Fair Finance Watch: Subprime Racial Disparities Grew Worse in 2007 at JPMorgan Chase, Bank of America, Citigroup, WaMu, Other Large Banks and Countrywide

NEW YORK, Apr 07, 2008 (ASCRIBE NEWS via COMTEX) -- -- In the first study of the just-released 2007 mortgage lending data, watchdog 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 findings call into question the use of JPMorgan Chase to bail out Bear Stearns, and Bank of America's proposal to acquire Countrywide Financial. 2007 is the fourth year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of 3 percent over the yield on Treasury securities of comparable duration on first lien loans, 5 percent on subordinate liens.

JPMorgan Chase in 2007 confined African Americans to higher-cost loans above this rate spread 2.44 times more frequently than whites, according to Fair Finance Watch. Chase's disparity to Latinos was 1.60. The percentage of Chase's loans which were over the rate spread actually went up from 2006 (19.28 percent) to 2007 (20.96).

In its headquarters Metropolitan Statistical Area (MSA) of New York City, Chase confined African Americans to higher-cost loans above the rate spread 2.92 times more frequently than whites. Chase's disparity to Latinos was 2.50.

In the New Orleans MSA Chase confined African Americans to higher-cost loans above the rate spread 2.25 times more frequently than whites. It denied over 50 percent of mortgage applications from African Americans. Meanwhile the Federal Reserve is bending if not breaking applicable law to allow Chase to acquire Bear Stearns and bail it out from its speculative involvement in predatory lending.

"These disparities in Chase's lending must be considered and acted on," said Matthew Lee, the general counsel of Fair Finance Watch and executive director of its affiliate, Inner City Press. "Particularly in New Orleans in the wake of Hurricane Katrina, Chase's denying of 50 percent of applications from African Americans requires an investigation, including Chase and other large banks on the Gulf Coast."

Bank of America in 2007 confined African Americans to higher-cost loans 1.88 times more frequently than whites, and denied the applications of Latinos 1.62 times more frequently than whites. Meanwhile, the large and troubled Countrywide Financial, which Bank of America has applied to buy, confined African Americans to higher-cost loans 1.95 times more frequently than whites, and denied the applications of Latinos 1.53 times more frequently than whites.

The U.S. Federal Reserve Board, while still trying to avoid any public comments on or review of the controversial Bear Stearns - JPMorgan Chase bail-out, has agreed to hold public hearings on Bank of America's Countrywide application, in Los Angeles on April 22 and in Chicago on April 29. Inner City Press and Fair Finance Watch had requested the public hearings, and in preparation are submitting to the Federal Reserve that Countrywide in the Los Angeles MSA in 2007 confined 18.91 percent of its African American borrowers to higher cost loans over the rate spread. Countrywide in the Chicago MSA in 2007 confined African Americans to higher-cost loans 1.93 times more frequently than whites, while confining Latinos to higher-cost loans 1.35 times more frequently than whites.

"Given Countrywide's disparities and its ongoing foreclosure practices, the Federal Reserve should not allow Bank of America to acquire it has proposed," Lee said. "The golden parachutes are just a form of impunity."

Citigroup in 2007 confined African Americans to higher-cost loans above this rate spread 2.33 times more frequently than whites. Fully 109,511 of Citigroup's 448,542 mortgages in 2007, or 24.41 percent, were high cost loans over the rate spread.

In its headquarters Metropolitan Statistical Area of New York City, Citigroup was even more disparate, confining African Americans to higher-cost loans above the rate spread 2.61 times more frequently than whites. Citigroup's disparity to Latinos was 1.90.

Citigroup was most disparate in home purchase loans, confining African Americans to higher-cost home purchase loans above the rate spread 3.41 times more frequently than whites. Citigroup's disparity to Latinos was 1.76. Citigroup has acquired Argent, an affiliate of Ameriquest which, like Citigroup, has settled governmental charges of predatory lending.

