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Racial Disparities Grew Worse in
2005 at Citigroup, HSBC and Other Large Banks -Inner City Press
New York, April 10 -- In the first study of the just-released 2005
mortgage lending data, the watchdog and technical assistance
organization Fair Finance Watch has identified worsening disparities by
race and ethnicity in the higher-cost lending of some of the nation's
largest banks. The trend raises concerns for regulators: 2005 is the
second year in which the data distinguishes which loans are higher cost,
over the federally-defined rate spread of three percent over the yield
on Treasury securities of comparable duration on first lien loans, five
percent on subordinate liens.
Citigroup
in 2005, in its headquarters Metropolitan Statistical Area of New York
City, confined African Americans to higher-cost loans above this rate
spread over seven times more frequently than whites, according to Fair
Finance Watch, more disparate than in 2004.
"Predatory lending has grown and not diminished, at Citigroup and other
companies," the study by Fair Finance Watch opines. "The disparities in
this new data, at the nation's largest bank and on down the line, call
out for immediate action by the public and private sectors, from
governmental enforcement agencies and private attorneys general to
grassroots consumers and community groups. Despite corporate claims of
best practices, the problem is just getting worse."
Redlining and continued disproportional denials to people of color are
also sketched by FFW's report on the new 2005 data. Nationwide for
conventional, first-lien home purchase loans, Citigroup denied the
applications of African Americans 2.69 times more frequently than those
of whites, and denied the applications of Latinos 2.02 times more
frequently than whites, both disparities worse even than in 2004.
Bank of America
in 2005 was more disparate to Latinos, denying their applications 2.38
times more frequently than whites, and denying African Americans 2.27
times more frequently than whites.
While experts note that comprehensive income comparisons will not be
possible until the aggregate data is released in September, Fair Finance
Watch and what it calls its academic support team have designed a way to
consider income correlations, by calculating upper and lower income
tranches based on each lenders own customers.
Nationwide at
JP Morgan Chase for
conventional first-lien loans, upper income African Americans were
confined to higher cost loans over the rate spread 3.34 times more
frequently than whites. Fair Finance Watch in an addendum states that
this will be raised to the regulators that must consider JP Morgan
Chase's proposal, announced on April 8, to buy branches and $15 billion
in deposits from Bank of New York.
Fair Finance
Watch is touting, as explanation,
buying this book
At Citigroup for conventional
first-lien loans nationwide, 37.73% of upper income African Americans
were confined to higher cost loans over the rate spread, versus only
11.46% of upper income whites. According to Fair Finance Watch's study,
income does not explain the disparities at Citigroup. Nor at HSBC, where
less than half of upper income white borrowers were confined to rate
spread loans, versus 61.87% of upper income African Americans and an
even higher percentage of Latinos, 62.82%.
HSBC, which bought Household
International in 2002
just after its predatory lending settlement with state attorneys general
for $484 million, has increased the interest rates changed by its former
Household units. Over eighty percent of HSBC's home purchase loans to
African Americans and Latinos were higher-cost loans over the rate
spread, much higher than in 2004 at these ex-Household units. In
Buffalo, HSBC's long-time headquarters, HSBC in 2005 confined African
Americans to higher cost rate spread loans 2.15 times more frequently
than whites.
In 2005, HSBC made over five thousand super high-cost loans subject to
the Home Ownership and Equity Protection Act (HOEPA) -- that is, at
least eight percent over comparable Treasury securities. Wells Fargo
made 795 HOEPA loans in 2005. Keycorp, which according to the report had
said it had discontinued HOEPA loans, made 755 such loans in 2005.
"We've heard a lot of excuses," the Fair Finance Watch report states.
"Various lenders told us in advance to expect a surprising rise in high
cost loans in the 2005 data due, they said, to the yield curve. But the
disparities in pricing by race and ethnicity have also grown worse in
2005, and no yield curve can explain or excuse that."
Using its method of analyzing income correlations, by calculating upper
and lower income tranches based on each lenders own customers, the Fair
Finance Watch report has found that nationwide at
Royal Bank of Scotland's
U.S. units, upper income African Americans were confined to higher cost
loans over the rate spread 4.01 times more frequently than whites. And
at
Washington Mutual and its
higher-cost affiliate, Long Beach Mortgage,
upper income African Americans were confined to higher cost loans over
the rate spread 4.19 times more frequently than whites.
Washington Mutual was also among the most disparate when considering
conventional first-lien loans without regard to income, confining
African Americans to rate spread loans 3.70 times more frequently than
whites.
