The state of fair lending in the united states ctech final v2

The State of Fair Lending in the United States “A Review of HMDA Data 2004-2012�

Maurice Jourdain-Earl Managing Director ComplianceTech

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Today’s Agenda • • • • • • •

Background and Purpose Fair Lending and the Mortgage Lending Life Cycle Fair Lending Analysis Progression Origination, Denial and Fallout Rate Trends 2004-2012 Distribution of Loan Types by Race/Ethnicity 2004-2012 2012 Loan Product Distribution by Race Underwriting and Pricing Disparities by Race, Loan Product and Census Tract % Minority - 2012 • Market Penetration Disparities by Race 2012

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Background & Purpose The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1975 and was implemented by the Federal Reserve Board's Regulation C. On July 21, 2011, the rule-writing authority of Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB). This regulation provides the public loan data that can be used to assist: a. in determining whether financial institutions are serving the housing needs of their communities; b. public officials in distributing public-sector investments so as to attract private investment to areas where it is needed;

c. and in identifying possible discriminatory lending patterns.

This regulation applies to certain financial institutions, including banks, savings associations, credit unions, and other mortgage lending institutions.

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Fair Lending Analysis Progression

Descriptive statistics

Inferential Statistics Regression

Comparative File Analysis

HMDA Analysis

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Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total

$ Volume 2,569,439,170,000.00 2,887,912,041,000.00 2,615,776,234,000.00 2,074,074,736,000.00 1,415,069,222,000.00 1,822,262,565,000.00 1,642,727,371,000.00 1,490,056,094,000.00 2,135,312,839,000.00 $18,652,630,272,000.00

Units 15,028,550 15,621,943 13,970,183 10,441,545 7,177,262 8,950,936 7,863,337 7,095,262 9,783,966 95,932,984

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12.000.000

# Loans by Race 2004-2012

10.000.000 8.000.000 6.000.000 4.000.000 2.000.000 0

2004 2005 2006 2007 2008 2009 2010 2011 2012 White 9.840.978 9.964.367 8.683.671 6.905.991 5.098.364 6.677.192 5.832.691 5.212.731 7.187.150 Black 1.088.394 1.255.051 1.232.784 790.254 425.078 373.355 307.407 279.552 379.203 Hispanic 1.559.629 1.855.720 1.801.924 1.068.375 546.008 527.098 457.997 442.160 604.633 Asian 594.816 611.130 521.803 382.493 266.039 394.554 411.617 377.945 550.207 Confidential Do Not Republish without Prior Consent

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% Share of Loans by Race 2004-2012 90,00 80,00 70,00 60,00 50,00 40,00 30,00 20,00 10,00 0,00

2004 White Share 74,53 Black Share 8,24 Hispanic Share 11,81 Asian Share 4,50

2005 72,16 9,09 13,44 4,43

2006 70,33 9,98 14,59 4,23

2007 74,91 8,57 11,59 4,15

2008 79,94 6,66 8,56 4,17

2009 83,25 4,65 6,57 4,92

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2010 82,73 4,36 6,50 5,84

2011 82,09 4,40 6,96 5,95

2012 81,92 4,32 6,89 6,27 9

% Change in # Loans by Race 2004-2012 40,00% 20,00% 0,00% -20,00% -40,00% -60,00% -80,00%

-100,00% -120,00%

% Chg. 04-05 White 1,24% Black 13,28% Hispanic 15,96% Asian 2,67%

% Chg. 05-06 -14,75% -1,81% -2,99% -17,12%

% Chg. % Chg. % Chg. % Chg. % Chg. 06-07 07-08 08-09 09-10 10-11 -25,74% -35,46% 23,65% -14,48% -11,89% -56,00% -85,91% -13,85% -21,45% -9,96% -68,66% -95,67% -3,59% -15,09% -3,58% Confidential Not Republish 32,57% without Prior Consent -36,42%Do -43,77% 4,15% -8,91%

