Tag Archives: fair housing

Good Data Makes Good Mortgages

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The CFPB issued a proposed rule about increasing the quality of information that lenders report about mortgage applications. The press release regarding the proposed rule states that these changes will ease the reporting burden on lenders, and that may very well be true. But the contested part of these rules relate to the type of information to be collected:

  • Improving market information: In the Dodd-Frank Act, Congress directed the Bureau to update HMDA regulations by having lenders report specific new information that could help identify potential discriminatory lending practices and other issues in the marketplace. This new information includes, for example: the property value; term of the loan; total points and fees; the duration of any teaser or introductory interest rates; and the applicant’s or borrower’s age and credit score.
  • Monitoring access to credit: The Bureau is proposing that financial institutions provide more information about underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the total discount points charged for the loan. This information would help regulators determine how the Ability-to-Repay rule is impacting the market, and would also help the Bureau monitor developments in specific markets such as multi-family housing, affordable housing, and manufactured housing. The proposed rule would also require that covered lenders report, with some exceptions, all loans related to dwellings, including reverse mortgages and open-end lines of credit.

Lenders are not going to like this, because this new information may be used against them in a variety of ways — in Fair Housing lawsuits, by the CFPB in enforcement actions, by members of Congress seeking to increase credit access to various constituencies.

I like this because regulators and academic researchers have been hamstrung by limited and stale data on the fast-moving mortgage market. The mortgage market is often driven by the short-term profit-seeking of private actors and by special interests pushing their agendas with the Executive and Legislative Branches.  Good data can inform good decision-making that can ensure that the housing finance system is vibrant and provides sustainable credit for households over the long term.

Comments on the proposed rule are due by October 22, 2014.

 

Reiss on Castro at HUD

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Law360 quoted me in Obama Chooses San Antonio Mayor As Next HUD Chief (behind a paywall). It reads in part,

President Barack Obama on Friday nominated San Antonio Mayor Julian Castro to be the next secretary of housing and urban development, a move that observers say will result in the continuation of his administration’s housing policies.

If confirmed, Castro would take over an agency that is still dealing with the after-effects of the bursting of the housing bubble in 2007 and the resulting foreclosure crisis. HUD is also struggling to deal with a dearth of affordable housing in major metropolitan areas and reforming the Federal Housing Administration’s work.

Obama called Castro an “all-star” who has done a “fantastic job” in San Antonio over the last five years.

“He’s become a leader in housing and economic development,” the president said.

Speaking at the White House on Friday, Castro said that he looked forward to helping Americans get access to “good, safe affordable housing.”

“We are in a century of cities. America’s cities are growing again and housing is at the top of the agenda,” Castro said.

Castro would take over HUD from outgoing Secretary Shaun Donovan, whom Obama nominated to lead the Office of Management and Budget. Donovan would in turn replace Sylvia Mathews Burwell, Obama’s nominee to be the next secretary of health and human services.

Among his major tasks will be overseeing the FHA, which provides a government guarantee on mortgages issued to low-income and first-time homebuyers. The agency, which is led by Commissioner Carol Galante, last year was forced to take a $1.7 billion bailout from the Treasury Department as its reserves were depleted due to losses on bad loans.

In response, the FHA has increased insurance premiums on most new mortgages by 10 basis points and sold off some defaulting mortgages as part of a series of reforms aimed at bolstering its capital levels. Even with those changes, the bailout was necessary.

HUD has also been a key player in the Obama administration’s heavily criticized programs aimed at stemming foreclosures, including the Home Affordable Mortgage Program, and in efforts to develop affordable housing stock around the country.

The department is also at the center of fair lending and fair housing litigation against banks and other lenders.

Castro’s views on those subjects are unknown, but observers expect him to follow closely policies established by his predecessor Donovan.

“Our conversations lead us to believe that Castro is unlikely to deviate materially from the existing FHA single-family strategy,” Isaac Boltansky, an analyst at Compass Point Research & Trading LLC, said in a note to clients.

Castro, 39, is serving his third term as San Antonio’s mayor. A rising star in the Democratic party, Obama tapped Castro to give the keynote address at the 2012 Democratic National Convention in Charlotte, North Carolina.

