Updated April 27, 2005 - See El
Diario editorial, on HITN.tv
4/28, Crain's 5/2
Predatory Lending in the Big Apple: Citigroup
Confines African Americans in New York to Higher Cost Loans Over Seven Times More
Frequently Than Whites, Over Three Times for Latinos; Wells Fargo Is Nearly as Disparate
by Matthew Lee of Inner City
Press / Fair Finance Watch
April 27 -- The nation’s two largest banks,
Citigroup and JP Morgan Chase, both disproportionately confine people of color to higher
cost loans in their headquarters city, the first local study of the 2004 mortgage data
shows. Citigroup’s record also includes
over 800 super-high cost loans of a type it said it stopped in 2003. Inner City Press /
Fair Finance Watch has reviewed, now for the New York City Metropolitan Statistical Area,
the 2004 Home Mortgage Disclosure Act data of Citigroup and four other major lenders,
including the new information concerning which loans are subject to a rate spread (3%
higher than comparable Treasuries on a first lien, and 5% on a subordinated lien), and has
found the following:
At Citigroup for all type of mortgage loans in the NYC MSA in 2004, African
Americans borrowers were more than seven times more likely to receive a rate spread loan
than white borrowers.
Meanwhile, Citigroup denied the applications of African Americans 2.67 times more
frequently than those of whites.
Latino borrowers were 3.92 times more likely to receive a rate spread loan from
Citigroup than were white borrowers, and Citigroup
denied the applications of Latinos 2.35 times more frequently than those of whites.
Nearly as disparate in 2004 in the NYC MSA was Wells Fargo, a major nationwide
mortgage lender. At Wells Fargo, African Americans borrowers were more than six times more
likely to receive a rate spread loan than white borrowers. Meanwhile, Wells Fargo denied the applications of
African Americans 2.09 times more frequently than those of whites. Wells Fargo’s rate spread disparity for
Latinos was 2.25; Wells denied the applications of Latinos 1.96 times more frequently than
those of whites. In terms of Wells Fargo’s mortgage servicing, FFW has received more
and more complaints, including about Wells’ stealth America’s Servicing Company
unit. Wells Fargo is also a major funder of payday lenders, including targeters of
military personnel such as Armed Forces Loans, Inc.. ICP has raised this directly to Wells
Fargo, and to the Federal Reserve on Wells
Fargo’s proposal to acquire First Community Capital Corp., which was announced
back on September 2, was challenged by ICP on November 1, and which still remains pending,
nearly six months later.
ICP also reviewed the NYC MSA lending of Washington Mutual, HSBC / Household, and
JP Morgan Chase.
At Washington Mutual, African Americans borrowers were 3.68 times more likely to
receive a rate spread loan than white borrowers. Washington
Mutual denied the applications of African Americans 1.51 times more frequently than those
of whites. Washington Mutual’s rate spread
disparity for Latinos was 3.09; Washington Mutual denied the applications of Latinos 1.33
times more frequently than those of whites. Nationwide, Washington Mutual imposed
higher-cost rate spread loans 3.26 times more frequently on African Americans than on
whites.
At HSBC (including the Household International units it acquired in 2003), African
Americans borrowers were 2.25 times more likely to receive a rate spread loan than white
borrowers. HSBC
denied the applications of African Americans 1.53 times more frequently than those of
whites. HSBC’s rate spread disparity for
Latinos was 1.72; HSBC denied the applications of Latinos 1.41 times more frequently than
those of whites. Of the lenders reviewed, HSBC had the highest percentage of its loans to
African Americans being higher cost rate spread loans: over 18 percent.
At JP Morgan Chase, African Americans borrowers were 2.89 times more likely to
receive a rate spread loan than white borrowers. JP
Morgan Chase denied the applications of African Americans 1.52 times more frequently than
those of whites.
J.P. Morgan Chase is a major funder of payday and car title lenders, as ICP has
previously documented. See, e.g., the Columbus
Dispatch of April 15, 2004, “Group Opposes Bank One Sale: Business with Predatory
Lenders a Concern,” in which the bank’s spokesman confirmed his
“aware[ness] of concerns about the type of businesses that Inner
City Press cited.” No changes, however, have been announced by the bank from
last April to this. J.P. Morgan Chase is, like HSBC, a major purveyor of tax Refund
Anticipation Loans and other high-cost fringe financial services products. JP Morgan
Chase’s rate spread disparity for Latinos was 2.05; JP Morgan Chase denied the
applications of Latinos 1.28 times more frequently than those of whites.
These over two-to-one disparities are troubling -- but they cast Citigroup’s
seven-to-one targeting disparity for African Americans, and over twenty-to-one disparity
for Latinos into starker contrast. The
nation’s largest bank is also its most disparate, when it come to confining people of
color to higher-cost home purchase loans.