% Chg. 11-12 27,47% 26,28% 26,87% 10 31,31%

Total % Chg. in # Loans by Race 2004-2012 0,00% -20,00%

White

Black

Hispanic

Asian

-40,00% -60,00%

% Chg. 2004-2012

-80,00%

-100,00%

White

-36.92%

-120,00%

Black

-187.02%

-140,00%

Hispanic -157.95%

-160,00%

Asian

-180,00%

-8.11%

-200,00%

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# Loans by Census Tract % Minority 2004-2012 0-10%

10-20%

2004

4,877,235

3,142,481

2005

4,923,586

2006

20-30%

30-40%

40-50%

50-60%

60-70%

70-80%

80-90%

90-100%

1,926,853 1,207,756

848,198

623,345

548,409

473,222

470,266

744,451

3,276,401

2,041,140 1,275,386

905,220

672,284

582,124

504,804

498,346

808,185

4,421,429

2,912,903

1,799,045 1,122,556

802,976

600,643

514,548

454,900

459,995

748,335

2007

3,620,249

2,247,542

1,322,186

794,107

555,898

401,401

336,349

291,214

294,371

478,686

2008

2,763,824

1,576,117

876,577

515,206

349,028

240,235

194,391

158,922

152,097

246,445

2009

3,688,624

2,080,666

1,098,361

601,654

390,941

256,587

201,490

154,373

141,608

190,934

2010

3,243,716

1,840,652

983,960

537,759

349,799

230,516

181,701

139,621

127,212

159,229

2011

2,873,670

1,664,920

902,331

498,014

324,996

213,181

169,348

128,937

117,916

155,463

2012

2,495,674

2,388,287

679,577

473,242

353,113

293,251

244,689

258,623

1,501,294 1,038,536

32,908,007 21,129,969 12,451,747 7,590,974 5,206,633 3,711,434 3,081,473 2,599,244 2,506,500 3,790,351

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Total # Loans by Census Tract % Minority 2004-2012 35.000.000 30.000.000 25.000.000 20.000.000

15.000.000 10.000.000 5.000.000 0

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0-10%

32,908,007

10-20%

21,129,969

20-30%

12,451,747

30-40%

7,590,974

40-50%

5,206,633

50-60%

3,711,434

60-70% 70-80%

3,081,473 2,599,244

80-90%

2,506,500

90-100%

3,790,351

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% Chg. # Loans by Census Tract % Minority 2004-2012 0,00% -20,00% -40,00%

% Chg. 2004-2012

-60,00%

0-10%

-95.43%

-80,00%

10-20%

-31.58%

20-30%

-28.35%

30-40%

-16.29%

40-50%

-24.81%

50-60%

-31.72%

60-70%

-55.31%

-160,00%

70-80%

-61.37%

-180,00%

80-90%

-92.19%

90-100%

-187.85%

-100,00% -120,00% -140,00%

-200,00%

0-10%

10-20%

20-30%

30-40%

40-50%

50-60%

60-70%

70-80%

80-90%

90-100 %

% Chg. 2004-2012 -95,43% -31,58% -28,35% -16,29% -24,81% -31,72% -55,31% -61,37% -92,19% -187,85%

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# 1st Lien Subprime Rate Loans by Race 2.000.000 1.500.000

White Black

1.000.000

Hispanic

500.000

Asian

0

2004

2005

2006

2007

2008

2009

2010

2011

2012

% 1st Lien Subprime Rate Loans by Race 60,00 50,00 40,00 30,00 20,00 10,00 0,00 White Black Hispanic Asian