"How the 2007 data of defunct lenders like Ameriquest, New Century, American Home Mortgage and others is being reported is not clear," Lee said. "The regulators have a duty to make sure those loans are reported, particularly by those still buying predatory lenders, such as Citigroup, HSBC, Merrill Lynch and Deutsche Bank."

At Wachovia, the nation's fourth largest bank, Latinos in 2007 were confined to high cost loans 1.71 times more frequently than whites.

Washington Mutual, the nation's largest savings bank, in 2007 confined African Americans to higher-cost loans above this rate spread 2.05 times more frequently than whites. Fully of 54,914 WaMu's 261,476 mortgages in 2007, or 21 percent, were high cost loans over the rate spread.

Royal Bank of Scotland, one of the largest banks in the world, through its U.S. subsidiaries in 2007 confined African Americans to higher-cost loans above the rate spread 1.76 times more frequently than whites. It denied over 66 percent of mortgage applications from African Americans, and over 62 percent of applications from Latinos.

National City, often rumored to be up for sale after unloading its subprime unit First Franklin to Merrill Lynch, in 2007 confined African Americans to higher-cost loans above the rate spread 1.77 times more frequently than whites. National City's disparity to Latinos was 1.73. Fully 25,012 of National City's 246,138 mortgages in 2007, or 10.16 percent, were high cost loans over the rate spread.

Keycorp, based in foreclosure-ridden Cleveland like National City, and also rumored to be up for sale, in 2007 confined African Americans to higher-cost loans above the rate spread fully 2.2 times more frequently than whites.

Suntrust in 2007 confined African Americans to higher-cost loans 2.51 times more frequently than whites, and denied the applications of African Americans 2.34 times more frequently than whites. Fully 15,435 of Suntrust's 2007 loans were high cost loans over the rate spread.

U.S. Bancorp continued to make 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 provided data at the March 31 deadline -- and then wrote to say the data was inaccurate and the corrected data would be provided on April 5 (it was not). Fair Finance Watch is still waiting for the 2007 data from HSBC, GE and others, and will be analyzing it upon receipt. Regions Financial, in a new low, provided its data at the deadline but only in paper format, on over 2000 pages, so that it could not yet be computer-analyzed. Lehman Brothers provided only a PDF file of over 6000 pages, to avoid any analysis of disparities.

"Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders, including as these are formally raised to them in timely comments on merger applications, such as that of Bank of America to acquire Countrywide, and the needed review of JPM Chase - Bear Stearns," concluded ICP's executive director Matthew Lee.

Methodology and scope of review: ICP Fair Finance Watch reviewed, using the SPSS program (Statistical Package for the Social Sciences), Countrywide Financial's 3,517,321 loan mortgage application records for 2007, 912,814 of which were originated loans, 157,409 (or 17.24 percent) of these over the rate spread. JPM Chase reported 989,683 loan mortgage application records for 2007. Citigroup in 2007 reported 1,540,325 loan application records; Wachovia reported 737,875 records. US Bancorp reported 313,908 records, including 19,206 high cost loans over the rate spread. Suntrust reported 395,188 records, including 15,435 high cost loans over the rate spread. Washington Mutual, the nation's largest saving bank, in 2007 reported 643,765 mortgage records, including 54,014 high cost loans over the rate spread.

Further information is available on

www.innercitypress.org/2007hmda1.html

Fair Finance Watch and Inner City Press will be pursuing and updating these issues -- for further information call 718-716-3540 or email MLee@innercitypress.org.

Fair Finance Watch works along with its affiliate Inner City Press to increase accountability by financial institutions, on matters of fair lending and community reinvestment, and human rights more broadly. For background on these issues, see the book, "Predatory Bender: Toxic Credit in the Global Inner City." The book is available on Amazon, BarnesAndNoble.com and elsewhere, on - and off-line, ISBN 0-9740244-1-4, 456 pages. FFW's new book, addressing global issues and the links between the banking industry and a range of destructive businesses, is forthcoming.

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