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#1812013 - 05/08/13 03:44 AM Majority Minority Census tracts
Len S Offline
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Connecticut
We have a client who examiners say is not lending enough in Majority Minority tracts. When we evaluated the client's loan distribution we found that examiners had not given them credit for half the loans the client originated in MM tracts. We pointed this out to the client who then asked the examiners. The examiner's response was the Agency does not count Asians residing in census tracts as part of the minority population.

I have never heard of this before. In fact, it contradicts how the FFIEC calculates the minority population percent in its Census demographic files.

Does anyone know anything about any Bank Regulatory Agency excluding Asians from the minority population for Majority Minority tract determination?
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Fair Lending
#1812014 - 05/08/13 04:02 AM Re: Majority Minority Census tracts Len S
Kathleen O. Blanchard Offline

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I have not come across this. Is it in a heavily Asian area, with perhapsmaffluent Asians?

Even so, I agree it does not agree with how the FFIEC calcualtes minority population and is troubling.
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#1813453 - 05/11/13 01:57 AM Re: Majority Minority Census tracts Len S
buggs Offline
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Len, that approach is wrong. If they are analyzing census tract penetration then the race of individual borrowers in a tract is irrelevant. They are comparing apples to oranges. They should either compare individuals to individuals or tracts to tracts.

Your client should push this up to the next level at the examining agency (or to the staff economist guiding the examiners -- if there is one) if the examiner digs in his/her heels and won't come around to reality.
Last edited by buggs; 05/11/13 02:00 AM.
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#1814753 - 05/15/13 10:10 PM Re: Majority Minority Census tracts Len S
Len S Offline
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Connecticut
I have been told that the DOJ uses a definition of Majority Minority tracts that does exclude Asians and that is why the regulator is using it. I don't know why the DOJ would discriminate against Asians. In the market that is being examined Asians don't make up as big a share of the race demographics as do Blacks or Hispanics. In fact, in one census tract that is being excluded there are only 39 Asians. But it so happens that the tract was 50.76% minority. When the very small Asian population is removed the tract is no longer a Majority Minority tract. So the 49.9% minority population in that tract is being denied recognition as a Majority Minority tract because of 39 people out of more than 5,000!

So beware, you may now have to reexamine your lending patterns not just for true Majority Minority tracts, but for this new restricted definition too!
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#1814760 - 05/15/13 10:32 PM Re: Majority Minority Census tracts Len S
Kathleen O. Blanchard Offline

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Very disturbing and very strange. Also, just because DOJ does not wish to sue based upon Asians, why should that carry over to banking regulators reviewing to make sure that a bank is serving all tracts and all populations.

I find it offensive.
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#1814765 - 05/15/13 10:56 PM Re: Majority Minority Census tracts Len S
rlcarey Online
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A request for an explanation from the ombudsman might be in order.
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#1815194 - 05/16/13 11:03 PM Re: Majority Minority Census tracts Len S
buggs Offline
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We live in interesting times, my friends. Very interesting indeed.

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#1815743 - 05/20/13 03:27 PM Re: Majority Minority Census tracts Len S
InFairness, CRCM Online
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This has been happening with increasing frequency in recent years. The theory is that Asians are not the victims of discrimination, and therefore are not minorities for the purposes of redlining evaluations.
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#1815766 - 05/20/13 04:00 PM Re: Majority Minority Census tracts Len S
Len S Offline
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Connecticut
If Asians are not included in the tract population for redlining purposes, why are they included in the minority population count in the FFIEC Census database?
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#1820420 - 06/05/13 03:04 PM Re: Majority Minority Census tracts Len S
Mr. Belvedere Offline
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Even though the examiner is performing what they call a redlining exam, it sounds much more like a targeted fair lending exam. The line between exam focus has blurred in recent years.
There are a few settlements that are good examples of this shift in recent years Citizens bank (http://www.justice.gov/opa/pr/2011/May/11-crt-576.html)& Midwest BankCentre (http://www.justice.gov/opa/pr/2011/June/11-crt-784.html).
These came from a referral from the Fed, so it is not necessarily just the DOJ defining the exam approach.

Within data analysis, Asian borrowers do tend to show good access to credit. Pricing models tend to show Asian borrowers with lower pricing than White Non-Hispanic borrowers (both within discretionary pricing models and scored pricing models). This probably why they are excluding them from consideration within the review. Remember also the Nara Bank auto lending case, where Asian borrowers were the control group within the DOJ case.

Things have certainly changed within the past few years for Fair Lending examinations. Data analysis is really the key, and knowing how your institution stacks up is very necessary. How do you rate against peer institutions? What is the owner occupied percentage within each MSA you operate? Not only in MMT, but all areas? And if not with mortgage related products, what other consumer loans do you have as evidence of serving the community? These are items you should know before being in front of your examier.

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