By Preeti Vissa Kristipati
The administration is moving to cut public access to information on how, and to whom, banks loan money.
Redlining – the practice of denying loans to home buyers and others based on their race or ethnic background – has been illegal for decades.
But, last year, the investigative news outlet Reveal published a massive investigation strongly suggesting that redlining continues today. Now, the Trump Administration is moving to cut public access to the information that helped Reveal produce its report.
Reveal’s reporters spent a full year analyzing 31 million records collected under the Home Mortgage Disclosure Act (HMDA), a law passed in 1975 to give policymakers the information needed to identify and combat lending discrimination. Under HMDA, banks and other mortgage lenders must report information like the type of property, the loan amount, and the sex, race and ethnicity of borrowers.
Reveal found that African Americans and Latinos—and in some locations Asian Americans and Native Americans, too—were far more likely to be turned down for conventional mortgages than white borrowers. That pattern remained even after controlling for factors like household income and the amount of the loan in relation to that income.
Reporting requirements under HMDA were updated by the Dodd-Frank financial reform act and again by the Obama Administration to give regulators a clearer picture of what’s happening. The updated rules required lenders to report every loan’s interest rate and the relationship between an applicant’s income and total amount of debt the would-be borrower was taking on. They also required more detail on ethnicity—like whether an Asian American borrower, for example, was of Chinese or Cambodian heritage.
Now the Consumer Financial Protection Bureau—formerly a tough consumer watchdog that’s fast becoming a bankers’ lapdog—has proposed new rules that would roll back the information requirements added by the Obama Administration. The bureau says it will close a web portal that has allowed easy public access to this information, giving vague promises to eventually develop a new tool for this purpose.
The proposed updates would exempt some lenders, such as smaller banks and credit unions, from having to report at all—even though some of them make more loans to low-income borrowers than do major banks. The administration claims these changes will provide “much needed relief” from supposed regulatory burdens.
But this makes no sense. Banks had already begun collecting and reporting the data that was required under Obama. The systems and procedures to do it are in place and working. Changing the rules now won’t relieve any regulatory burdens; it will make lenders rewrite their procedures yet again.
Redlining produced an enormous racial wealth gap, in which the median white family has roughly twenty times the wealth of the median black family. While lenders no longer draw red lines on maps to mark off non-white neighborhoods as no-mortgage zones, Reveal found they often still either declined loans entirely to black people and Latinos or steered them into the sort of high-cost subprime loans that sent millions of people into foreclosure a decade ago.
If the Trump Administration succeeds, that discrimination will continue and be much harder to detect.