Wells Fargo
was nearly as disparate, confining African Americans to rate spread
loans 3.31 times more frequently than whites. Royal Bank of Scotland
and its Citizens Bank units came in at 3.11, and JP Morgan Chase at
2.98. The disparity at
Wachovia
was 2.58, and at Atlanta-based
SunTrust
it was 2.40. The disparity at GMAC was 2.92, while at Countrywide it was
2.86.
Countrywide’s disparity between pricing to African Americans and whites
was even more stark when considering conventional first lien home
purchase loans: Countrywide confined African Americans to rate spread
loans 3.53 times more frequently than whites. Countrywide was topped,
however, by Milwaukee-based M&I, with a disparity of 3.78, and by Bank
of America's MBNA unit, with a disparity of 4.23.
Bank of America
also assisted other subprime lenders in 2005, the report says, by
securitizing loans for
Ameriquest,
which earlier this year settled predatory lending charges with state
attorneys general for $325 million. The settlement only required reforms
at Ameriquest Mortgage and two affiliates, but not its largest
affiliate, Argent Mortgage. The 2005 data show that Argent made 220,069
higher cost loans over the rate spread, while Ameriquest Mortgage made
122,868 such loans. The reforms announced in support of the predatory
lending settlement with the attorneys general cover barely 35% of ACC's
high-cost lending.
Like ACC / Ameriquest, Citigroup and HSBC, other large subprime lenders
also increased the percentage of their loans that were over the rate
spread, from 2004 to 2005. At New Century in 2005, fully 215,579 of the
company's 268,101 loans were over the rate spread. National City /
First Franklin made 177,526 higher cost loans over the rate spread in
2005. Countrywide in 2005 made 190,621 loans over the rate spread.
199,249 of 237,700 loans were over the rate spread at H&R Block, which
also in this season offers problematic high-cost tax refund anticipation
loans.
According to Fair Finance Watch, several large lenders sought to avoid
being scrutinized by refusing to provide their data in computer
analyzable form. Institutions insisting on providing their data in
paper or PDF form included Lehman Brothers,
AIG,
Delta Funding, Fremont Investment & Loan and other large subprime
lenders, as well as banks such as New York Community Bancorp, Whitney
Bank and Fifth Third Bank.
Fair Finance
Watch says it will be pursuing those issues as well, with each lender's
regulator.
"Predatory lending is a still-growing problem, impacting consumers not
only homebuyers but also consumers who make payday, car title and tax
refund anticipation loans," the Fair Finance Watch study concludes. "We
will be redoubling our efforts to reign in the predatory lenders, using
this data as a road map."
[Optional
cut]
The Fair Finance Watch report also casts its glance local. The nation's
largest bank, Citigroup, was disparate in Metropolitan Statistical Areas
all over the country in 2005.
In Los
Angeles, Citigroup confined African Americans to higher cost rate spread
loans 2.13 times more frequently than whites; its disparity for Latinos
was 2.02.
Citigroup's
African American to white disparity was 2.27 in the Washington DC MSA,
and 2.72 in Chicago.
In
Philadelphia, Citigroup confined African Americans to higher cost rate
spread loans 3.43 times more frequently than whites; its disparity for
Latinos was 2.50.
Definition:
the Federal Reserve has defined higher-cost loans as those loans with
annual percentage rates above the rate spread of three percent over the
yield on Treasury securities of comparable duration on first lien loans,
five percent on subordinate liens.
Source: info
[at] FairFinanceWatch.org
* * *
Argent Mortgage Layoffs, One Week
After Ameriquest's $325 Predatory Lending Settlement
Just after after announcing a $325 million
predatory lending settlement by three of its subsidiaries, ACC Capital
Holdings on January 30 has reportedly laid off 16% of the workforce of
its non-covered subsidiary, Argent Mortgage. So, analysts wonder, will Ameriquest’s settlement be paid by eliminating what few levels of
oversight exist in Argent Mortgage’s subprime lending process? The
layoff reports have reached Inner City Press from impacted employees,
one of whom writes:
Subject: Argent Layoffs
Sent: Mon, 30 Jan 2006
16:39:48 -0800 (EST)
From: [Name withheld]
To: Ameriquest-Watch
[at] innercitypress.org
Argent has laid off 16%
of their workforce, approximately 1250-1500 [Editor's note: see
2/1/06 update, below] in job cuts that took place
this past Friday and Today. The positions include mostly production
jobs, but cuts were also made within their corporate staff. No sales
positions were eliminated. One of the biggest changes to come from this
consolidation has been the elimination of set-up and doc draw employees.
