LOUIS — The title of the new federal law that rolls
back Obama-era banking regulations includes the words
"relief" and "consumer protection."
A close look at the bill, however, suggests that banks
are the ones getting relief while consumers are losing
the new "Economic Growth, Regulatory Relief and
Consumer Protection Act," signed by President
Donald Trump on May 24, smaller banks no longer are
required to report detailed information about mortgage
change benefits a majority of U.S. banks, which no
longer will have to comply with the detailed reporting
requirements outlined in the Dodd-Frank Act of 2010.
those banks, the new law means less regulation and
fair-housing advocates — especially in cities like St.
Louis with a history of redlining and other
discriminatory lending practices — say less
information means it’ll be harder to identify problems
and push for reforms.
Dodd-Frank, which bolstered provisions of the Home
Mortgage Disclosure Act of 1975, the number of data
fields required for reporting by banks more than doubled
to include fields like interest rate information, loan
terms, credit score and age of borrower.
the new law, smaller banks with fewer than 500
closed-end loans or open-end credit lines do not have to
report the additional data fields required by
Dodd-Frank. The banks still collect the data, according
to a letter sent to Congress by the National Community
Reinvestment Coalition, but are not required to report
there are roughly 5,500 banks in the U.S., according to
Julie Stackhouse, an executive vice president at the
Federal Reserve Bank of St. Louis. Stackhouse said
roughly 20 percent of banks are still required to report
all mortgage applicant data, and those banks comprise
some of the largest mortgage lenders.
estimate that the banks that no longer have to submit
the 25 additional items; on average they make about 250
mortgages a year," Stackhouse said. "They are
small mortgage lenders. Banks that still have to report
make about 8,400 mortgages a year."
Risch, director of research at the Metropolitan St.
Louis Equal Housing and Opportunity Council (EHOC)
thinks the new regulations will cause the loss of a
significant amount of data.
that data is from banks that are smaller, have less
infrastructure and systems to get a large market share,
and perhaps are not as savvy as the larger banks in
terms of fair lending or Community Reinvestment Act
compliance," Risch said in an email. "All of
the redlining cases we’ve filed over the last eight
years is evidence that smaller regional community banks
have just as much risk for fair lending violations, if
shows that racism in banking practices is still a
this year, California-based investigative reporting
outlet Reveal took a look at Home Mortgage Disclosure
Act data and shared it with the Post-Dispatch through
the Associated Press. Reveal’s analysis found that
African-Americans who apply for conventional mortgage
loans are 2.5 times more likely to be denied than
non-Hispanic whites, controlling for loan amount, income
St. Louis and elsewhere, poor, under-served communities
are often those that are majority black because of
lingering effects of historical, racist local and
federal housing and zoning policies.
Post-Dispatch analysis of the data shows where mortgage
activity is highest and lowest in the St. Louis area.
North St. Louis has little to no mortgage activity. In
neighborhoods with broken mortgage markets, like those
in north St. Louis, more information is needed about the
mortgage loan process, not less.
new exemptions prevent community groups and the public
from seeing data, identifying patterns and making
comments on it, Risch said.
of the new law, including Sen. Claire McCaskill, D-Mo.,
point to some benefits to consumers, including financial
exploitation protection for seniors and children, free
credit freezes and unfreezes and protection for tenants
when a landlord is foreclosed on.
data-reporting part of the bill, they say, is meant to
reduce burden on smaller community banks that may not
have the resources needed to comply with the additional
data reporting, which went into effect at the beginning
of this year.
community banks on Main Street didn’t cause the
financial crash and recession, and they shouldn’t have
to bear the financial burdens as those that did,"
McCaskill said in a November release after the
legislation was introduced.
final version of the bill "fixes the overregulation
of small banks and credit unions that tied their hands
from lending to local businesses and families," she
said a release last month.
Risch doesn’t agree that less regulation means more
do think less regulation means less costs for banks, but
it’s far more likely that those cost savings will go
to the bank’s profits — not invested back into the
community through loans," Risch said.
"the investment in modifying systems to collect the
data has already been made and it is unlikely that
vendors will revert their systems back for exempted
institutions," according to a report issued by
QuestSoft Corp., a company providing automated mortgage
lending compliance software to banks. The report,
published in April, used the "most recent"
Home Mortgage Disclosure Act data.
is purportedly a way to reduce burden. However, because
the data points covered by the rule are already
collected by lenders, the burden associated with the
rule is minimal," according to the National
Community Reinvestment Coalition letter. "Further,
as with any data collection effort, the primary driver
of HMDA costs is in establishing and maintaining systems
to collect and report data, and not the costs associated
with collecting and reporting a particular data
report by QuestSoft also notes "the data also
strongly suggests opponents may be overstating the
negative effects of the HMDA portion of this
is big here
the St. Louis area, small banks, credit unions and
independent mortgage companies are receiving the most
banks will still have to submit the robust data, but
those banks aren’t necessarily receiving the most
mortgage applications in the St. Louis area, according
to Home Mortgage Disclosure Act data from 2015 and 2016.
most mortgage applications submitted to one institution
in the St. Louis area, or 8 percent, were submitted to
USA Mortgage, a division of DAS Acquisition LLC.
three large banks in St. Louis that received the most
mortgage applications out of all large banks in the area
— U.S. Bank, Stifel Bank and Trust and Wells Fargo —
accounted for about 11 percent of mortgage loan
banks may not receive as many mortgage applications from
residents in disadvantaged neighborhoods because
residents may not have prior experience or comfort
working with a large bank that’s not located in their
laws designed to address the denial of mortgages in
certain neighborhoods, a practice known as redlining,
may soon be weakened.
Community Reinvestment Act, enacted in 1977, requires a
financial institution undergo examinations to assure it
is lending in all communities it serves.
of the way the evaluations are structured and grades are
given, some banks may pass examinations despite uneven
a bank’s not getting any applications from an area
with a higher minority population, that might not
trigger their red flag for lending discrimination,"
also may avoid attempting to make loans in areas like
north St. Louis because it’s a difficult place to
close a loan, said Glenn Burleigh, community engagement
specialist for EHOC.
you going to spend time actively marketing and seeking
clients in those areas that would potentially simply
drive up the denial rate in the case of the next review,
which would then potentially be a red flag?"
memo from the Treasury Department expresses support for
reforming the law, including a provision that would
allow banks to pass exams even if the bank has fair
lending violations, Risch said.
thinks the larger solution to St. Louis’ housing
issues requires local officials to tell U.S. senators
and representatives the importance of keeping existing
regulations in place.
need business and civic leaders to step up, name the
problem and say, ‘We really need to deal with this and
we’re going to put together money for a fund to help
with mortgages,’" Burleigh said. "You can’t
solve big problems like this with just dollars."