NEW YORK, April 4 (AScribe Newswire) -- The nation's largest bank, Citigroup, is four times more likely to confine African Americans than whites to higher-cost home purchase loans, according to the just-released 2004 mortgage lending data. Inner City Press and Fair Finance Watch have reviewed the 2004 Home Mortgage Disclosure Act data of Citigroup and certain other lenders, including the new information concerning which loans are subject to a rate spread (3 percent higher than comparable Treasuries on a first lien, and 5 percent on a subordinated lien), and have found the following:
At Citigroup for home purchase loans, African Americans borrowers are more than four times more likely to receive a rate spread loan than white borrowers.
Meanwhile, Citigroup denied the applications of African Americans for home purchase loans 2.6 times more frequently than those of whites.
Citigroup's rate spread disparity for Hispanics was even worse: for home purchase loans, Hispanic borrowers are 6.48 more than six times more likely to receive a rate spread loan from Citigroup than are non-Hispanic white borrowers.
"The nation's largest bank, Citigroup, is also its most disparate when it come to confining people of color to higher-cost home purchase loans," said Matthew Lee, general counsel of Fair Finance Watch. "CitiFinancial, HSBC and others are expanding predatory lending across the United States and are now being exporting it globally. Unless these disparities are cleaned up, these banks should be permitted to expand."
Citigroup's disparate treatment of people of color seeking to own their homes is decidedly more pronounced, and more troubling, than for example National City Corporation's two-to-one disparity reported in the Wall Street Journal of March 30, 2005. National City apparently presented its data in the light most favorable to it, leading to the summary conclusion that African Americans are 2.21 times more likely to receive rate spread loans than whites at National City, and Hispanics 1.26 more likely. See, "Blacks Are Found to Pay High Rates for Home Loans," WSJ of 3/30/05, D2.
While Citigroup, like National City, claims that types of information that banks keep confidential (in the WSJ article, debt-to-income ratio and size of downpayment) explain these ratios, there is no plausible explanation of why Citigroup's applicant pool results in Citigroup's doubly-disparate ratios.
Inner City Press' analysis of Bank of America, N.A.'s 2004 lending record finds similar rate spread disparities at Bank of America. For home purchase loans, Hispanics are 1.39 times more likely to receive rate spread loans than non-Hispanic whites; non-Hispanic Blacks are 2.20 times more likely to receive rate spread loans than non-Hispanics whites at Bank of America. Additionally, Bank of America in 2004 denied home purchase loan applications from Hispanics 2.104 times more frequently than from whites, and denied applications from non-Hispanic Blacks 2.063 times more frequently than non-Hispanic whites.
Beyond mortgage lending, in which Bank of America has de-emphasized subprime lending since closing and selling off its NationsCredit and EquiCredit units, Bank of America is a major funder of payday lenders including Advance America Cash Advance and others. Likewise National City acknowledged, in response to earlier ICP comments to the Federal Reserve, that it lends to major payday lenders like Check n 'Go, "Check into Cash of Cleveland, Tenn[essee and] Ace Cash Express of Dallas." See, e.g., Crain's Cleveland Business of May 17, 2004, reporting that "groups, led nationally by the nonprofit Inner City Press/Fair Finance Watch of New York City, contend that the nation's large commercial banks are enabling this type of predatory, or subprime, lending through loan agreements such as those involving National City."
ICP's requests for data have included questions about banks' support for payday lenders. In its response to ICP, Alabama-based AmSouth stated that it will no longer do banking for businesses engaged in payday lending or title lending. While ICP obtained a similar commitment from Atlanta-based SunTrust in July 2004, questions remain -- including regarding loans to payday lenders by J.P. Morgan Chase, Wachovia and others.
Inner City Press requested numerous other large lenders' data on February 28 and March 1 (such that by regulation it was due on March 31), with an eye to including it in this first comparative study of the new HMDA data. But several large lenders flouted the deadline. J.P. Morgan Chase and Wachovia did not provide their data on time; Wells Fargo and AIG provided their data on the last permissible day, but in a format (PDF) in which it could not be analyzed. Likewise HSBC / Household provided data in less than useful formats. Fair Finance Watch has now filed complaints on these and other banks with the federal regulators; these and other lenders, including such subprime lenders as Ameriquest, New Century, Option One, Countrywide, Homeowners Loan Corp., Delta Funding and Greenpoint. The last of these is owned by North Fork Bank, which for its prime rate loans in 2004 denied African Americans 2.34 times more frequently. North Fork's Greenpoint unit provided its 2004 data in, of all thing, Microsoft Word format, making comparison within this prime-and-subprime conglomerate impossible at this point. FFW is preparing a complaint to North Fork's regulator, the FDIC and New York Banking Department, and will cumulate and analyze Greenpoint's data with North Fork's, upon receipt. The Internet home of this and forthcoming studies is www.innercitypress.org/2004hmda.html.
