Your March 14 article "Home Mortgage Disclosure Plan Gets an Earful" quotes representatives from several banks and banking trade associations who blast the recent Federal Reserve Board proposal to amend the Home Mortgage Disclosure Act regulations.
The Fed's proposal would, among other things, collect and disclose information on the annual percentage rate of loans reported, and indicate whether a particular loan was subject to the provisions of the Home Ownership and Equity Protection Act. These modest proposals would help to track subprime mortgage loans and flag potentially predatory lending patterns.
What the article fails to mention is that, despite the explosive growth in subprime mortgage lending over the last several years, there is no consistent, comprehensive source of data on where those loans are being made geographically, by which lenders, and to what types of borrowers.
Virtually all the research to date is based on a list of subprime lenders compiled, on his own initiative, by an enterprising researcher at the Department of Housing and Urban Development. This list is used by the Federal Reserve Board, HUD, and other government agencies, as well as lenders, academics, and anyone else interested in the field.
Lenders on the list are classified as subprime if they identify themselves as such. All loans reported by those lenders are counted as subprime, and no loans reported by lenders that do not identify themselves as subprime are counted. This is the best information we have about subprime lending, and nobody thinks it serves the need adequately.
Equally important, HUD is under no mandate to compile this list, and should it cease to do so, there would be no information at all about which companies are making subprime loans and where. The industry representatives attack the Fed's proposal on a series of fronts. On the one hand, they charge that it is overly broad. On the other, they charge that it fails to include important elements needed to understand the basis for the lender's credit decision.
They claim that the data would be confusing, and that disclosure would have unfortunate results, including raising the cost of credit and "enhancing the environment for predatory lenders."
The mortgage market has changed dramatically in the decade or so since the Home Mortgage Disclosure Act was last updated. It is long past time to update our single best source of information about the market's trends and patterns. Good data serves everyone - public policymakers, regulators, lenders, and the public.
If members of the mortgage lending industry believe that more comprehensive data will paint them in a bad light, maybe they should reexamine their lending practices. If they believe they are operating in a reputable fashion, then they should support this small measure that would advance considerably our understanding of the subprime market.
Deborah Goldberg
Co-Director
Neighborhood
Revitalization Project
Washington