ICP’s study of the 2004 data has shown that Citigroup has violated a pledge it
made publicly, including in connection with the Federal Reserve Board’s predatory
lending fine against CitiFinancial in May 2004, that it had stopped, from January 2003
onward, making loans covered by the Home Ownership and Equity Protection Act of 1994
(eight full percent over Treasuries on a first lien mortgage, ten percent over Treasuries
on a subordinate lien). But in the 2004 data,
ICP has found that Citigroup reported fully 837 HOEPA loans.
ICP raised this to Citigroup’s senior management at the April 19
shareholders’ meeting at Carnegie Hall in Manhattan. Neither Citigroup chairman Sandy
Weill nor CEO Charles Prince would directly answer the question. Citigroup chief operating
officer Robert Willumstad directly denied that Citigroup had reported HOEPA loans in its
2004 data.
After Mr. Willumstad’s public denial, two Citigroup staffers summoned
ICP’s director out into the lobby. They acknowledged that hundreds of loans in
Citigroup’s 2004 data are covered by HOEPA. They put the number of Citigroup-reported
HOEPA loans in 2004 at 797. Further inquiry by ICP has found this breakdown: 611 HOEPA
loans by “Associates International Holding Company;” 29 HOEPA loans by Citicorp
Trust Bank fsb (fka Travelers Bank & Trust); 180 HOEPA loans by Washington Mutual
Finance (now CitiFinancial); and 17 HOEPA loans by CitiFinancial Services of Puerto Rico.
This violates both the letter and spirit of Citigroup’s statements that it had
stopped making loans covered by HOEPA in January 2003. This statement appears, among other
places, on Citigroup’s web site -- in a May 27, 2004 Memo at www.citigroup.com/citigroup/citizen/consumerfinance/040527a.htm
and a list of what Citi doesn’t do, at www.citigroup.com/citigroup/citizen/consumerfinance/index.htm#doesnot
In Citigroup’s 2004 data there are HOEPA loans reported as CitiFinancial, in
29 states as well as Puerto Rico, and it is not at all clear that these were all acquired
among with the subprime lender “Easy Money,” which Citigroup acquired in 2004. Latin Finance magazine of July 2002 reported that
“Willumstad will now have an oversight role in Citigroup's operations both in Mexico
and Puerto Rico. Willumstad, president of Citigroup and Chairman and CEO of the company's
global consumer group, will run credit cards, consumer finance and retail branch
banking.” The American Banker newspaper
of June 12, 2004, was even clearer: “Mr. Willumstad, 56, also assumes full
responsibility for Citi's activities in Mexico and Puerto Rico.”
Simply put, Citigroup to the highest levels has violated and evaded its so-called
best practices and anti-predatory lending commitments. Even when the issue is raised and
documented with Citigroup’s own data, Citigroup denies it, from the stage of Carnegie
Hall no less, and then keeps on denying. Citigroup
is in denial. Given Citigroup’s many statements that it was integrating and reforming
Associates First Capital Corporation, that its defense now is that it could continue
making HOEPA loans as long as it kept subsidiaries with the old Associates name is
disingenuous and troubling.
Inner City Press has also studied the borough by borough lending of the two New
York City titans (and the two largest banks in the United States), Citigroup and JP Morgan
Chase, along with HSBC and Wells Fargo, comparing each of the five boroughs and suburban
Westchester, Nassau and Suffolk Counties in New York and two counties in New Jersey. All
four lenders had their highest percentages of rate spread loans in The Bronx: over six
percent of Citigroup’s Bronx loans were rate spread, while the percentage was 5.44 at
Chase. This compares to only 2.95% of Citigroup’s loans in suburban Westchester being
rate spread; Chase’s Westchester percentage was 2.05.
At Citigroup, 4.61% of loans in Brooklyn were rate spread; 3.59% at Chase. The
percentages in Manhattan were below one percent for both banks: 0.07614% at Citigroup, and
0.13988 at Chase. Thus, at Citigroup Bronx residents are
over seventy-nine times more likely to get higher cost rate spread loans than are
residents of more affluent Manhattan; at JP Morgan Chase the ratio is the lower but still
disparate 38.9 to one.
At HSBC, fully 14% of Bronx loans were rate spread, compared to one percent in
Manhattan, 5.21% in Westchester, 6.36 in Queens and 7.26% in Brooklyn. In New Jersey,
11.51% of HSBC’s Bergen County loans were rate spread. At Wells Fargo, while only
0.55% of Manhattan loans were rate spread, the figure rose to 6.89 in The Bronx, Wells
Fargo’s highest percentage in all the counties studied.
In New Jersey, 4.16% of Wells Fargo’s loans in Hudson County were higher cost,
rate spread loans.
Inner City Press has requested numerous other local lenders’ data, with an eye
to including it in this first NYC area study of the new HMDA data. But several lenders
have sought to evade public scrutiny. New York Community Bancorp has claimed that it only
has to provide its data in paper format, in which it can be viewed but not analyzed.
