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Racial Disparities Grew Worse in 2005 at Citigroup, HSBC and Other Large Banks -Inner City Press

   New York, April 10 -- In the first study of the just-released 2005 mortgage lending data, the watchdog and technical assistance organization Fair Finance Watch has identified worsening disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. The trend raises concerns for regulators: 2005 is the second year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

            Citigroup in 2005, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread over seven times more frequently than whites, according to Fair Finance Watch, more disparate than in 2004.

            "Predatory lending has grown and not diminished, at Citigroup and other companies," the study by Fair Finance Watch opines. "The disparities in this new data, at the nation's largest bank and on down the line, call out for immediate action by the public and private sectors, from governmental enforcement agencies and private attorneys general to grassroots consumers and community groups. Despite corporate claims of best practices, the problem is just getting worse."

            Redlining and continued disproportional denials to people of color are also sketched by FFW's report on the new 2005 data. Nationwide for conventional, first-lien home purchase loans, Citigroup denied the applications of African Americans 2.69 times more frequently than those of whites, and denied the applications of Latinos 2.02 times more frequently than whites, both disparities worse even than in 2004. Bank of America in 2005 was more disparate to Latinos, denying their applications 2.38 times more frequently than whites, and denying African Americans 2.27 times more frequently than whites.

            While experts note that comprehensive income comparisons will not be possible until the aggregate data is released in September, Fair Finance Watch and what it calls its academic support team have designed a way to consider income correlations, by calculating upper and lower income tranches based on each lenders own customers. Nationwide at JP Morgan Chase for conventional first-lien loans, upper income African Americans were confined to higher cost loans over the rate spread 3.34 times more frequently than whites. Fair Finance Watch in an addendum states that this will be raised to the regulators that must consider JP Morgan Chase's proposal, announced on April 8, to buy branches and $15 billion in deposits from Bank of New York.

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   At Citigroup for conventional first-lien loans nationwide, 37.73% of upper income African Americans were confined to higher cost loans over the rate spread, versus only 11.46% of upper income whites. According to Fair Finance Watch's study, income does not explain the disparities at Citigroup. Nor at HSBC, where less than half of upper income white borrowers were confined to rate spread loans, versus 61.87% of upper income African Americans and an even higher percentage of Latinos, 62.82%.

        HSBC, which bought Household International in 2002 just after its predatory lending settlement with state attorneys general for $484 million, has increased the interest rates changed by its former Household units. Over eighty percent of HSBC's home purchase loans to African Americans and Latinos were higher-cost loans over the rate spread, much higher than in 2004 at these ex-Household units. In Buffalo, HSBC's long-time headquarters, HSBC in 2005 confined African Americans to higher cost rate spread loans 2.15 times more frequently than whites. 

            In 2005, HSBC made over five thousand super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities.  Wells Fargo made 795 HOEPA loans in 2005. Keycorp, which according to the report had said it had discontinued HOEPA loans, made 755 such loans in 2005.

            "We've heard a lot of excuses," the Fair Finance Watch report states. "Various lenders told us in advance to expect a surprising rise in high cost loans in the 2005 data due, they said, to the yield curve. But the disparities in pricing by race and ethnicity have also grown worse in 2005, and no yield curve can explain or excuse that."

            Using its method of analyzing income correlations, by calculating upper and lower income tranches based on each lenders own customers, the Fair Finance Watch report has found that nationwide at Royal Bank of Scotland's U.S. units, upper income African Americans were confined to higher cost loans over the rate spread 4.01 times more frequently than whites. And at Washington Mutual and its higher-cost affiliate, Long Beach Mortgage, upper income African Americans were confined to higher cost loans over the rate spread 4.19 times more frequently than whites.