In many ways the appointment is seen as a political decision as much as a policy one for housing experts, and a departure from Donovan, an expert on housing policy.

“Donovan focused his entire career on housing and affordable housing in particular. He is known for his deep understanding of housing issues. Mayor Castro has had a broader portfolio of concerns as a big city mayor,” said Brooklyn Law School professor David Reiss.

*     *     *

While Castro has focused on affordable housing issues, the mayor of San Antonio is a nonexecutive position, Reiss noted.

“So his ability to implement his vision will be tested in this new position,” he said.

Reiss on BK Live!

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The BK Live segment on Mortgage Inequities in Brooklyn has been posted to the web. Mark Winston Griffith (Brooklyn Movement Center Executive Director), Alexis Iwaniszie (New Economy Project) and I discuss mortgage inequities and how they effect Brooklyn (and beyond). REFinblog.com gets a nice shout out from BK Live.

Reiss on Mortgage Inequities

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I will be appearing on a segment on BK Live on BRIC , the Brooklyn Public Network, about “Mortgage Inequities/Fair Housing in Brooklyn” on Thursday, February 13th at noon (running again at 2pm, 8pm, 9pm and 10pm (Cablevision Ch 69, Time Warner 56, RCN Ch 84, Verizon Ch 44 or online at: www.bkindiemedia.bricartsmedia.org).

I will be appearing with Mark Winston Griffith, Executive Director of the Brooklyn Movement Center, a community organizing group based in Bed-Stuy and Crown Heights, and Alexis Iwanisziw of the New Economy Project.

We will be discussing The New Economy Project’s recent study about inequities in mortgage lending based on race in NYC:

Mortgage lenders made markedly fewer conventional home mortgage loans in communities of color than in predominately white neighborhoods in New York City, according to a series of GIS maps published today.

The maps show unequal lending patterns based on the racial composition of communities in New York City, controlling for the number of owner-occupied units in each neighborhood. New Yorkers who live in predominantly white neighborhoods on average receive twice as many conventional home purchase loans as New Yorkers who live in predominantly black or Latino neighborhoods, for every 100 owner-occupied housing units in the neighborhood.

“The maps show that banks continue to redline communities of color across New York City,” said Monica M. Garcia, Community Education Coordinator at New Economy Project, which produced the maps. “For decades, banks have excluded neighborhoods of color from fair access to mortgage financing, allowing predatory lenders to flourish right up to the financial crisis. Now it’s déjà vu all over again, with banks failing adequately to provide conventional mortgages to people in predominantly black and Latino neighborhoods.”

“The maps highlight the profound and continued need for strong government action against banks that violate fair housing and fair lending laws,” said Sarah Ludwig, Co-Director of New Economy Project.

The series includes a map of New York City and borough-level maps of Brooklyn, Queens and Bronx.

To produce the maps, New Economy Project analyzed home mortgage lending data for 2012, the most recent year for which the data are publicly available. New Economy Project received partial funding to produce the maps from the U.S. Department of Housing and Urban Development’s Fair Housing Initiatives Program.

Reiss on Qualified Mortgages and Fair Housing

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Law360 ran Banks Fear CFPB Rule Could Spur Fair Lending Fights (behind a paywall) which asked for my thoughts:

banks may be getting a bit ahead of themselves when it comes to worrying about how the fair lending law will work in the qualified mortgage context, said David Reiss, a professor at Brooklyn Law School.

Any mortgage that is purchased by Fannie Mae, Freddie Mac and — key for low-income borrowers — the Federal Housing Administration for seven years after the rules take effect in January will be deemed qualified mortgages. The FHA currently backs around $1.1 trillion worth of mortgages.

Unless the FHA drastically reduces its presence in the market that should cover many of the loans that have banks worried, he said.

The banks are not wrong to flag potential problems that may arise in the future, and the issue of fair lending law bumping up against decisions regarding extending only qualified mortgages is a legitimate potential problem, Reiss said.

It’s simply a bit premature with the federal government’s heavy role in the housing finance market.

“They are predicting a scenario, but there’s a lot that’s going to happen between now and that scenario ever being actualized,” Reiss said.