Underwriters will perform the set-up function, and funders will assume
the duties of the doc-drawers. Customer service levels and turn time may
be affected by these changes.
Layoffs by Location:
200 Doc-drawers and
set-up workers in White Plains, NY
~100 Doc-drawers and
set-up workers in Schaumburg, IL
Also
Subject: Argent Update
1/30/06
Sent: Tue, 31 Jan 2006
00:26:48 +0000
From: [Name withheld]
To: Ameriquest-Watch
[at] iinnercitypress.org
I thought you would be
interested to know that Argent Mortgage laid off approximately 16% of
its workforce today. Luckily, I still have a job, but I would like to
see what you write about it. I find your site very informative.
Beyond the kind words, one of the questions
raises by the specific job-functions that have reportedly been targeted
for the layoffs is whether, just after three subsidiaries have settled
predatory lending charges, the non-covered subsidiary should be
eliminating what oversight it has of its lending process. What will the
attorneys general (or the U.S. Senators considering the nomination of
ACC founder Roland Arnall to become U.S. ambassador to the Netherlands)
or most importantly the consumers impacted by ACC and Argent have to say
about these strangely-timed layoffs? Only time will tell…
In other media, North Carolina’s attorney
general’s spokeswoman has tried to explain the loopholes in the
settlement by telling the
Charlotte Observer that the settlement was necessarily "limited to
activities over which Ameriquest had direct control." We note that by
laying-off 1200 employees at Argent, ACC can claim to have even less
control over Argent’s high-cost subprime mortgages. The
St. Louis Post-Dispatch has reported on a sample instance of a
borrower whom ACC instructed “to file another application - and this
time include a letter stating that she owns a cleaning company. ‘They
told me what to write,’ she recalls. She says Ameriquest loan officers
instructed her to write that she had received an advance of $12,000 to
clean two office buildings. It wasn't true, but Hopkins says she and her
husband needed the $125,000 loan... They eventually lost the house.”
In other St. Louis news, Fair Finance Watch has
filed comment on the proposed acquisition there of Forbes First National
Corporation’s Pioneer Bank & Trust Company by notorious subprime lender
National City Corporation – click
here to view,
and click here for
FFW Jan. 30 comments on Whitney National Bank’s attempt to buy 1st
National Bank & Trust in Florida.
[Editor's update 1: late on the afternoon of Jan.
31, ACC's spokesman confirmed by email the Argent layoffs, reported 24
hours earlier by Inner City Press. He wrote that "this consolidation
increases our efficiency."]
[Editor's update 2:
on February 1, ACC emphasized to Inner City Press that while the 15%
layoff figure is correct, the individual who first wrote in to us with
the employee number over 1,000 was wrong, that the number is 600. Duly
noted -- along with ACC's argument that that Argent does not, even
cannot, control the mortgages it makes, much less now with 600 fewer
employees.]
Predatory Lending
Settlement Leaves Out Ameriquest’s Largest Lender, Argent, Critics Say
Jan. 23 – Earlier today,
the largest subprime mortgage lending conglomerate in the United States,
ACC Capital Holdings Corporation, announced a $325 million predatory
lending settlement with the attorneys general of more than 40 states.
Almost immediately, questions were raised as to why the settlement does
not cover ACC’s subsidiary which made the most high-cost loans in 2004,
Argent Mortgage.
The
settlement comes at a convenient time for ACC and its founder, Roland
Arnall. In two weeks, the company plans a major multi-million dollar
advertising campaign connected to the National Football League’s Super
Bowl XV in Detroit. Arnall has been nominated to become the United
States ambassador to the Netherlands. He has seen his confirmation
stalled for months due to the pending settlement. But given the
perceived loopholes in the settlement, critics question whether Arnall’s
nomination should be forward in the U.S. Senate.
In 2004, the
most recent year for which Home Mortgage Disclosure Act data is
available, ACC’s Ameriquest Mortgage made 185,833 loans, while its
Argent Mortgage unit made 215,403 loans, more than half of them over the
federal regulators’ high cost definition, of three percent over
comparable Treasury securities on a first lien, and over five percent on
a subordinate lien.
Studies of the
data have shown that ACC and Argent direct a much higher percent of
their high cost loans to African Americans and Latinos than is true of
other, prime-priced lenders.