2004 11,38 30,03 17,10 5,72

2005 18,60 46,67 34,88 15,01

2006 21,57 49,09 38,81 17,88

2007 15,43 34,65 26,13 10,25

2008 11,26 21,67 16,79 4,72

2009 5,11 9,81 8,07 1,80

2010 2,92 6,25 5,20 0,73

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2011 3,43 7,17 6,26 1,01

2012 2,72 5,75 4,98 1,02 15

% Conventional Loans by Race

% FHA Loans by Race

120,00 100,00 80,00

60,00 40,00 20,00 0,00

2004 2005 2006 2007 2008 2009 2010 2011 2012

50,00 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00

2004 2005 2006 2007 2008 2009 2010 2011 2012

White

94,54 95,92 95,74 93,98 80,23 76,00 78,36 79,58 80,80

White

3,78

2,85

3,05

4,47 16,36 19,01 16,74 13,61 12,11

Black

88,43 93,18 94,04 88,50 58,89 41,94 45,61 50,18 53,71

Black

8,21

4,95

4,30

8,83 34,42 44,98 40,68 32,64 28,73

Hispanic 92,50 96,18 96,81 93,90 69,49 52,52 54,74 58,67 62,72

Hispanic 6,40

3,15

2,55

4,92 26,99 40,63 38,28 32,72 28,67

Asian

Asian

0,79

0,76

1,10

98,47 98,98 98,98 98,57 91,78 87,99 89,19 90,16 91,21

1,22

% VA Loans by Race 18,00 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 0,00

8,34

7,11

% FSA/RH by Race 2,50 2,00 1,50 1,00 0,50

2004 2005 2006 2007 2008 2009 2010 2011 2012

White

1,49

1,05

1,02

1,22

2,48

Black

3,27

1,80

1,60

2,44

Hispanic 0,98

0,59

0,53

0,91

Asian

7,39 10,84 9,72

0,30

0,22

0,24

0,30

0,00

2004 2005 2006 2007 2008 2009 2010 2011 2012

White

0,18

0,18

0,19

0,34

0,92

1,49

1,23

1,81

1,53

5,91 11,40 12,01 15,31 15,82

Black

0,08

0,07

0,07

0,22

0,78

1,68

1,71

1,87

1,73

2,56

6,79

Hispanic 0,11

0,08

0,10

0,28

0,97

1,88

1,77

2,22

1,82

1,50

Asian

0,01

0,01

0,03

0,08

0,15

0,14

0,21

0,17

0,75

3,50 4,96 1,02

3,68 5,21 0,96

5,01 6,40 1,29

5,57

0,02

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Origination Rate Trend by Race 2004-2012 80,00

70,00 60,00 50,00

40,00 30,00

20,00 10,00

0,00

2004 White 60,29 Black 43,68 Hispanic 52,02 Asian 61,64

2005 58,28 42,77 50,35 57,57

2006 57,25 41,89 47,84 54,62

2007 54,70 36,04 40,02 50,69

2008 55,04 34,83 38,54 49,85

2009 63,30 43,51 47,98 58,96

2010 64,01 45,65 51,65 63,02

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2011 63,52 45,16 52,23 61,84

2012 66,90 49,02 55,74 65,78 17

Denial Rate Trend by Race 2004-2012 50,00 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00

2004 White 18,66 Black 31,86 Hispanic 23,99 Asian 16,38

2005 19,36 31,45 24,67 18,38

2006 20,92 33,79 27,59 20,42

2007 24,14 40,82 35,34 24,12

2008 24,59 43,70 38,23 24,76

2009 18,09 34,06 29,49 19,06

2010 18,04 33,61 27,48 17,14

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2011 18,50 34,42 27,32 17,77

2012 16,47 31,66 25,03 16,17 18

Fallout Rate Trend 2004-2012 30,00 25,00 20,00 15,00 10,00 5,00

0,00

2004 White 21,05 Black 24,46 Hispanic 23,99 Asian 21,98

2005 22,36 25,78 24,99 24,05

2006 21,82 24,32 24,57 24,96

2007 21,16 23,14 24,65 25,19

2008 20,37 21,47 23,23 25,40

2009 18,61 22,44 22,52 21,98

2010 17,95 20,74 20,88 19,84

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2011 17,98 20,42 20,45 20,40

