Trump Troop Doesn’t Believe Black Loans Matter

Trump Troop Doesn’t Believe Black Loans Matter

Administration, agencies’ actions paint a picture of discriminatory neglect.

BY LEW SICHELMAN | CONTRIBUTING WRITER, NATIONAL MORTGAGE PROFESSIONAL

For the first time in its 10-year history, the political football known as the Consumer Financial Protection Bureau has filed a complaint in court alleging a violation of the Equal Credit Opportunity Act by a mortgage company.

The supposed miscreant, Townstone Financial, a small Chicago-based nonbank retail lender, fired back, saying it did not violate the law’s prohibitions against redlining, which is the abhorrent practice of refusing to lend in poorrisk neighborhoods. But whether Townstone is guilty or not is not the point, at least not here.

Rather, the point is that it took so long for the CFPB to locate a lender, any lender, that purportedly violated the ECOA, which was put in place 26 years ago to make it unlawful for any creditor “to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age; to the fact that all or part of the applicant’s income derives from a public assistance program, or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.”

More than a quarter century later, discrimination still exists. Recently, LendingTree took a look at mortgage denial rates between Black Americans and the overall population in each of the nation’s 50 largest metropolitan areas. The findings were abysmal.

Generally, Blacks were more likely to be denied financing for a house they want to buy than the overall population. For purchase money loans, their denial rate was higher in every one of the 50 metros and double overall. For refinance loans, the denial rate also was higher in each market, an average of more than 13 percentage points higher. And the racial disparities were sometimes even more extreme at the county level. Even in majority Black counties. “Racial barriers to homeownership ... are an undeniable reality for many,” said Tendayi Kapfidze, the site’s chief economist.

MINAMILIST EFFORT

The Townstone case has been hailed in some quarters as proof the Trump Administration is serious about anti-discrimination and its support of people of color. But the CFPB suit is but small potatoes, perhaps to mask all that this White House has done to unravel all the steps that took place before it to improve the lot of minorities.

Of course, less than three years of the CFPB’s existence have been under Trump’s watch. Perhaps previous administrations haven’t been all that vigilant, either. But it seems to me as someone who is not a particularly political animal that there’s little else the current regime has done to promote antidiscrimination in the housing sector. In fact, it’s been just the opposite.

Trump recently showed his true colors when he said, and I paraphrase here, that suburban homeowners no longer have to worry about people of color moving into their neighborhoods and bringing down housing values. The occasion of that repulsive remark was the recission of the Affirmatively Furthering Fair Housing rules, an Obama-era regulation requiring local governments to proactively ensure fair housing in order to receive federal housing funding.

The reg was designed to give more teeth to the Fair Housing Act in combating segregation and was praised by civil rights groups at the time it was put into place in 2015. But in late July, the Department of Housing and Urban Development replaced it with a significantly watered-down policy that allows local governments to self-certify that housing is affordable and free of discrimination.

The move was justified as alleviating undue burdens on local jurisdictions. And it was widely covered in the popular press. But what has largely been missed by the glare of the public spotlight are several tactical maneuvers from the White House in the mortgage sector that also point to the administration’s views on discriminatory practices.

For example, according to ProPublica, an independent, nonprofit newsroom that produces investigative journalism in the public interest, at least six investigations into redlining have been either halted or stalled by the Office of the Comptroller of the Currency. Against staff recommendations, no less. More on that later.

SHIFTING STANDARDS

More recently, HUD, under former Trump challenger and current Secretary Benjamin Carson, finalized rules put forth more than a year ago to change the Fair Housing Act’s disparate impact standard. Specifically, the changes are said to provide a framework for setting legal liability for actions that on their face seem neutral but nevertheless have unintended discriminatory effects. “The new rule is intended to increase legal clarity and promote the production and availability of housing in all areas while making sure every person is treated fairly under the law,” Carson said in August 2019.

At this writing, the rule is still under review at HUD’s Office of Information and Regulatory Affairs. Normally, the changes – plaintiffs relying on the so-called “disparate impact” doctrine would have to show a more direct link between a lender’s policy and its discriminatory effect -- would be applauded by the lending community. But these are not normal times, not hardly. Indeed, the National Association of Realtors, National Association of Mortgage Brokers, Wells Fargo Bank of America, Citi and Quicken Loans, among others, have asked HUD to reconsider its timing, if not the changes themelves.

In a piece penned for HousingWire, David Stevens, former FHA Commissioner and former CEO of the Mortgage Bankers Association, had this to say: “In this year especially, when we see the stark divides of opportunity and access so plainly displayed throughout the nation, it’s the imperative of all who care about equality to simply call for what’s right. Whether it impacts the bottom line is irrelevant to the clarity of what needs to be stood for. HUD needs to withdraw its planned changes to the disparate impact rule.”

CROSSING A RED LINE

In another sinister action, meanwhile, the Comptroller of the Currency has “fixed” something else that many agree wasn’t broken. In this case, it was the Consumer Reinvestment Act, a 1977 law intended to fight redlining by forcing lenders to serve all consumers within their banking footprints, not just highincome individuals.

Without a buy-in from other banking regulators, the OCC moved on its own in 40 quick days after receiving more than 7,000 comments on the revisions, which many say will weaken the CRA. U.S. Rep. Maxine Waters, D-Calif., who chairs the House Financial Services Committee, said the new regulation: “will be harmful for so many communities across the country at a time when they are under severe distress due to the pandemic.”

The day after the final rule was posted, Comptroller of the Currency Joseph Otting, a Trump appointee who once worked with Treasury Secretary Steven Mnuchin at One West Bank, submitted his resignation, never to be seen or heard from again. Meanwhile, several community groups have filed suit against the agency and the Democrat-controlled House has passed a resolution to block the changes.

OCC NOTHING

Now, back to ProPublica, which found at least six incidents in which the OCC under Otting’s watch failed to take action against major mortgage lenders found by his own staff to have engaged in discriminatory practices. Shortly after ProPublica’s report, 18 Senate Democrats called on the OCC to explain how these cases were handled and why the banks involved were not sanctioned. And no wonder.

In one instance, examiners “trained to spot discriminatory lending” found something they thought was amiss at Bank of America in Philadelphia, where the institution was believed to be making fewer loans to Blacks than to whites. But “after complaints” from the bank, the OCC failed to follow up.

Wrote ProPublica: “The abandoned Bank of America inquiry is part of a larger, previously unreported pattern in which the Trump administration has pulled back on civil rights enforcement as a part of its overall relaxation of bank oversight.”

Investigative reporters found five other apparently solid cases that were shelved: Flagstar Bank was said to charge Blacks higher rates through a network of lending affiliates. Colorado Federal Bank, an online lender, supposedly did the same to female borrowers. Examiners also concluded that MB Financial of Chicago charged Latinos too much, that Candence Bank turned away minorities in Houston, and Fulton Bank had been discriminating against minorities in Richmond, Va., as well as part of its home state of Pennsylvania.

“In each case,” ProPublica’s investigative team wrote, “despite staff recommendations that fines or other penalties be imposed, the OCC took no public action and closed the investigations quietly.”

Is it just me, or does anyone else see a pattern here? And more importantly, where’s the outrage from the mortgage community?

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.