            Washington Mutual was also among the most disparate when considering conventional first-lien loans without regard to income, confining African Americans to rate spread loans 3.70 times more frequently than whites.  Wells Fargo was nearly as disparate, confining African Americans to rate spread loans 3.31 times more frequently than whites.  Royal Bank of Scotland and its Citizens Bank units came in at 3.11, and JP Morgan Chase at 2.98.  The disparity at Wachovia was 2.58, and at Atlanta-based SunTrust it was 2.40. The disparity at GMAC was 2.92, while at Countrywide it was 2.86.

            Countrywide’s disparity between pricing to African Americans and whites was even more stark when considering conventional first lien home purchase loans: Countrywide confined African Americans to rate spread loans 3.53 times more frequently than whites. Countrywide was topped, however, by Milwaukee-based M&I, with a disparity of 3.78, and by Bank of America's MBNA unit, with a disparity of 4.23.

            Bank of America also assisted other subprime lenders in 2005, the report says, by securitizing loans for Ameriquest, which earlier this year settled predatory lending charges with state attorneys general for $325 million. The settlement only required reforms at Ameriquest Mortgage and two affiliates, but not its largest affiliate, Argent Mortgage. The 2005 data show that Argent made 220,069 higher cost loans over the rate spread, while Ameriquest Mortgage made 122,868 such loans. The reforms announced in support of the predatory lending settlement with the attorneys general cover barely 35% of ACC's high-cost lending. 

            Like ACC / Ameriquest, Citigroup and HSBC, other large subprime lenders also increased the percentage of their loans that were over the rate spread, from 2004 to 2005. At New Century in 2005, fully 215,579 of the company's 268,101 loans were over the rate spread.  National City / First Franklin made 177,526 higher cost loans over the rate spread in 2005. Countrywide in 2005 made 190,621 loans over the rate spread. 199,249 of 237,700 loans were over the rate spread at H&R Block, which also in this season offers problematic high-cost tax refund anticipation loans.

   According to Fair Finance Watch, several large lenders sought to avoid being scrutinized by refusing to provide their data in computer analyzable form.  Institutions insisting on providing their data in paper or PDF form included Lehman Brothers, AIG, Delta Funding, Fremont Investment & Loan and other large subprime lenders, as well as banks such as New York Community Bancorp, Whitney Bank and Fifth Third Bank.

Fair Finance Watch says it will be pursuing those issues as well, with each lender's regulator.

            "Predatory lending is a still-growing problem, impacting consumers not only homebuyers but also consumers who make payday, car title and tax refund anticipation loans," the Fair Finance Watch study concludes. "We will be redoubling our efforts to reign in the predatory lenders, using this data as a road map."

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            The Fair Finance Watch report also casts its glance local. The nation's largest bank, Citigroup, was disparate in Metropolitan Statistical Areas all over the country in 2005.

In Los Angeles, Citigroup confined African Americans to higher cost rate spread loans 2.13 times more frequently than whites; its disparity for Latinos was 2.02.

Citigroup's African American to white disparity was 2.27 in the Washington DC MSA, and 2.72 in Chicago. 

In Philadelphia, Citigroup confined African Americans to higher cost rate spread loans 3.43 times more frequently than whites; its disparity for Latinos was 2.50.

Definition: the Federal Reserve has defined higher-cost loans as those loans with annual percentage rates above the rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

Source: info [at]

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Argent Mortgage Layoffs, One Week After Ameriquest's $325 Predatory Lending Settlement

  Just after after announcing a $325 million predatory lending settlement by three of its subsidiaries, ACC Capital Holdings on January 30 has reportedly laid off 16% of the workforce of its non-covered subsidiary, Argent Mortgage.  So, analysts wonder, will Ameriquest’s settlement be paid by eliminating what few levels of oversight exist in Argent Mortgage’s subprime lending process?  The layoff reports have reached Inner City Press from impacted employees, one of whom writes:

Subject: Argent Layoffs

Sent: Mon, 30 Jan 2006 16:39:48 -0800 (EST)

From: [Name withheld]

To: Ameriquest-Watch [at]

Argent has laid off 16% of their workforce, approximately 1250-1500 [Editor's note: see 2/1/06 update, below] in job cuts that took place this past Friday and Today. The positions include mostly production jobs, but cuts were also made within their corporate staff. No sales positions were eliminated. One of the biggest changes to come from this consolidation has been the elimination of set-up and doc draw employees. Underwriters will perform the set-up function, and funders will assume the duties of the doc-drawers. Customer service levels and turn time may be affected by these changes.