Inner City Press has also reviewed the 2004 lending of controversy-plagued Riggs Bank, N.A., and has now commented to the three regulatory agencies considering PNC's take-over proposal that Riggs in 2004 denied the applications of African Americans 7.52 times more frequently than those of whites (while denying the applications of Hispanics 4.81 times more frequently than whites). Beyond its money-laundering for Augusto Pinochet and the dictator of Equatorial Guinea, this striking under-service to communities of color in and around the District of Columbia militates for the public hearings Fair Finance Watch has requested from the Federal Reserve on PNC's application to acquire Riggs Bank.
Similarly, that the largest bank in the U.S. is targeting its higher cost home purchase loans at African Americans and Hispanics (over four and six times more frequently that at whites, respectively) is directly relevant to current proposals in the U.S. Congress to preempt state anti-predatory lending laws, and to shield major players in the subprime lending field from liability. Fair Finance Watch is calling initially for public hearings of these findings, for guidance from the regulatory agencies to lenders, first directing them to provide their data without delay or obfuscation, and second directing them to revise all marketing, lending and pricing practices that have led to these disparate patterns.
Methodology and scope of review: ICP Fair Finance Watch reviewed Citigroup's 1,218,401 loan mortgage loan applications records for 2004. Bank of America, N.A. reported 805,181 loan application records; National City Corp. reported 877,981 records.
For home purchase loans, comparing all applicants identified as White and Black (without regard to Hispanic or other ethnic status), Blacks were 4.336 times more likely to receive rate spread loans from Citigroup than whites. Hispanics / Latinos were 6.36 more likely to receive rate spread loans from Citigroup than whites (and 6.48 times more likely than non-Hispanic whites).
ICP's review has identified a loophole in the Federal Reserve's rate spread reporting system of which Citigroup is availing itself: while rate spread is defined as three percentage points over comparable Treasury securities for first liens, and five percentage points over Treasuries for all subordinated liens, Citigroup makes an exempt category of not-secured home improvement loans. Citigroup's reasoning for reporting unsecured loans in its mortgage lending data is not known; FFW notes that Citigroup made more of these unsecured home improvement loans to Hispanics than to whites, while for both first lien and subordinate lien secured home improvement loans, Citigroup made more loans to whites than Hispanics. No matter how high the interest rates on these loan, they do not show up using the rate spread filter, because they fit neither into the first lien / three percent or subordinate lien / five percent over Treasuries definition. FFW intends to pursue this issue with Citigroup, including at its annual meeting on April 19, and with the Federal Reserve, which in an applications proceeding on Citigroup's proposal to acquire First American Bank, challenged by ICP, ruled last month that it does not expect Citigroup to significantly expand in the foreseeable future, given the range of compliance problems. This is another.
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ICP: Inner City Press / Fair Finance Watch [ICP] works to increase accountability by financial institutions, on matters of fair lending and community reinvestment, and human rights more broadly. ICP's challenges to bank merger proposals since 1994 have resulted in several multi-billion dollar lending commitments, precedents and commitments to fair lending protections. ICP's consumer protection work includes the 2004 book, "Predatory Bender: Toxic Credit in the Global Inner City." The book is available on Amazon, InnerCityPress.org/books.html and elsewhere, on - and off-line, ISBN 0-9740244-1-4, 456 pages. "In an interview with CBS Marketwatch, Rev. Jesse Jackson, who has battled bank mergers with [ICP] for more than a decade, said [Predatory Bender's and this study's author] is a key figure in the current stage of the civil rights fight, the access to capital. ... Jackson said, 'He is an enemy of predatory exploitation' [CBS-MW April 23, 2004]." ICP's next book, addressing the links between the banking industry and a range of predatory businesses, including payday lending and other fringe finance, is forthcoming. The ICP Fair Finance Watch is on the case, for now analyzing the 2004 data as it comes in. See, www.innercitypress.org/2004hmda.html
For further information, contact Matthew Lee, Executive
Director, Inner City Press, 718-716-3540,
lee@fairfinancewatch.org
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