NEDAP Press Statement

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NEW MULTI-STATE REPORT SHOWS POSITIVE EFFECT OF FAIR LENDING REGULATION ON MORTGAGE PRICING IN NYC

Lenders not subject to Community Reinvestment Act far likelier to make high-cost loans

A report released today underscores the critical role that the Community Reinvestment Act (CRA) plays in promoting affordable mortgage lending to lower-income borrowers and communities in New York City, and nationally.  The report, Paying More for the American Dream III, examines pricing disparities in mortgage lending in New York and six other metropolitan areas in the U.S., and finds that banks subject to the CRA made a far smaller share of high-cost loans than lenders not covered by the law. 

The CRA, passed by Congress in 1977, requires banks to make credit equitably available to all communities they serve, consistent with safe and sound banking practices.  The CRA has come under attack by those who blame the regulation for causing the subprime lending crisis, on the grounds that the CRA pushed banks to make bad loans to unqualified borrowers.

“This report contains clear evidence that the CRA is not responsible for the financial crisis,” said Alexis Iwanisziw, NEDAP Program Associate.  “That said, banks with CRA obligations made an overwhelmingly proportion of their high-cost mortgages in NYC’s neighborhoods of color.”

Key findings for New York City include:

• More than 30% of loans made by independent mortgage companies and banks without CRA obligations were high-cost in low- and moderate-income communities.  Twelve percent of loans made by banks with CRA obligations were high-cost.  

• Despite their relatively small market share of high-cost loans, overall, lenders subject to the CRA made a disproportionate share (70%) of their high-cost loans in communities of color. 

• Borrowers living in black and Latino communities in New York City were more than three times as likely to receive a high-cost mortgage as borrowers living in predominantly white communities.

The report, Paying More for the American Dream III: Promoting Responsible Lending to Lower-Income Communities and Communities of Color, includes detailed lending maps of New York City, may be found at: www.nedap.org/resources/documents/PayingMoreFortheAmericanDreamIII_Final.pdf

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The Paying More for the American Dream series is a collaborative effort of the California Reinvestment Coalition, Community Reinvestment Association of NC, Empire Justice Center, Massachusetts Affordable Housing Alliance, NEDAP, Ohio Fair Lending Coalition, and Woodstock Institute. This report is the collaboration’s third annual study of systematic inequalities in the housing finance system and their impact on lower-income neighborhoods and communities of color. Previous reports are available at: www.nedap.org/resources/reports.html

 

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NEDAP, an economic justice resource and advocacy center, has been at the forefront of combating abusive and discriminatory lending practices in New York City and State. 

For more information, please visit www.nedap.org.