CUNA Disputes Data Indicating Mortgage Bias

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A survey conducted by San Diego's City-County Reinvestment Task Force found that credit unions in San Diego County were less likely to make mortgage loans to minority applicants than banks and thrifts. The survey, based on Home Mortgage Disclosure Act (HMDA) data, shows that only 8.5% of mortgage loans approved by county credit unions in 2000 went to Hispanics, compared to 13.5% for banks and thrifts. The study found that of 1,267 standard home loans approved by the three largest San Diego-area credit unions that year only 86 went to blacks and 63 to Hispanics. The study also found much higher mortgage denial rates among the local credit unions, with a 13.5% denial rate for black borrowers, compared to 5.5% for all area lenders; and a 16.7% denial rate for Asian-Americans, compared to 7.7% for all area lenders.

But CUNA responded to the report by calling it "confusing and incomplete." CUNA Economist Mike Schenk said "glaring" problems in the report were numerous, including:

1. Many of the graphs in the report do not contain data labels and no complete data tables are provided.

2. The overall denial rates by regulator are only reported for NCUA-regulated institutions and FDIC-regulated institutions.

3. Approval and denial rates by race are not systematically reported-instead the report focuses on the "share" of total approvals and the "share" of total denials for each ethnic group by institution regulator. He said the report cannot be used to determine the percentage of Hispanic applicants that credit unions approve, and can only be used to determine the percentage of total approvals for Hispanic applicants.

4. For some "inexplicable reason," denial shares by regulator are only provided for American Indians, Asians and Blacks. Hispanic, White, and "Other" denial shares aren't shown.

5. The American Indian denial share by regulator is reported, but the corresponding approval share for this ethnic group is not.

6. Denial rates for low/moderate-income applicants are shown, but not approval rates.

Yet despite those shortcomings, stressed Schenk, the report still makes "clear" that, in general, "consumers in San Diego county who are looking for a mortgage have the best chance of obtaining such a loan at a credit union."

Schenk pointed to the report's finding that NCUA-regulated credit unions had the lowest overall denial rate (8.4%) of six key regulator-based groups that were studied. "FDIC-regulated institutions had a denial rate (21.8%) that was over two-and-one-half times higher than the NCUA-regulated institution rate and the highest amongst the six regulator- groups examined in the study," he said, noting that in addition, the aggregate denial rate in San Diego (15.8%) was nearly double the rate at NCUA-regulated institutions.

Schenk said that while much of the data needed for a through analysis is missing, it is possible to make comparisons for two ethnic groups between two of the key regulator groups included in the study, and that NCUA-regulated institutions are more likely than FDIC-regulated institutions to approve Asian applicants. Conversely, NCUA- regulated institutions are less likely to deny Asian mortgage applicants than FDIC regulated institutions. Moreover, NCUA-regulated institutions have a denial rate amongst blacks that is one-half the denial rate at FDIC-regulated institutions.

But, stressed Schenk, comparing the statistics used in the study to similar statistics for other mortgage lenders is not a measure of credit union "success" (or failure) in reaching these populations because there is no corresponding measure of the ethnic break-down of the potential membership fields of the credit unions in the study. Credit unions are not free to serve all consumers-only those who are part of their FOM.

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