This blog post was coauthored by the Woodstock Institute and the National Council of La Raza.
Pages and pages of ratios and figures don't usually fire up a crowd, but they do affect the rash of foreclosures our country is experiencing, and Americans are fired up about that. One of the driving factors behind the foreclosure crisis was lenders putting unsuspecting borrowers into loans they could not reasonably afford. Borrowers of color, women, the elderly, and low-income families were favorite targets for these practices. Thankfully, legislators recently passed a bill that includes the modernization of a tool that is critical to fighting discrimination in the housing market.
The Home Mortgage and Disclosure Act (HMDA) requires mortgage lenders to provide detailed reports of their lending activities to regulators and the public. HMDA data have long served as a powerful mechanism that identifies unfair lending practices, such as discriminating against minority families, women, and low-income borrowers. HMDA is 35 years old, however, and Congress recognized it was time for a tune-up. Now it is the job of the Federal Reserve to revamp HMDA to keep pace with an ever-evolving mortgage market.
Next Thursday, September 16, the Woodstock Institute and the National Council of La Raza (NCLR) will testify at the Federal Reserve Bank of Chicago about enhancing HMDA data collection. Woodstock, which seeks equal opportunity for modest-income families and communities of color to achieve economic security, and NCLR, focused on helping Latino families find safe loans and equality in the mortgage market, share the following three recommendations to enhance HMDA and better serve vulnerable communities.
HMDA should:
- Collect "back-end ratios" that take debt into account. These include other types of monthly payment obligations in addition to the mortgage, and are a better reflection of a borrower's overall debt burden.
HMDA certainly proves that there is safety in numbers. First, with proper updates, HMDA will generate critical numbers that can ultimately prove disparate practices among specific lenders. Second, the more practitioners, advocates, and members of the concerned public who get involved, the better. Call your local bank regulator. Register here to attend the Chicago public hearings on HMDA. And don't forget to keep an eye out in this space for further HMDA activity.