Fair Lending And Insurance Are Related!
For more than two years, banks have given intense attention to fair lending. The increased intensity of the fair lending examination and the development of improved examination techniques played no small role in causing this focus of attention. To ensure fair lending, banks have developed and conducted training programs for their staff, developed and used a variety of self-assessment tools, and reviewed and redeveloped their lending policies and procedures. Most importantly, they have used the techniques of CRA to identify minority credit needs, design products to meet them, and market the products. As a result of these efforts, HMDA data shows a marked increase in lending to minorities, and in particular, to African Americans. Banks are out in front with their efforts - but they may also be alone. Recent investigations indicate that other participants in the real estate financing industry may not be making equal efforts.
Now, thanks to HUD, there is evidence that property insurers may be violating the Fair Housing Act in two ways: by refusing to insure property in certain neighborhoods at rates comparable to those charged in other neighborhoods, and by discouraging or refusing to deal with customers who are minorities or who own property in minority neighborhoods.
These results, when added to the allegations of the US Department of Justice filed against American Family Mutual Insurance Company, validate statements long made by banks that their willingness and ability to lend in minority neighborhoods is limited by the borrower's ability to obtain property insurance.
For too long, banks have been the primary or exclusive focus of fair lending enforcement. It is time to stop being passive about these laws and to aggressively take credit for positive actions. The fact is, banks are making a difference in their communities. Not all participants in real estate finance can make the same claim. Banks have long and accurately pointed out that real estate finance is a complex process involving many parties. Banks can't make loans without the participation of appraisers, credit reporters, insurers, the secondary market -- and others.
Right now, the banking industry is fighting for expanded insurance powers -- and losing this battle to the insurance industry. Something is wrong when an industry that may be refusing to provide services to minority customers and in minority neighborhoods is protected by Congress at the expense of the industry that has made such significant progress.
It is time for banks to stand up for their industry. Why should Congress protect the insurance industry when it may be part of the problem? Why should significant regulatory burden relief be at the price of the banking industry's development?
Bankers need to be counted -- all of them. Let your Congressmen and Senators know how you feel about regulatory burden and expanded powers. And make sure they count all of your bank's employees -- not just the bank. Ask for fair treatment for your industry! And most important, tell your story positively. Sometimes a success story makes good press.
Copyright © 1995 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 1, 11/95
First published on 11/01/1995