The Department of Housing and Urban Development has quietly begun a process that will ultimately require property and casualty insurers to face fair lending reporting mandates equal to those required of mortgage lenders. The ostensible purpose of the HUD advance notice of proposed rulemak-ing, published Aug. 16 in the Federal Register, is to make providers of home-owners insurance track applications the same way banks are required to do under the Home Mortgage Disclosure Act. But the real objective of the notice of proposed rulemaking is to blunt the insurance industrys considerable clout in Congressand its smash-mouth lobbying tacticsby doing through regulation what the insurance underwriters and agents have stopped them from doing through legislation: Put pressure on them to provide insurance at reasonable cost to homeowners in the inner city by publicizing detailed data that reveal their true business policies. The move will win broad support in the mortgage lending industry, which feels it has been singled out as a target for affordable housing advocates. And disclosure of approval and rejection rates of applications for credit by census tract, as HUD wants to do and banks have been required to do since 1991, has been found to be a powerful tool in increasing the availability of credit in formerly poorly served areas. HMDA also requires lenders to report on loan applications and denials according to race and income characteristics. Disparities in HMDA data are a frequent starting point for bias investigations. Industry lawyers caution that the regulatory process will be a lengthy one. And they also expect that the insurance industry will seek further delays by filing suit. And, if they are smart, it will be in the U.S. Court of Appeals for the 4th Circuit in Richmond, where a 1984 ruling upholding their position still stands, one industry lawyer said. That ruling held that the McCarran-Ferguson Act barred the federal government from enforcing fair lending standards on insurers. Two later cases in federal district court in Ohio earlier this year and a ruling of the U.S. Court of Appeals for the 7th Circuit in Chicago in 1992 held otherwise.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.