Data Shed Little Light on Causes
Banks are committed to making credit of all types available to all sectors of their communities. The new home mortgage data are troubling yet they tell very little about the cause of apparent mortgage loan disparities.
At best, regulators will be able to use this data to more carefully target examinations and identify unlawful discrimination if it exists. This should help clear the air of suspicions, and we welcome it.
The shortcoming of the Home Mortgage Disclosure Act reports is that income is only one of many factors lenders use when making a loan decision, but it is the only credit factor isolated in these reports. Down payment, credit history, total indebtedness and job stability are among many factors that determine creditworthiness.
When the Federal Reserve Board reports that in 1986 "the mean amount of financial assets held by black families was $5,900, compared with $64,000 for white families," and that "in mid-1991 the national employment rate for blacks was nearly twice that of whites," it's clear that we have to work harder to provide equal opportunities.
The good news is that banks across the country are pursuing programs to target mortgages to minorities and lower income groups. These efforts include additional loan reviews, credit counseling, and special loan products with more lenient debt-to-income ratios, pricing, and down payment requirements. In spite of discrepancies that may exist, the majority of loan applicants are approved for loans.