates and other loan-pric­ing fea­tures, in Jan­uary.

Congress had charged the CFPB, an in­de­pen­dent watch­dog agency formed af­ter the fi­nan­cial cri­sis, with col­lect­ing, an­a­lyz­ing and pub­lish­ing the data. But White House bud­get direc­tor Mick Mul­vaney, named the CFPB’s act­ing direc­tor in Novem­ber, said the agency plans to re­con­sider the new re­quire­ments.

The Se­nate bill would re­peal many of the new re­port­ing re­quire­ments, ex­empt­ing small lenders mak­ing 500 or fewer mort­gages a year from the ex­panded data dis­clo­sure.

“Banks say they don’t treat bor­row­ers dif­fer­ently, but the data shows a dif­fer­ent story,” Sen. Cather­ine Cortez Masto (D-Nev.) said on the Se­nate floor Thurs­day. “Redlin­ing re­mains a ma­jor prob­lem for com­mu­ni­ties of color.”

Ne­vada had the high­est fore­clo­sure rate dur­ing the Great Re­ces­sion, es­pe­cially in mi­nor­ity com­mu­ni­ties, said Cortez Masto, a for­mer state at­tor­ney gen­eral. More than 219,000 fam­i­lies lost their homes, she said. “I’ve seen what hap­pens when you don’t have strong enough pro­tec­tions against hous­ing dis­crim­i­na­tion.”

But 12 of her Demo­cratic col­leagues have co-spon­sored the bill, in­clud­ing 2016 vice pres­i­den­tial can­di­date Tim Kaine ( Va.), a for­mer fair-hous­ing lawyer. The bill’s sup­port­ers say they don’t think it would widen the door for dis­crim­i­na­tory lend­ing, ar­gu­ing that mort­gage data such as race and gen­der would still be gath­ered.

The Mort­gage Bankers As­so­ci­a­tion es­ti­mates that ex­panded data would still be col­lected on 95 per­cent of loans.

“If you want to pro­vide some reg­u­la­tory re­lief, it makes sense to do it for these in­sti­tu­tions that aren’t mak­ing a lot of loans,” said Mike Fratan­toni, chief economist for the Mort­gage Bankers As­so­ci­a­tion. “You’re not los­ing much in terms of your vis­i­bil­ity into trends in the mar­ket.”

Ad­vo­cates say banks of­ten blamed racial lend­ing dis­crep­an­cies on bor­row­ers’ credit scores or other char­ac­ter­is­tics that were im­pos­si­ble to ver­ify with­out ad­di­tional data.

“Lend­ing dis­crim­i­na­tion is oc­cur­ring in real time, and we have to have the tools to be able to ad­dress it,” said Vanita Gupta, who headed the Jus­tice Depart­ment’s civil rights di­vi­sion dur­ing the Obama ad­min­is­tra­tion and now is the president of the Lead­er­ship Con­fer­ence on Civil and Hu­man Rights. “It’s not just hap­pen­ing in the con­text of big banks, it’s also hap­pen­ing in com­mu­nity banks and credit unions.”

“Lend­ing dis­crim­i­na­tion is oc­cur­ring in real time, and we have to have the tools to be able to ad­dress it.” Vanita Gupta, Lead­er­ship Con­fer­ence on Civil and Hu­man Rights

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