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Public
Policy
7/22/02
VIA FACSIMILE
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
RE:
Amendments to Regulation C (Home Mortgage Disclosure)
Docket No. R-1120
Dear
Ms. Johnson:
The Lawyers' Committee for Civil Rights Under Law ("the
Lawyers' Committee") is a nonpartisan, nonprofit organization,
formed in 1963 at the request of President John F. Kennedy
to involve the private bar in providing legal services to
address racial discrimination. The Lawyers' Committee is
committed to improving lending opportunities for minorities
and holding lending institutions accountable for discriminatory
practices. We believe that the data provided by the Home
Mortgage Disclosure Act ("HMDA") has significantly
increased lending opportunities for communities of color
and has enabled lending institutions, community groups,
and public agencies to work together to identify and address
gaps in lending to communities of color. Accordingly, the
Lawyers' Committee believes that in order to further reduce
disparities in lending to communities of color, the Federal
Reserve should enhance the disclosure of HMDA data during
its Regulation C update.
Below
are the Lawyers' Committee's specific comments regarding
the proposed rulemaking:
I.
IN ORDER TO DETECT DISCRIMINATION IN THE PRIME AND SUBPRIME
LENDING MARKETS, THE FEDERAL RESERVE SHOULD REQUIRE THE
REPORTING OF DATA FOR ALL LOANS, RATHER THAN ONLY THOSE
LOANS THAT EXCEED A CERTAIN PERCENTAGE ABOVE COMPARABLE
TREASURY SECURITIES.
The
Lawyers' Committee strongly believes that lenders should
be required to report price data for all HMDA loans, as
opposed to only those loans that are above a certain threshold
over the yield on comparable Treasury securities. We believe
that the availability of this data is essential to detecting
discrimination in both the prime and subprime lending markets,
particularly against communities of color whom we believe
are receiving higher priced loans than are offered to comparable
non-minority borrowers.
If
the Federal Reserve does not collect price data on all loans,
the Lawyers' Committee believes that the effectiveness of
fair lending enforcement will be severely curtailed. If
the Federal Reserve adopts the proposed threshold, pricing
data on most prime loans will be excluded. Without price
data on prime loans, it will be difficult, if not impossible,
to detect instances of price discrimination when a lending
institution with both prime and subprime affiliates is steering
minorities to subprime loans when they qualify for prime
loans. This discrimination will be missed if the data collected
does not include price information for the great majority
of prime loans. Moreover, the Federal Reserve's proposed
thresholds for the reporting of loans is too rigid and will
not be able to keep pace with future changes in the lending
marketplace. Finally, if the Federal Reserve decides not
to collect data on prime loans, it risks sending a signal
to prime lenders that they can relax since the regulatory
spotlight will be focused only on subprime lenders. This
practice could result in a reversal of the positive changes
adopted by many lending institutions in the 1990s to correct
problematic practices in the prime market.
For
those reasons, the Lawyers' Committee strongly believes
that the Federal Reserve must collect price data on all
loans.
II.
LENDING INSTITUTIONS SHOULD BE REQUIRED TO REPORT THE LIEN
STATUS ON ALL LOANS, INCLUDING PURCHASED LOANS.
The
Lawyers' Committee supports the Federal Reserve's proposal
to require lending institutions to report lien status. However,
we believe that the Federal Reserve should require reporting
of lien status for loans that financial institutions purchase,
as well as for loans that they make. The availability of
this data would greatly enhance data on loan pricing and,
thus, provide a further tool to enforce fair lending requirements.
III.
LENDING INSTITUTIONS SHOULD BE
REQUIRED TO ASK FOR RACE AND GENDER ON TELEPHONE APPLICATIONS.
The
Lawyers' Committee also strongly supports the Federal Reserve's
proposal to amend Regulation C to require that lenders request
information about an applicant's race and gender when conducting
an application over the telephone. This change, which we
believe is the most important of the proposed changes, will
eliminate an unnecessary distinction between telephone applications,
where lenders are not required to request this information,
and internet and mail applications, where lenders are required.
Moreover, the proposed amendment will likely remedy the
dramatic increase in HMDA data that is reported without
the race and gender of the borrowers - an increase from
approximately eight to twenty-eight percent from 1993 to
2000. Thus, the proposed amendment will provide vital data
to identify and remedy discrimination by lending institutions.
Accordingly, the Lawyers’ Committee urges the Federal
Reserve to require lending institutions to ask for race
and gender on telephone applications.
In
sum, we urge the Board to update the rules governing Regulation
C consistent with our comments as set forth above. We believe
that the changes outlined above will maximize the fair lending
value of HMDA data. By collecting price data on all loans
and requiring lending institutions to ask for race and gender
for telephone applications, the Federal Reserve will enhance
the fair lending and community reinvestment power of the
data - a change that will significantly improve the lending
opportunities for communities of color throughout our country.
Should further explanation be required on any of the discussion
points above, please feel free to contact Ms. Cheryl Ziegler,
the Director of our Housing & Community Development
Project. Ms. Ziegler may be reached directly at (202) 662-8331.
We thank you for soliciting and reviewing our comments.
Sincerely,
Barbara
R. Arnwine
Executive Director
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