Bank practices under scrutiny

ALBANY, N.Y. — New York Attorney General Eliot Spitzer is questioning some of the nation’s biggest banks in an investigation of potential discriminatory practices in setting mortgage rates and fees.

“We are looking at the HMDA (Home Mortgage Disclosure Act) data and other information that would help us understand how the loans are being priced and whether or not they are justified by legitimate business practices,” said Spitzer spokeswoman Juanita Scarlett.

Citigroup Inc., HSBC Holdings PLC, Wells Fargo & Co., Countrywide Financial Corp., and Norfolk Mortgage were sent letters from Spitzer regarding the companies’ loan pricing, according to a source familiar with the investigation in its “early stages.” Spitzer also seeks applicants’ credit scores, “loan-to-value ratios,” and any internal reviews by lenders into ethnic disparities of loan trends, said the source who spoke on the condition of anonymity.

Citigroup spokesman Robert Julavits said: “We briefed the (attorney general’s) office on our data last month as a courtesy, and we are working with the AG’s staff to provide follow-up information.”

“Any individual applying for a loan from Citigroup is considered using the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis,” he said. “We are a leader in making fairly priced credit more widely available and we appreciate the recognition we have received for our industry-leading best practices.

HSBC spokeswoman Kathleen Young confirmed the company received Spitzer’s request and said “we are complying.” Wells Fargo spokeswoman Julia Tunis confirmed the company received Spitzer’s letter, but said the company doesn’t comment on communications from regulators as a matter of policy.

The attorney general will be looking at contentious reports made public under HMDA, which requires financial institutions to collect information on home loans priced above comparable Treasury rates. First-lien loans must be reported if they exceed the Treasury rate by 3 percentage points, and second mortgages by 5 percentage points.

Community groups looking at the data have concluded that African Americans and Hispanics are more likely than whites to get higher cost mortgage loans. These groups also argue that minority families are much more likely than whites to be turned down for mortgages.

The industry has argued that HMDA data can be misleading because it does not take into account all the variables that a financial institution uses to price a loan, including credit scores, the quality of the home, the size of the down payment or the debt-to-income ratios of buyers.

Last year, Spitzer testified to a congressional committee against proposals that mortgage lending be regulated nationally. He argued that states should have a role in protecting consumers from predatory lenders.


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