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GSEs Have a Duty to Serve the Entire Mortgage Market, CRL Says in House Hearing

Wednesday, October 25, 2017
Nikitra Bailey

WASHINGTON, D.C. – Today Nikitra Bailey, an Executive Vice President with the Center for Responsible Lending testified before the U.S. House of Representatives Subcommittee hearing entitled, “Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform.”

Bailey reviewed the secondary mortgage market’s history as it relates to low-wealth communities and consumers of color, citing past federal policies that excluded communities of color from homeownership, and its accompanying opportunity to build wealth. Bailey’s testimony today underscores how federal policy has both the duty and opportunity to expand these opportunities.

“It is imperative that the system serves the full universe of credit worthy borrows, and provide equal treatment for small lenders including community banks and credit unions that often are the only sources of mortgage credit in underserved communities across the nation. Moreover, according to CRL’s 2016 HMDA analysis, for the third straight year, mortgage lending overall has not been affected by the Ability to Repay and Qualified Mortgage rules,” Bailey said in her testimony. “Instead, lending trends show incremental increases, signaling modest growth in 2014, 2015, and again in 2016. The GSEs and FHA today have an affirmative duty to serve all markets, which incentivizes them to set prices in a way that balances risk and access….Underwriting structures determine if borrowers are credit worthy; but pricing structures determine if a credit worthy borrower can afford a mortgage.”

Citing both historical systemic policies of exclusion and the most recent data provided by the Home Mortgage Disclosure Act (HMDA), Bailey remarked how communities of color remain underserved by the conventional mortgage market and are more likely than white borrowers to receive government-backed loans.  According to 2016 HMDA figures, only 3.1 percent of conventional loans were made to African-American borrows, and only 5.8 percent were made to Hispanic white borrowers.

View Bailey’s full testimony.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Charlene Crowell at charlene.crowell@responsiblelending.org