Banks v. Non-Banks v. Credit Unions

//Banks v. Non-Banks v. Credit Unions

Banks v. Non-Banks v. Credit Unions

Home lending to LMI borrowers and communities by banks compared to non-banks

As the federal bank agencies consider Community Reinvestment Act (CRA) reform, data on the patterns of lending to low- and moderate-income (LMI) borrowers and neighborhoods will help inform needed changes. For example, if non-banks not covered by CRA were found to be making significantly higher percentages of loans to LMI borrowers or neighborhoods than CRA-covered banks, stakeholders would want to understand the reasons and craft CRA reform proposals accordingly.

In November 2018, the Urban Institute released a report that looked at lending trends of banks compared to non-banks. They found that when the analysis considers all banks compared to all non-banks, non-banks are issuing a modestly larger percentage of loans to LMI borrowers and communities.[1]

We wanted to extend this analysis. We wanted to compare individual banks to individual credit unions and non-banks. CRA, after all, does not compare one segment of the lending industry to another segment in figuring out whether lenders are serving credit needs. Instead, it seeks to ensure that each individual bank is meeting the needs of the communities it serves. With this perspective in mind, NCRC sought to compare the individual banks to individual mortgage companies and credit unions. We wanted to see how this analysis could inform reforms to CRA.

Analysis/Key Findings
This is an overview of lending to LMI borrowers or census tracts (referred to here as LMI lending). All data is from the 2017 Home Mortgage Disclosure Act (HMDA), and includes lender types selected by the Federal Housing Finance Administration (FHFA) HMDA lender file provided by Robert Avery, project director, National Mortgage Database Program at the FHFA.

Lenders are analyzed individually to determine how many of their originated loans are LMI. Then each lender type is analyzed to determine the share of their activity that is LMI.

At its broadest setting, this analysis covers about 7.3 million loans. This includes all loans made by all lenders, for all purposes and loan types.

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