Inner City
Press in mid-2005 submitted Freedom of Information Act requests to many
states’ attorneys general, for copies of consumer complaints against ACC
and Argent. ACC’s legal department opposed the release of any
information, resulting in ongoing litigation, including in Texas.
ACC and its
predecessors have previously purported to reform their practices, as far
back as 1996 with the Department of Justice and Office of Thrift
Supervision (when the company was named Long Beach Mortgage), in 2000
with the Federal Trade Commission, and since. Among those questioning
the settlement are class action lawyers, by means of a press release.
Consumer protection advocates, however, emphasize the need for binding
reforms at ACC including Argent, and not only monetary settlement for
past loans. This is a developing story.
The
settlement has also given rise to
questions about the due diligence performed by the investment banks
which have helped package Ameriquest’s loans and sell them as
mortgage-backed securities, including the three largest banks in the
United States: Citigroup, JP Morgan Chase and Bank of America. Each of
these three banks has securitized Ameriquest loans, while claiming to
screen out predatory loans. With today’s settlements, questions are
being raised about these banks previous defenses of their practices.
Other recent Inner City Press
reports
Mine Your Own
Business: Explosive Remnants of War and the Great Powers, Amid the
Paparazzi
Human Rights Are
Lost in the Mail: DR Congo Got the Letter, But the Process is Still
Murky
Iraq's Oil to be
Metered by Shell, While Basrah Project Remains Less than Clear
At the UN, Dues
Threats and Presidents-Elect, Unanswered Greek Mission Questions
Kofi, Kony,
Kagame and Coltan: This Moment in the Congo and Kampala
As Operation
Swarmer Begins, UN's Qazi Denies It's Civil War and Has No Answers if
Iraq's Oil is Being Metered
Cash Crop: In
Nepal, Bhutanese Refugees Prohibited from Income Generation Even in
their Camps
The Shorted and
Shorting in Humanitarian Aid: From Davos to Darfur, the Numbers Don't
Add Up
UN Reform:
Transparency Later, Not Now -- At Least Not for AXA - WFP Insurance
Contract
In the Sudanese
Crisis, Oil Revenue Goes Missing, UN Says
Empty Words on
Money Laundering and Narcotics, from the UN and Georgia
In Locked Down
Iraq, Oil Flows Unmetered While Questions Run in Circles
What is the Sound
of Eleven Uzbeks Disappearing? A Lack of Seats in Tashkent, a Turf War
at UN
In a Bronx
Basement, Complaints Linger Long After Lease Is Signed
Kosovo: Of
Collective Punishment and Electricity; Lights Out on Privatization of
Ferronikeli Mines
Predatory Super
Bowl: Ameriquest and the Big Banks in Detroit
Abkhazia:
Cleansing and (Money) Laundering, Says Georgia, Even Terror’s Haven
Post-Tsunami
Human Rights Abuses, including by UNDP in the Maldives
Halliburton
Repays $9 Million, While Iraq’s Oil Remains Unmetered
Argent Mortgage Layoffs, One Week After Ameriquest's $235 Predatory
Lending Settlement
Ameriquest
Settlement: What Does $325 Million Buy? Carte Blanche to Gouge Consumers
(and Get Out of Jail as Ambassador to Holland)
Predatory Lending
Settlement Leaves Out Ameriquest’s Largest Lender, Argent, Critics Say
Darfur on the
Margins: Slovenia’s President Drnovsek’s Quixotic Call for Action
Ignored
Who Pays for the
Global Bird Flu Fight? Not the Corporations, So Far - UN
Royal Bank of
Scotland Has Repeatedly Been Linked to Terrorist Finance and Money
Laundering, Not Only in the Current Brooklyn Case
From Appalachia
to Wall Street: Behind the Mining Tragedy, UBS and Lehman Brothers
Iraqis Absent
from Oil Oversight Meeting on Development Fund for Iraq, Purportedly Due
to Visa Problems
Watching the
Detectives: Oversight of the Development Fund for Iraq Will be Discussed
at the UN on December 28, 2005
From the UN
Budget, Transit Strike, to the USA Patriot Act, 2005 Ends with
Extensions
Some previous
highlights and special reports:
Citigroup
Dissembles at United Nations Environmental Conference
The United
Nations' Year of Microcredit: Questions & No Answers
Other Inner City Press
reports are archived on
www.InnerCityPress.org - if you have
trouble finding previous articles, please
contact us
©opyright 2006 Inner City Press, Inc. To request
reprint or other permission, e-contact Editors [at] innercitypress.com - phone: (718) 716-3540 |
