jsilver at ncrc.org
08-02-2002, 07:28 PM
NCRC Press Release
Lenders Decrease Lending to Minority and Low- and Moderate-Income Borrowers and Communities: *Today¹s Fed Release of Home and Small Business Data Demonstrates Need for CRA Modernization
Washington DC--August 2-- The Federal Reserve¹s release of home and small business lending reveals a significant decline in lending to African-Americans and small businesses as well as stagnant lending levels to most other minority and low- and moderate-income borrowers and communities. *
John Taylor, President and CEO of the National Community Reinvestment Coalition (NCRC), declared, "Today¹s Fed release of the home and small business data confirms our worst fears. *Inaction by our policymakers is resulting in a shrinking of affordable credit and an increase in predatory lending to traditionally underserved populations. *We will be entering a new era of redlining unless our policymakers act now to expand CRA and the fair lending laws. *
Taylor continues, "CRA-covered lenders are now neglecting the critical credit needs of the smallest businesses. *Minority and low- and moderate-income communities depend on these small business start-ups and expansions of locally-owned businesses as integral to their revitalization efforts."
After steady increases in prime and affordable lending to underserved populations in the 1990¹s, the 2001 data shows a dramatic drop-off in lending to African Americans and to the smallest of the small businesses. *It is no coincidence that banks increased their lending to underserved populations after Congress and federal banking agencies strengthened CRA in the 1990¹s. *But then in the late 1990¹s Congress passed so-called financial modernization legislation, which allowed banks to merge with other financial institutions. *At the same time, Congress failed to expand CRA to mortgage companies, insurance firms, and other parts of the new financial conglomerates that lend.
Two years after the passage of financial modernization legislation we observe the following trends:
… The number of home purchase loans (conventional and government-insured) to African-Americans dropped 7 percent from 306,672 loans in 2000 to 285,243 loans in 2001. *This is the worst performance during the last nine years. *If the current administration is serious about extending home ownership to minorities, they better focus on boosting the sagging home purchasing lending since 2000.
… In 2001, banks and thrifts issued only 44 percent of the CRA-reported small business loans to small businesses with revenues under $1 million. *This is down dramatically from a high of 60 percent of all loans to the smallest businesses in 1999. *
… Small business lending is stagnant in low- and moderate-income census tracts. *In 2001, banks and thrifts issued about 18 percent of all reported small business loans in low- and moderate-income tracts * the same portion of loans as in the previous two years.
… Lending institutions are focusing less on low- and moderate-income borrowers. *From 2000 to 2001, low- and moderate-income (up to 80 percent of median income) borrowers received 2 percent more home purchase loans, one of the smallest increases of the last nine years. *In contrast, low- and moderate-income borrowers enjoyed 19 percent more home purchase loans in 1998 than 1997 and 14 percent more home purchase loans from 1998 to 1999.
… Minority and low- and moderate-income census tracts fared poorly. *Home purchase lending to borrowers in low- and moderate-income tracts declined 1 percent from 2000 to 2001, but home purchase lending to borrowers in upper income tracts surged 5 percent.
… Native Americans received 39 percent fewer home purchase loans in 1999 than 2000. NCRC calls on responsible lenders to re-focus their attention to Native Americans and tribal lands. *
… Interest rates dropped in 2001, fueling a refinance boom as millions of homeowners refinanced their mortgages to decrease their mortgage payments. *But minority and low- and moderate-income borrowers did not enjoy this benefit to nearly the same extent. *Whites received 250 percent more refinance loans in 2001 than 2000; African-Americans only reaped 86 percent more refinance loans. *The disparities were similar among lower and upper-income borrowers.
… Denial rates fell across the board but denial rate disparities worsened. *In conventional home purchase lending, African-Americans were 2.2 times more likely than whites to be denied conventional loans in 2001, but only 2 times more likely in 2000. *For Hispanics, the disparity ratio nudged up to 1.5 times more likely to be denied.
John Taylor concludes, *"The trends are clear and they are abysmal. *Lending institutions feel that they can slack off in their commitments to community reinvestment and fair lending. *Everyone loses in this scenario * lenders lose profitable business opportunities and economic recovery stalls as minority and low- and moderate-income communities have less access to credit. *As the recent Department of Justice and Federal Trade Commission settlements show, lender discrimination is still alive and well. *What is dying is our national commitment to economic justice, eliminating discrimination in lending, and yes, our commitment to homeownership in minority and low- and moderate-income communities."
Editor's note: *For more details on this report, NCRC and/or to interview staff contact Rachel Maleh at 202-628-8866 or via email: rmaleh@ncrc.org.
