<p>WASHINGTON-The National Community Reinvestment Coalition (NCRC) conducted a two-year study of the lending trends, based on Home Mortgage Disclosure Act (HMDA) data, in which it alleges "NCUA member lenders" fall short of efforts in community reinvestment than their financial services counterparts that are subject to the Community Reinvestment Act (CRA). The study also says that credit unions turn down minority applicants significantly more often than whites. Over the two-year period, credit unions consistently lagged behind all lenders in home purchase loans to minority and low-and moderate-income (LMI) borrowers, as well as to residents of minority and LMI neighborhoods. When NCRC expanded its study to include all single-family loans it found that CRA-covered lenders issued 32% of their loans to LMI borrowers in 2000, while credit unions issued only 24% of their loans to LMI borrowers. CUNA Chief Economist Bill Hampel said, "We agree with them. We know this is the case and we'd like to do something about it." Much of the problem for credit unions has been that throughout their history, credit unions have been restricted to serving specific occupational or associational fields of membership. Only recently have community-based charters been permitted. NAFCU does not disagree with the numbers, themselves, either. "It's as accurate as you can possibly make it given the holes that are all over the place," NAFCU Director of Research and Analysis Tun Wai said. According to Wai, several problems in the collection of HMDA data can skew the numbers. First, he said that credit unions overall approve a greater percentage of loans than banks, which can bring down the percentage of LMI loans. Additionally, institutions under $30 million in assets-which includes many credit unions-do not have to file with HMDA. For the 2000 HMDA data, 41% of credit unions-4,453 of 10,754 at year-end 1999-fell below the $30 million asset floor. Also, because credit unions are typically smaller lenders than banks or thrifts, one loan can make a large difference in the percentages. NCUA responded similarly to the study's findings, placing the blame on credit unions' statutory field of membership restrictions. But NCRC Senior Vice President of Programs David Berenbaum went one-step further and accused credit unions of "cherry picking" for borrowers. While he did not say that NCUA was in violation of the Federal Fair Housing Act, he did comment that, "It raises issues that came up ten to 15 years ago with the banks," he said, which led to the passage of CRA. He admitted that many smaller credit unions with mostly volunteer staffs are doing their best but some of the larger ones are not putting forth the same effort. "It appears that the group continues to overlook a major distinction and that is the field of membership restrictions and federal statutes which credit unions are bound," Nick Owens, special assistant to the NCUA chairman for public affairs, said. He added that many credit unions do not even provide mortgage lending services. At the same time, Owens touted the agency's record-breaking year for adding low-income areas. "We will certainly let the record of serving underserved communities in 2001 stand, as 16.1 million Americans are now eligible for credit union services who were not before NCUA streamlined the process to serve these low-income, underserved communities," he said. "Furthermore, we commend the credit unions that have taken the step forward to provide financial services to these communities. Clearly, this is an apples vs. oranges comparison." Wai agreed that in the NCRC study, "The opportunity to go into a specific area is assumed to be the same between a bank and a credit union." This is simply not the case when field of membership issues are taken into consideration, he said. Additionally, he indicated that the use of metropolitan statistical areas in the NCRC study further skewed the credit union data, because credit unions may not be serving a field of membership in the areas studied. Disparities were also apparent when divided along racial lines, according to the NCRC study. Credit unions denied African-American mortgage applicants 3.6 times more often that white applicants compared with CRA-covered lenders at twice the denial rate of blacks over whites. NCRC said these numbers "clearly cry out" for greater regulation of credit unions in this area. But, according to Hampel and others in the credit union community, NCRC used spin to make credit unions look like they are not fulfilling their social mission. In considering the discrepancy in denial rates between ethnic groups, NCRC failed to take into account that approval rates at credit unions are much higher than at other lenders, which automatically would bump up the rates. For example, Hampel said if a credit union approves 99% of non-minorities and 96% of minorities for loans the ratio would indicate that credit unions turn down four times as many minorities as non-minorities. If a bank shows an 80% approval for non-minority applicants and a 60% approval rate for minorities then the denial ratio would only be two to one. "Although the black denial rate is in fact over three times that of the white denial rate, the fact that credit union have overall lower denial rates to begin with exaggerates the difference between the two rates when relatively compared," NCUA's Office of Public and Congressional Affairs (PACA) said in an agency study of the numbers. Hampel took the same HMDA statistics that NCRC used to demonstrate that, in 1999, 73% of low-income applicants were approved by credit unions while only 49% were approved by non-credit unions. And when looking at minorities, 72% were approved by credit unions in 1999, while non-credit unions approved only 56%. He added that because institutions under $30 million in assets do not report HMDA data, many credit unions, particularly low-income and community development credit unions, are bumped out of the data gathering because they tend to be smaller institutions. The study follows a lawsuit filed by NCRC, charging NCUA with not following the Administrative Procedures Act (APA) in repealing the Community Action Plan (CAP) regulation, which would have required community chartered credit unions to provide NCUA with a business plan explaining exactly how it would serve all segments of its field of membership. Under the APA, NCUA must allow time for a public comment period. The rule also, however, permits NCUA to pass interim final rules, as it did with the CAP repeal, without prior public comment. "While some groups may believe that another regulation or rule from the federal regulator will insure quality, affordable financial services for these communities, I remain committed to the belief that removal of regulatory obstacles can accomplish even greater results in extending low-cost financial services to folks from all walks of life…It is unfortunate that the plaintiffs in this action are putting their energy and resources toward litigation, while America's credit unions continue to utilize NCUA's existing programs to serve the very communities they claim to represent. NCUA will defend its record in promoting service to the underserved and the regulatory process we follow in doing so aggressively," NCUA Chairman Dennis Dollar responded to NCRC's allegations. NCUA PACA Director Cliff Northup pointed out that since 1998, federal credit unions converting to community charters have been required to submit a business plan describing how the credit union will serve the proposed community. "CAP would have been a duplication in efforts," he explained. He also noted that NCUA has implemented a program that specifically focus on underserved communities and a low-income designation program. Of the 4,453 credit unions not required to report HMDA data, 230 had low-income designations. However, the study appears to be only indirectly related to the lawsuit. CUNA General Counsel Eric Richard commented, "It shouldn't have any impact (on the lawsuit)." He pointed out that the NCRC's lawsuit against NCUA only addressed the issue of an alleged violation of the APA in repealing the CAP. "The lawsuit is going to win on its merits," NCRC's Berenbaum said. He explained that there can be no argument that the public was denied a chance to comment on the CAP repeal. There also should not be any political ramifications on Capitol Hill, CUNA Senior Vice President of Governmental Affairs John McKechnie said. "I think the people on Capitol Hill who know the group recognize this group does not represent the mainstream of the consumer community," he said. [email protected]</p>