2012 16,63 19,32 19,23 18,04 19

2012 Overall Disparities by Race 2012 Overall Disparities by Race

2,50 2,00 1,50 1,00

0,50 0,00

ODI DDI FDI

White 1,00 1,00 1,00

Black 1,38 1,94 1,16

Hispanic 1,20 1,50 1,15

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Asian 1,02 0,98 1,08 20

2012 Loan Product Distribution Rank 1

2 3

4 5

Product

#

%

Conventional, 1st Lien, Refinance, Owner4,950,698 Occupied, 1-4 Family Conventional, 1st Lien, Purchase, Owner1,245,152 Occupied, 1-4 Family FHA, 1st Lien, Purchase, Owner-Occupied, 1-4 699,816 Family Conventional, 1st Lien, Refinance, Non Owner- 606,195 Occupied, 1-4 Family FHA, 1st Lien, Refinance, Owner-Occupied, 1-4 554,043 Family

50.86

Sub-Total

82.76

8,055,904

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12.79 7.19

6.23 5.69

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I 2012 Blacks and Hispanics had Different Loan Type Experiences

White #

%

Black #

Conventional 5,739,727 80.80% 200,494

Hispanic

%

#

%

53.71%

379,221

62.72%

28.73%

173,338 28.67%

FHA

859,966

12.11% 107,243

VA

395,560

5.57%

59,064

15.82%

41,056

FSA

108,338

1.53%

6,457

1.73%

11,018

100.00%

604,633

7,103,591 100.00% 373,258

Asian #

%

493,372 91.21% 38,453

7.11%

6.79%

8,135

1.50%

1.82%

941

0.17%

100.00% 540,901 100.00%

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2012 Underwriting Disparities by Race and Loan Product Conventional, 1st Lien, Refinance, Owner-Occupied, 1-4 Family

Conventional, 1st Lien, Purchase, Owner-Occupied, 1-4 Family

Race

ODI

DDI

FDI

Race

ODI

DDI

FDI

White Black Hispanic Asian

1.00 1.34 1.20 1.00

1.00 1.88 1.56 0.96

1.00 1.23 1.19 1.04

White

1.00

1.00

1.00

Black

1.55

2.79

1.13

Hispanic

1.25

1.87

1.18

Asian

1.08

1.10

1.24

FHA, 1st Lien, Purchase, Owner-Occupied, 1-4 Family

Race White Black Hispanic

ODI 1.00 1.24 1.13

DDI 1.00 1.66 1.34

FDI 1.00 1.26 1.20

Asian

1.13

1.36

1.20

FHA, 1st Lien, Refinance, Owner-Occupied, 1-4 Family Race White Black

ODI 1.00 1.26

DDI 1.00 1.45

FDI 1.00 1.17

TDI 3.00 3.88

Hispanic 1.07

1.17

1.04

3.29

1.05

1.05

3.15

Asian

1.04

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2012 Pricing Disparities by Race and Loan Product Conventional, 1st Lien, Refinance, Owner-Occupied, 1-4 Family Race

Loans

White 3,771,956 Black 123,712 Hispanic 227,108 Asian Total

Race

Loans w/Spread

%

Avg. Spread

45,268 3,467 4,436

1.20 2.80 1.95

2.42 2.61 2.54

315,330 883 0.28 2.00 4,950,698 58,075 1.17 2.41 FHA, 1st Lien, Purchase, Owner-Occupied, 1-4 Family Loans

Loans w/Spread

White 444,968 16,634 Black 64,128 4,248 Hispanic 115,092 6,392 Asian 22,777 475 Total 699,816 29,648

%

Avg. Spread

3.74 6.62 5.55 2.09 4.24

1.90 1.85 1.85 1.87 1.88

Conventional, 1st Lien, Purchase, OwnerOccupied, 1-4 Family Loans Avg. Race Loans % w/Spread Spread White 946,832 29,904 3.16 2.53 Black 26,956 1,757 6.52 2.71 Hispanic

