Western Independent Banker - January/February 2008 - (Page 28) Federal and state Fair Housing Laws, and in 1989, the Home Mortgage Disclosure Act (HMDA) a complete regulatory scheme was developed aimed at opening credit markets for groups of people who were traditionally shut out. While many economists and essayists have argued over the effectiveness of the regulatory scheme, the facts remain that vast numbers of communities still lack access to the credit markets. Over the years, there have been various studies performed that have determined that women and racial minorities have limited access to credit markets. This is especially true in the housing markets.5 Equal Credit Opportunity Doesn’t Mean Sub-Standard or Sub Prime Over the years, compliance with Fair Housing and Equal Credit Opportunity laws has come to be associated with substandard or marginal credit. However, this view truly misapprehends the intent of the regulations. The goal of the Fair Housing and Equal Credit opportunity laws was to prod financial institutions to consider markets that had been unfairly or unreasonably overlooked. Within most economically depressed communities exists the opportunity for profitable, solid credit facilities. Unfortunately, many of these potential borrowers get painted with the broad brush of “sub-standard” or “sub-prime” borrowers. The ECOA, CRA and Fair Housing Act by themselves can really do little towards reaching the goal of opening credit markets to the traditionally under banked. It is the spirit of these laws that must be embraced by lenders as we go forward. Embracing the spirit of the ECOA, CRA and Fair Lending Laws would entail little cost and a moderate amount of time. Developing credit products that truly address the needs of traditionally under banked communities only requires the will to do so. In summary, without financial institution’s willingness to address the need for credit in the communities sought to be protected by the ECOA, the CRA and Fair lending laws, it is only a matter of time before we are asking all over again … “How could this happen?” James DeFrantz is senior auditor for Bank Vision Inc. in Hayward, Calif. He can be reached at JDeFrantz@aol.com. “Senate Democrats Call for Home Loan Bailouts” International Herald Tribune April 12, 2007. 2 “Why we shouldn’t be bailing out subprime lenders or borrowers” San Francisco Chronicle April 22, 2007. 3 Ibid. 4 “Minorities depend on subprime loans” USA Today, March 16, 2005. 5 Opening the Book on Lending Discrimination, Multinational Monitor, November 1992. 1 28 Westernpromo3.indd 1 www.wib.org Western Independent Banker 12/17/07 1:53:54 PM http://www.wib.org http://www.wib.org
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