WASHINGTON, D.C. - House Financial Service Committee Chairman Barney Frank, along with 15 members of the committee sent a letter to Government Accountability Office, calling for a comprehensive review of the current state of the federal enforcement of the Equal Credit Opportunity Act (ECOA), the Home Mortgage Disclosure Act (HMDA) and the Fair Housing Act (FHA), and other related fair lending laws. The members expressed concern over the thoroughness and effectiveness of Federal regulator’s oversight and enforcement of fair lending laws and asked the GAO to study mortgage lending as well as other types of lending such as small business and unsecured lending.
The full text of the letter as follows:
April 11, 2008
The Honorable Gene Dodaro
Acting Comptroller General of the United States
Government Accountability Office
441 G Street, NW
Washington, DC 20548
Dear Mr. Dodaro:
We request that the Government Accountability Office (GAO) conduct a comprehensive review of the current state of federal enforcement of the Equal Credit Opportunity Act (ECOA), the Home Mortgage Disclosure Act (HMDA), the Fair Housing Act (FHA), and other related laws and regulations (“Fair Lending laws”).
Vigorous federal enforcement of Fair Lending laws is essential to help ensure that lenders do not discriminate on the basis of race, gender, age or other prohibited factors in making credit decisions. However, information obtained by the House Oversight and Investigations (O&I) Subcommittee of the Financial Services Committee has raised questions about the thoroughness and effectiveness of Federal regulators’ oversight and enforcement efforts of Fair Lending laws.
We are troubled that HMDA data continue to reveal significant racial and ethnic disparities in mortgage lending, particularly in the incidence of higher-priced lending to minorities. However, because current HMDA data lack key variables involved in the underwriting process such as borrowers’ credit history, debt-to-income ratio, and loan-to-property value, we understand that HMDA data alone cannot be used to determine whether lenders are violating Fair Lending laws. For this reason, we would like the GAO to conduct an independent and comprehensive assessment of Federal regulators’ monitoring and enforcement of Fair Lending laws, including the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, Department of Justice, and Department of Housing and Urban Development, and how the shortcomings regarding the data collected might be overcome.
We request that GAO conduct a review of:
(1) The level and adequacy of resources that Federal regulatory agencies have dedicated to monitoring and enforcing of Fair Lending laws and to detecting lending discrimination in all it forms;
(2) The benefits and limitations of HMDA data as a tool for citizens and public officials to detect potential lending discrimination, as well as the extent to which the Federal regulators have leveraged HMDA data to further their oversight and enforcement efforts;
(3) The extent to which Federal regulatory agencies comply with existing examination procedures and other programs designed to identify potential violations of Fair Lending laws and the extent to which these procedures are effectively detecting lending discrimination in all its forms;
(4) The consistency and effectiveness of Federal regulatory efforts to follow-up on potential violations of Fair Lending laws through administrative means and through referrals of potential illegal activity to the Department of Justice and Department of Housing and Urban Development;
(5) The adequacy and effectiveness of the procedures and standards used by the Department of Justice and the Department of Housing and Urban Development to determine whether to pursue a referral or return the referral back to the primary Federal regulatory agencies for administrative resolution; and
(6) Whether other data collection methodologies would help in detecting and eliminating lending discrimination in all its forms.
While we understand that Federal regulators’ fair lending enforcement efforts are largely focused on mortgage lending due to the volume of such lending and the availability of HMDA data, we are also concerned about Federal regulatory efforts to monitor other types of lending, such as small business lending and unsecured lending (credit cards). Therefore, we also request that GAO include in its analysis other types of lending as appropriate. Given the scope of this request and the number of regulatory agencies involved, we also understand that GAO may need to initiate one or more reviews to fully address the issues involved as appropriate.
Sincerely,
BARNEY FRANK MELVIN L. WATT
MAXINE WATERS CAROLYN B. MALONEY
LUIS V. GUTIERREZ GREGORY W.MEEKS
MICHAEL E. CAPUANO RUBEN HINOJOSA
CAROLYN McCARTHY JOE BACA
AL GREEN EMANUEL CLEAVER
GWEN MOORE PAUL W. HODES
KEITH ELLISON ANDRE CARSON
