The Dream Revisited by Ingrid Ellen

Author:Ingrid Ellen
Language: eng
Format: epub
Tags: SOC026030, Social Science/Sociology/Urban, POL002000, Political Science/Public Policy/City Planning & Urban Development
Publisher: Columbia University Press
Published: 2019-01-14T16:00:00+00:00

The Contemporary Relevance of Decades-Old Fair Lending Laws

by Patrice Ficklin

In the recent financial crisis, millions lost their jobs; millions lost their homes; and many lost a considerable portion of their household wealth. As so often seems to be the case, communities of color were hit the hardest, with their net worth being approximately cut in half.14 One of the results of the financial crisis was the creation of the Consumer Financial Protection Bureau (CFPB), through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). We at the CFPB have several powerful tools to combat discrimination, including supervisory, enforcement, and regulatory authority over two important fair lending laws: the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA).

The Equal Credit Opportunity Act, implemented through Regulation B, prohibits lenders from discriminating on a prohibited basis in any aspect of credit transactions. While the CFPB’s efforts to enforce this broad mandate include focusing on a variety of areas, we have consistently prioritized mortgage lending. Homeownership plays a critical role in building wealth for consumers, particularly for communities of color, where the greatest source of wealth is the home.

The Home Mortgage Disclosure Act, implemented through Regulation C, requires certain mortgage lenders to collect and report accurate data about, among other things, the race, ethnicity, and sex of home-mortgage loan applicants and borrowers. The CFPB, other federal regulators, community organizations, state and local agencies, and other entities rely on HMDA data to identify possible discriminatory lending patterns and monitor lenders’ compliance with fair lending laws, including the ECOA.

As delinquencies, foreclosures, and other harmful effects of subprime lending unfolded following the financial crisis, it became apparent that communities throughout the nation lacked sufficient information to understand the magnitude of the risk to which they were exposed. Community groups and local, state, and federal officials relied on HMDA data to identify at-risk neighborhoods and develop foreclosure relief and homeownership stabilization programs. However, the limited HMDA data presented challenges for those who attempted to create effective and responsive relief programs.

Accordingly, in response to the mortgage crisis, the Dodd-Frank Act directed the CFPB to expand the HMDA data set to include additional information about applications and loans that would be helpful to better understand the mortgage market. The CFPB recently completed extensive work on changes to Regulation C, expanding the data fields that certain mortgage lenders must collect and report. The new HMDA data fields, which include specific information about borrower credit characteristics, loan terms, and the property securing loans, are designed to serve the purposes of HMDA and to address the informational shortcomings exposed by the financial crisis. The final rule also imposes a new requirement that certain large-volume mortgage lenders report their data to the appropriate federal agency on a quarterly basis, which will enable more timely identification of trends and risks and allow for more effective interventions or other actions.

HMDA disclosures can help the CFPB identify potential discriminatory lending patterns, including redlining. Mortgage redlining is a form of illegal discrimination

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