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Ripped
Off Worse in the Big Apple, by Citigroup and Chase: High Cost Mortgages
Spread in Outer Boroughs in 2005, Study Finds -Inner City Press
New York, April 24 -- Last spring, a statistical firestorm surrounded
the release of the 2004 Home Mortgage Disclosure Act data. For the first
time, the data set included information about which loans exceeded the
rate spread determined by the Federal Reserve, of three percentage
points over the yield of Treasury securities of comparable maturity on
first lien loans, five percent on subordinate liens. Consumer groups
including the Bronx-based watchdog organization Fair Finance Watch
released reports showing disparities at some of the largest banks. These
were reported on in the English and Spanish-language press. El Diario
reported
for example that "at
Citigroup,
Latinos borrowers were 3.92 times more likely to receive the higher
interest rate loans than were white borrowers." Soon afterwards the NYS
Attorney General (NYAG) requested information behind the data from four
large national banks:
Citigroup,
JPMorgan Chase,
HSBC
and
Wells Fargo.
Less than a week later, the Office of the Comptroller of the Currency
and the New York Clearinghouse trade association both sued to block this
inquiry.
Now the 2005 data has become available, with a few exceptions,
allowing a comparison to the previous year and that degree,
identification of trends. Fair Finance Watch today released the first
study of the 2005 data in New York City. Citigroup in 2005 confined its
borrowers in The Bronx to higher-cost loans above this rate spread over
35 times more frequently than in Manhattan, worse than Citigroup's
record in 2004. The Bronx is the lowest income and most predominantly
African American and Latino county in New York State. In Brooklyn,
Citigroup was almost as disparate. In 2005, Citigroup confined its
borrowers in Brooklyn to higher-cost loans above the rate spread 23
times more frequently than in Manhattan. For the entire New York City
Metropolitan Statistical Area in 2005 Citigroup confined African
Americans to higher-cost loans above this rate spread over seven times
more frequently than whites, also worse than Citigroup's record in 2004.
JPMorgan Chase was nearly as disparate in New York City. In 2005, JPM
Chase confined its borrowers in Queens to higher-cost loans above the
rate spread 8.64 times more frequently than in Manhattan. Chase's
disparities were also intra-borough: in 2005 at JPMorgan Chase African
Americans in Manhattan were confined to higher cost loans over the rate
spread 11.42 times more frequently than whites in Manhattan.
Redlining and continued disproportional denials to people of color are
also evidenced by the 2005 data for NYC, the Fair Finance Watch study
says. Citigroup denied applications from The Bronx 4.62 times more
frequently than applications from Manhattan; the disparity at Wells
Fargo was nearby as bad, at three-to-one. While the disparities are
nationwide, they are more pronounced in New York City. 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.
The banks at issue have tried to blur the issues, in strikingly similar
cover letters they sent along with the data. Citigroup's senior vice
president Eric Eve, for example, wrote in a March 30 letter that
"Citigroup, as we expect will be the case with most other lenders, will
show a greater percentage of loans above the threshold for 2005 than
2004... The issue is the narrowing gap between short- and long-term
interest rates, a phenomenon known as the 'flattening yield curve.' This
is not an indication that borrowers were treated differently in 2005."
Based on Citigroup's 2004 disparities reported, for example, by
El Diario,
merely denying that practices in 2005 were different that in 2004 might
seem to be a strangely limp defense. In fact, Citigroup's 2005 data show
worsening disparities. In the state's poorest and least white county,
The Bronx, for example, Citigroup confined 7.39% of its borrowers to
higher cost loans over the rate spread -- 35.19 times more frequently
than in more affluent and less minority Manhattan, where only 0.21% of
Citigroup's borrowers were confined to rate spread loans. While of the
five boroughs, The Bronx had the highest percentage of loans from
Citigroup over the rate spread, Citigroup's percentage of higher cost
loans in each of the four outer boroughs was higher than in more
suburban, and less diverse, Westchester.
Citigroup's CEO Charles Price and chairman emeritus Sandy Weill were
each questioned directly about these patterns on April 18 at the
company's annual shareholders' meeting at Carnegie Hall. Mr. Weill
referred the question to Mr. Prince, who said that the issues are "too
complex to be addressed in this forum," adding that the disparities were
clearly not so bad that the Federal Reserve would continue to block
Citigroup from large mergers. His reference, repeated throughout the
shareholders' meeting, was to the Federal Reserve's recent lifting of
its year-old ban on significant expansion, which took place before
Citigroup's 2005 mortgage data was released.
Mr. Prince's claim that the Federal Reserve has implicitly condoned the
disparities in Citigroup's 2005 mortgage data appears dubious. As was
pointed out at the shareholders' meeting, the 2005 data was released
after the Fed lifted its ban on significant expansion. And the lifting
of the ban, at most, only puts Citigroup back on par with its
competitors, including for example HSBC.
HSBC's March 29 letter accompanying its data is nearly identical to
Citigroup's, concluding that "had the yield spread between short term
and long term interest rates stayed at the 2004 levels, far fewer longer
maturity loans would have exceeded the thresholds in 2005. Consequently,
a meaningful comparison of the rates at which loans exceeded the rate
spread between 2004 and 2005 cannot be made."
While it may be true that a comparison of the raw percentages of a
lender's 2004 and 2005 loans that exceeded the rate spread should also
take into account "the effect of monetary policy" (as Citigroup's March
30 letter puts it), there is no reason that the disparities between
white and African Americans and Latinos cannot be compared year to year.
In this comparison, the NYAG Four were more disparate in 2005 than in
2004.
And the 2005 disparities extended beyond this quartet. Strikingly the
largest lender, both prime and subprime, to African Americans in NYC in
2005 was Ameriquest and its affiliates including Argent, which made 6394
loans in NYC in 2005, 4656 (or 72.8%) of them over the rate spread.
Ameriquest recently settled charges of predatory lending for $325
million, while leaving its Argent affiliate entirely unreformed. In NYC
in 2005 Washington Mutual and its higher-cost affiliate, Long Beach
Mortgage, together confined their borrowers in The Bronx to higher-cost
loans above this rate spread over 35 times more frequently than whites,
worse than their record in 2004. ICP's analysis of other NYC lenders
continues. Some lenders are trying to avoid such comparisons by only
providing data to the public in unanalyzable form, an evasion it's
proved surprisingly difficult to get regulatory guidance on. Evaders for
now include New York Community Bank, North Fork / Greenpoint, Lehman
Brothers and AIG, down through the NYAG-sued subprime lender Delta
Funding Corporation. Each federal regulator has an evader in its midst;
none of the agencies has yet acted on this issue.
In New York, the NYAG is now focused on running to become state
governor; in any event his inquiry has been blocked for now by the
courts. So who will take action, on the disparities in the 2005 data?
Given preemption and inertia at the federal bank supervisory agencies,
this appears to require regulation from below. As to JPMorgan Chase, the
issues can be raised to the Office of the Comptroller of the Currency,
on Chase's proposal to buy 338 branches from the Bank of New York. Fair
Finance Watch filed such comments on April 10, as reported on Associated
Press and elsewhere. Now that Citigroup is no longer explicitly blocked
from large acquisitions by the Federal Reserve, its pent-up M&A hunger
may soon trigger the Community Reinvestment Act lending reviews that
accompany merger reviews. Wells Fargo is embroiled in fights about its
environmental record, with no reforms in sight. HSBC is buying, but in
Mexico for now. Everything is growing, including the disparities in the
data. And what of 2006, the loans being made today? More scrutiny and
enforcement actions are needed, to cut through the fogs of the banks'
excuses.
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 |