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Lenders Decrease Lending to Minority and Low- and Moderate-Income Borrowers and Communities: *Today¹s Fed Release of Home and Small Business Data Demonstrates Need for CRA Modernization
Washington DC--August 2-- The Federal Reserve¹s release of home and small business lending reveals a significant decline in lending to African-Americans and small businesses as well as stagnant lending levels to most other minority and low- and moderate-income borrowers and communities. *
John Taylor, President and CEO of the National Community Reinvestment Coalition (NCRC), declared, "Today¹s Fed release of the home and small business data confirms our worst fears. *Inaction by our policymakers is resulting in a shrinking of affordable credit and an increase in predatory lending to traditionally underserved populations. *We will be entering a new era of redlining unless our policymakers act now to expand CRA and the fair lending laws. *
Taylor continues, "CRA-covered lenders are now neglecting the critical credit needs of the smallest businesses. *Minority and low- and moderate-income communities depend on these small business start-ups and expansions of locally-owned businesses as integral to their revitalization efforts."
After steady increases in prime and affordable lending to underserved populations in the 1990¹s, the 2001 data shows a dramatic drop-off in lending to African Americans and to the smallest of the small businesses. *It is no coincidence that banks increased their lending to underserved populations after Congress and federal banking agencies strengthened CRA in the 1990¹s. *But then in the late 1990¹s Congress passed so-called financial modernization legislation, which allowed banks to merge with other financial institutions. *At the same time, Congress failed to expand CRA to mortgage companies, insurance firms, and other parts of the new financial conglomerates that lend.
Two years after the passage of financial modernization legislation we observe the following trends:
… The number of home purchase loans (conventional and government-insured) to African-Americans dropped 7 percent from 306,672 loans in 2000 to 285,243 loans in 2001. *This is the worst performance during the last nine years. *If the current administration is serious about extending home ownership to minorities, they better focus on boosting the sagging home purchasing lending since 2000.
… In 2001, banks and thrifts issued only 44 percent of the CRA-reported small business loans to small businesses with revenues under $1 million. *This is down dramatically from a high of 60 percent of all loans to the smallest businesses in 1999. *
… Small business lending is stagnant in low- and moderate-income census tracts. *In 2001, banks and thrifts issued about 18 percent of all reported small business loans in low- and moderate-income tracts * the same portion of loans as in the previous two years.
… Lending institutions are focusing less on low- and moderate-income borrowers. *From 2000 to 2001, low- and moderate-income (up to 80 percent of median income) borrowers received 2 percent more home purchase loans, one of the smallest increases of the last nine years. *In contrast, low- and moderate-income borrowers enjoyed 19 percent more home purchase loans in 1998 than 1997 and 14 percent more home purchase loans from 1998 to 1999.
… Minority and low- and moderate-income census tracts fared poorly. *Home purchase lending to borrowers in low- and moderate-income tracts declined 1 percent from 2000 to 2001, but home purchase lending to borrowers in upper income tracts surged 5 percent.
… Native Americans received 39 percent fewer home purchase loans in 1999 than 2000. NCRC calls on responsible lenders to re-focus their attention to Native Americans and tribal lands. *
… Interest rates dropped in 2001, fueling a refinance boom as millions of homeowners refinanced their mortgages to decrease their mortgage payments. *But minority and low- and moderate-income borrowers did not enjoy this benefit to nearly the same extent. *Whites received 250 percent more refinance loans in 2001 than 2000; African-Americans only reaped 86 percent more refinance loans. *The disparities were similar among lower and upper-income borrowers.
… Denial rates fell across the board but denial rate disparities worsened. *In conventional home purchase lending, African-Americans were 2.2 times more likely than whites to be denied conventional loans in 2001, but only 2 times more likely in 2000. *For Hispanics, the disparity ratio nudged up to 1.5 times more likely to be denied.
John Taylor concludes, *"The trends are clear and they are abysmal. *Lending institutions feel that they can slack off in their commitments to community reinvestment and fair lending. *Everyone loses in this scenario * lenders lose profitable business opportunities and economic recovery stalls as minority and low- and moderate-income communities have less access to credit. *As the recent Department of Justice and Federal Trade Commission settlements show, lender discrimination is still alive and well. *What is dying is our national commitment to economic justice, eliminating discrimination in lending, and yes, our commitment to homeownership in minority and low- and moderate-income communities."
Editor's note: *For more details on this report, NCRC and/or to interview staff contact Rachel Maleh at 202-628-8866 or via email: rmaleh@ncrc.org.
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