Data sought on loans to low-income areas

Community groups, Schumer say greater detail would help show suspect bank practices.

Friday, March 8, 2002
By Mark Libbon
Washington bureau

Washington - A Syracuse community group wants the federal government to help identify so-called "predatory lenders" by requiring more public information about loans that are made in low-income neighborhoods.

Syracuse United Neighbors is taking part in a campaign to reform federal rules that help monitor lending practices. SUN was one of 10 community groups from across the country to attend a news conference Wednesday to encourage the reforms.

SUN and other groups are concerned about the rise of "subprime lenders," which offer home mortgage and improvement loans to people with flawed credit histories. Those subprime loans often come with higher interest rates and fees.

To support its case, SUN cited an analysis of loans made in 2000 by M&T Mortgage Corp., which it called the "subprime affiliate" of M&T Bank. SUN cited statistics suggesting that M&T Bank steered customers in Syracuse's low- and moderate-income neighborhoods toward its subprime affiliate and, therefore, forced them to pay higher interest rates and fees.

Buffalo-based M&T challenged the analysis, denying the premise that M&T Mortgage can be described as a subprime lender.

"M&T Mortgage Corp. is not a subprime lender; therefore, their data is inaccurate and is not representative of M&T's lending performance," the bank said in a statement released by spokeswoman Tara Ellis.

The National Training and Information Center in Chicago, which organized the campaign for reforming the regulations, pointed to a mortgage industry publication as its source for listing M&T Mortgage as a subprime lender.

The community groups insist that better information would help identify the predatory practices that are associated with some lenders in the subprime industry: misleading marketing, unnecessary fees and prepayment penalties.

Sen. Charles Schumer, D-N.Y., attended the news conference in the Capitol to endorse the need for reforms to the Community Reinvestment Act. That 1977 law outlawed "redlining," the practice of refusing to issue loans within certain neighborhoods, and set up a system to examine each bank's record of making loans.

"We all know one of the biggest obstacles to community development is predatory lending," Schumer said. Those lenders "weasel around the law" and prey on people who work hard, save money and play by the rules, he said.

The community groups, such as SUN, want federal agencies to require that lenders disclose the interest rate, fees and points offered on each loan. That information, they said, would help detect patterns of lenders relying on higher-cost affiliates to serve lower-income neighborhoods.

The groups also want the federal review of lending practices to look for evidence of discrimination. And they say they believe the Community Reinvestment Act ratings are too lenient, giving "satisfactory" and "outstanding" ratings to too many lenders.