Citi among banks ignores data on home loan race – depriving researchers of both positive and negative trends

The importance of the data, collected under the Home Mortgage Disclosure Act, is further reflected in the fact that, just in the past year, it has been approved by the Consumer Financial Protection Bureau, Federal Financial Institutions Investigation, Office of Citation. of the Comptroller of the Currency, among others.

The problem is that more than 12% of borrowers do not voluntarily provide the information required by law, and 90% of loans sold to third parties have the resulting data stripped. That’s the opinion of the National Community Reinvestment Alliance, a nonprofit organization that researches issues surrounding socioeconomics and race.

“The impact is profound,” according to the NCRC report published today, “because these gaps hinder our ability to understand who is receiving loans and on what terms, which is critical to assessing fairness and comprehensiveness. ”

To help address this problem, NCRC today pledges to never reuse any data that does not include racial demographic information. “Starting with this report, NCRC is eliminating records without demographic data from our calculations of the percentage of loans made to specific races,” the researchers wrote.

NCRC and others say the missing data is largely due to gaps in HMDA. Passed in 1975 to help ensure a more equitable distribution of loans, the HMDA rule requires in-person and telephone applicants to provide demographic data. But online applicants can refuse.

“In the past, it was assumed that people who chose not to select race were typically white,” Richardson said. “However, in this paper, we demonstrate that data-blind loans may reflect racial diversity more accurately than previously thought. So, the right approach is to exclude these loans.”

Exacerbating data inaccuracies, third-party loan buyers do not need to track demographic information at all. According to report co-author and NCRC senior researcher Jason Richardson, in a conversation with 7 of the top 10 loan purchasers from last year used a vulnerability that allowed them to delete data borrower demographics regarding the mortgages they purchased. Luck.

“A few years ago, it was rare for lenders to buy loans and strip out demographic data, but Citibank pioneered this practice,” Richardson said. “Now, many debt lenders have taken advantage of this loophole.” Citi did not respond to a request for comment.

Sure, many lenders’ biases may be hiding behind this data black hole, but some of the more positive trends are also obscured.

The NCRC report found “possibly indicative of a historic point” that Hispanic home lending — 16.5% of all home purchases last year — was roughly the same rate. their prevalence in the US adult population. Black borrowers also saw their loan rates improve, although not at the same rate as the general population.

Unfortunately, these seemingly positive trends are difficult to confirm because the data are incomplete.

“We urgently need more comprehensive data on community and small business investment to develop effective policies that mitigate the harsh realities of redistribution,” according to the report.

Of course, any increase in data collection on borrowers comes with the risk of invasion of privacy. Although CFPB speak there is “low, if any, privacy risk” in HMDA, 2017 report report by economist Anthony Yezer expressed concern that such data collection could lead to widespread privacy violations.

That is something the NCRC pays little attention to. “The enormous benefits of collecting detailed data, including income, race, sexual orientation, and gender identity, would certainly outweigh any concerns about burden or privacy,” the authors write. private”. “It is imperative that efforts to limit the collection of this essential data be recognized as not only misguided but also detrimental to the health and well-being of our communities.”