63,470

4,966

7.82

2.74

Asian

96,592

1,218

1.26

2.37

Total

1,245,152

39,468

3.17

2.55

FHA, 1st Lien, Refinance, OwnerOccupied, 1-4 Family Race

Loans

White 385,160 Black 39,929 Hispanic 53,849 Asian 15,447 Total 554,043

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Loans w/Spread

%

Avg. Spread

16,636 3,854 2,317 318 24,077

4.32 9.65 4.30 2.06 4.35

3.07 3.27 2.65 2.96 3.04 24

2012 Pricing Disparities by Loan Product and Census Tract % Minority Conventional 1st Lien Refi 1-4 Family Tract % Minority

Loans

Loans w/Spread

%

Avg. Spread

<10%

1,341,707

20,467

1.53

2.45

10-20%

1,279,510

11,489

0.90

2.37

20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100% Unk/NA Total

773,108 512,296 319,571 216,378 157,032 130,285 106,803 92,858 21,150

7,418 5,183 3,425 2,363 1,938 1,419 1,282 2,434 657

0.96 1.01 1.07 1.09 1.23 1.09 1.20 2.62 3.11

2.39 2.40 2.34 2.30 2.46 2.31 2.33 2.62 2.75

4,950,698

58,075

1.17

2.41

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2012 Pricing Disparities by Loan Product and Census Tract % Minority Conventional 1st Lien Purchase 1-4 Family Tract % Minority

<10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100% Unk/NA Total

Loans

Loans w/Spread

%

Avg. Spread

318,285 337,132 202,475 132,448 83,784 53,210 38,020 29,339 22,198 21,185 7,076

13,480 7,843 5,047 3,435 2,156 1,535 1,308 922 864 2,164 714

4.24 2.33 2.49 2.59 2.57 2.88 3.44 3.14 3.89 10.21 10.09

2.51 2.53 2.59 2.59 2.61 2.56 2.57 2.67 2.68 2.54 2.58

1,245,152

39,468

3.17

2.55

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2012 Pricing Disparities by Loan Product and Census Tract % Minority FHA 1st Lien Home Purchase 1-4 Family Tract % Minority

<10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100% Unk/NA Total

Loans

Loans w/Spread

%

Avg. Spread

118,355 142,058 103,776 81,471 60,240 46,720 37,550 34,843 30,604 41,579 2,620 699,816

4,912 5,051 3,601 2,950 2,344 2,175 1,944 1,941 1,941 2,690 99 29,648

4.15 3.56 3.47 3.62 3.89 4.66 5.18 5.57 6.34 6.47 3.78 4.24

1.93 1.90 1.92 1.87 1.88 1.84 1.86 1.84 1.83 1.85 1.84 1.88

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2012 Pricing Disparities by Loan Product and Census Tract % Minority FHA 1st Lien Refi 1-4 Family Tract % Minority <10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100% Unk/NA Total

Loans

Loans w/Spread

%

113,819 123,702 82,435 61,039 42,921 32,527 25,045 22,344 19,097 26,939 4,175 554,043

5,082 4,761 3,213 2,321 1,659 1,213 1,069 935 1,058 2,745 21 24,077

4.46 3.85 3.90 3.80 3.87 3.73 4.27 4.18 5.54 10.19 0.50 4.35

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Avg. Spread 3.04 3.05 3.11 3.04 3.02 3.14 3.03 3.04 3.05 2.95 2.05 3.04 28

2012 Market Penetration Disparities by Race Race

Loans

Population

Ratio

196,844,498 63.12%

1.29

White

7,187,150

81.64%

Black

379,203

4.31%

37,690,511

12.09%

0.36

Hispanic

604,633

6.87%

54,166,049 17.37%

0.40

Asian

550,207

6.25%

14,468,054

4.64%

1.35

Native American

26,292

0.30%

2,247,427

0.72%

0.41

Hawaiian

25,610

0.29%

481,653

0.15%

1.88

MultiRace

30,574

0.35%

5,967,844

1.91%

0.18

Totals

8,803,669 100.00% 311,866,036 100.00% Confidential Do Not Republish without Prior Consent

1.00

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Maurice Jourdain-Earl Managing Director

jourdainearl@compliancetech.com 202-842-3800 www.compliancetech.com