Senate bill would diminish banks’ mortgage disclosures
WASHINGTON — Buried within Senate legislation to roll back restraints on banks is a provision that would exempt an estimated 85 percent of US banks and credit unions from public reporting requirements, raising fears that discriminatory practices by lenders could go undetected.
The data that would be exempt from reporting include the financial information of borrowers and loan applicants, along with their race and sex.
Some Democratic lawmakers, community activists, and low-income-housing advocates have raised the alarm over the bill. Removing the spotlight, they say, could allow lenders to unfairly deny loans or charge excessive interest and escape notice.
The bill would “again place low-income and borrowers of color at risk of falling prey to the same unscrupulous lending practices that helped cause the Great Recession,’’ Marc Morial, president of the National Urban League, wrote to the Senate. ‘‘We must preserve and strengthen these important protections and continue collecting the data that exposes disparities in the industry.’’
The bill would alter key elements of the Dodd-Frank law enacted to prevent a repeat of the financial crisis 10 years ago that brought the US economy to the brink of collapse. Buttressed by support from a number of Democrats, it has a strong chance of passing the Republican-led Senate. A vote is expected this week. Prospects in the GOP-dominated House are unclear.
At the Senate bill’s core is a fivefold increase, to $250 billion, in the level of assets at which banks are deemed so big and plugged into the financial system that their failure could bring severe disruption.
The change would ease rules and oversight on more than two dozen large financial companies, including BB&T Corp., Fifth Third Bankcorp, SunTrust Banks and American Express. They’re not as big as the Wall Street megabanks, but they also got taxpayer bailouts during the 2008-09 financial meltdown fueled by the housing foreclosure crisis.
Less central to the bill is the data provision. It would exempt banks and credit unions from reporting requirements if they issue fewer than 500 home mortgage loans a year. That’s an estimated 85 percent of US banks, data from the Consumer Financial Protection Bureau show.
The reporting rules come from the Home Mortgage and Disclosure Act, or HMDA. The 1975 law has become a key tool for regulators and activists to monitor mortgage lending practices.
Low-income and minority consumers and people in distressed communities are key among the groups that Democrats are looking to champion as they challenge President Trump’s policies and the GOP in 2018 elections. Support among Senate Democrats — including several from states won by Trump in 2016 — helped lift the banking bill toward passage in a rare show of bipartisanship in Congress.
All five Democrats up for reelection from those red states — Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, Joe Manchin of West Virginia, Claire McCaskill of Missouri, and Jon Tester of Montana — are among the Senate cosponsors of the banking bill, whose primary author is Republican Mike Crapo of Idaho.
Those Democrats stress say Dodd-Frank requirements need to be eased for community banks and credit unions that had no part in the reckless Wall Street practices that ignited the financial crisis. When it comes to balancing those interests against traditional Democratic constituencies, including minorities, some Democrats may bend toward local bankers.
Proponents of narrowing the scope of HMDA requirements say they unfairly affect smaller, rural banks that are trying to remain active in mortgage lending. There are a lot of banks that make a relatively small number of mortgage loans, said Michael Fratantoni, chief economist at the Mortgage Bankers Association.
‘‘Many of the folks in our industry have found this to be a very burdensome, very expensive exercise,’’ he said.
Another group, the Independent Community Bankers of America, said that under the Senate bill, community banks that have been required to collect and report HMDA data on mortgages would continue to do so.
They did that for decades ‘‘until the Consumer Financial Protection Bureau dramatically expanded reporting mandates in 2015,’’ said Camden Fine, president of the community bankers group, said in a statement on Monday.