Greenpoint, which North Fork Bancorporation purchased last year, has provided its data
only in a word processing program, in which it cannot be analyzed. Likewise MBNA and AIG
provided data in less than useful formats. Fair Finance Watch has now filed complaints on
these and other banks with the federal regulators; see, e.g., American Banker newspaper of
April 13, 2005, “Open Access? It Depends on Who's Asking,” reporting that
“a different hurdle was put up by New Century Financial Corp., which told Mr. Lee it
would send him its data only if he agreed in writing not to ‘identify New Century's
customers and thereby violate New Century's obligations regarding the confidentiality of
its customers' data.’ In an April 8 letter to Mr. Lee, New Century's fair-lending
officer, Pam Cirinelli, cited the Gramm-Leach-Bliley Act and "state laws imposing
similar or greater confidentiality, security, and privacy obligations." She told him
New Century could send the data either as 8,400 pages of hard copy or through a secure Web
site. Mr. Lee said he has spoken with many smaller lenders who are handling their first
such public requests and are understandably having problems.” ICP is studying and/or still awaiting the data of
smaller banks and non-bank lenders such as Ameriquest, Option One, and New York-based
Delta Funding, which previously settled state and federal charges of predatory lending
(and, perhaps not surprisingly, has provided its data in PDF, in which it can be viewed
but not yet cumulated or analyzed).
Methodology, Scope
of Review and Results
ICP Fair Finance Watch reviewed the mortgage records, in the NYC MSA (the
five boroughs of NYC plus other surrounding counties: Westchester, Putnam and Rockland,
and Bergan, Passaic and Hudson in New Jersey), of the following consolidated
conglomerates:
Citigroup - click here for ICP's weekly CitiWatch report
Whites: 10,135 originations of which 218 (or 2.15%) were at rate
spread
African Americans: 1796 originations of which 300 (or 16.7%) were at
rate spread (7.77 times higher / more likely to be rate spread than whites)
Latinos: 1592 originations of which 134 (or 8.42%) at rate spread
(3.92 times higher / more likely to be rate spread than whites)
Wells Fargo - click here for ICP's weekly WellsWatch report
Whites: 11,028 originations of which 218 (or 1.98%) were at rate
spread
African Americans: 1756 originations of which 224 (or 12.76%) were at
rate spread (6.44 times higher / more likely to be rate spread than whites)
Latinos: 1664 originations of which 74 (or 4.45%) at rate spread
(2.25 times higher / more likely to be rate spread than whites)
Washington Mutual
Whites: 12,951 originations of which 256 (or 1.98%) were at rate
spread
African Americans: 2498 originations of which 182 (or 7.29%) were at
rate spread (3.68 times higher / more likely to be rate spread than whites)
Latinos: 2717 originations of which 166 (or 6.11%) at rate spread
(3.09 times higher / more likely to be rate spread than whites)
HSBC (including HSBC Bank, HSBC Mortgage, HFC,
Beneficial and Decision One)
Whites: 4992 originations of which 402 (or 8.05%) were at rate spread
African Americans: 1850 originations of which 335 (or 18.1%) were at
rate spread (2.25 times higher / more likely to be rate spread than whites)
Latinos: 1241 originations of which 172 (or 13.86%) at rate spread
(1.72 times higher / more likely to be rate spread than whites)
JP Morgan Chase - click here for ICP's JPMChaseWatch report
Whites: 10,328 originations of which 252 (or 2.44%) were at rate
spread
African Americans: 1814 originations of which 128 (or 7.06%) were at
rate spread (2.89 times higher / more likely to be rate spread than whites)
Latinos: 1810 originations of which 90 (or 5.0%) at rate spread (2.05
times higher / more likely to be rate spread than whites). Again, J.P. Morgan Chase is a
major funder of payday and car title lenders, as ICP has previously documented. See, e.g., the Columbus Dispatch of April 15, 2004,
“Group Opposes Bank One Sale: Business with Predatory Lenders a Concern,” in
which the bank’s spokesman confirmed his “aware[ness] of concerns about the type
of businesses that Inner City Press cited.” No changes,
however, have been announced by the bank from last April to this. J.P. Morgan Chase is,
like HSBC, a major purveyor of tax Refund Anticipation Loans and other high-cost fringe
financial services products.
The ICP Fair Finance Watch is on the case, for now
analyzing the 2004 mortgage data of other lenders, and in other markets, as it comes in.
Definitional note (from FDIC.gov) --
"Lenders must report for certain loans the rate spread between a loan's annual
percentage rate (APR) and the yield on Treasury securities with a comparable maturity when
the spread is equal to or greater than three percent for loans secured by a first lien on
a dwelling and five percent if secured by a subordinate lien."
ICP's other studies of the 2004 HMDA data: first second third
Some coverage: AP
re ICP's first study CBS
MarketWatch re second
ICP's book on these topics, "Predatory Bender"
CL
Review order / Amazon
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