Layoffs by Location:

200 Doc-drawers and set-up workers in White Plains, NY

~100 Doc-drawers and set-up workers in Schaumburg, IL


Subject: Argent Update 1/30/06

Sent: Tue, 31 Jan 2006 00:26:48 +0000

From: [Name withheld]

To: Ameriquest-Watch [at]

I thought you would be interested to know that Argent Mortgage laid off approximately 16% of its workforce today. Luckily, I still have a job, but I would like to see what you write about it. I find your site very informative.

   Beyond the kind words, one of the questions raises by the specific job-functions that have reportedly been targeted for the layoffs is whether, just after three subsidiaries have settled predatory lending charges, the non-covered subsidiary should be eliminating what oversight it has of its lending process.  What will the attorneys general (or the U.S. Senators considering the nomination of ACC founder Roland Arnall to become U.S. ambassador to the Netherlands) or most importantly the consumers impacted by ACC and Argent have to say about these strangely-timed layoffs? Only time will tell…

  In other media, North Carolina’s attorney general’s spokeswoman has tried to explain the loopholes in the settlement by telling the Charlotte Observer that the settlement was necessarily "limited to activities over which Ameriquest had direct control."  We note that by laying-off 1200 employees at Argent, ACC can claim to have even less control over Argent’s high-cost subprime mortgages. The St. Louis Post-Dispatch has reported on a sample instance of a borrower whom ACC instructed “to file another application - and this time include a letter stating that she owns a cleaning company. ‘They told me what to write,’ she recalls. She says Ameriquest loan officers instructed her to write that she had received an advance of $12,000 to clean two office buildings. It wasn't true, but Hopkins says she and her husband needed the $125,000 loan... They eventually lost the house.” 

In other St. Louis news, Fair Finance Watch has filed comment on the proposed acquisition there of Forbes First National Corporation’s Pioneer Bank & Trust Company by notorious subprime lender National City Corporation – click here to view, and click here for FFW Jan. 30 comments on Whitney National Bank’s attempt to buy 1st National Bank & Trust in Florida.

[Editor's update 1: late on the afternoon of Jan. 31, ACC's spokesman confirmed by email the Argent layoffs, reported 24 hours earlier by Inner City Press. He wrote that "this consolidation increases our efficiency."]

[Editor's update 2: on February 1, ACC emphasized to Inner City Press that while the 15% layoff figure is correct, the individual who first wrote in to us with the employee number over 1,000 was wrong, that the number is 600. Duly noted -- along with ACC's argument that that Argent does not, even cannot, control the mortgages it makes, much less now with 600 fewer employees.]

Predatory Lending Settlement Leaves Out Ameriquest’s Largest Lender, Argent, Critics Say

Jan. 23 – Earlier today, the largest subprime mortgage lending conglomerate in the United States, ACC Capital Holdings Corporation, announced a $325 million predatory lending settlement with the attorneys general of more than 40 states. Almost immediately, questions were raised as to why the settlement does not cover ACC’s subsidiary which made the most high-cost loans in 2004, Argent Mortgage.

            The settlement comes at a convenient time for ACC and its founder, Roland Arnall. In two weeks, the company plans a major multi-million dollar advertising campaign connected to the National Football League’s Super Bowl XV in Detroit. Arnall has been nominated to become the United States ambassador to the Netherlands. He has seen his confirmation stalled for months due to the pending settlement. But given the perceived loopholes in the settlement, critics question whether Arnall’s nomination should be forward in the U.S. Senate.

            In 2004, the most recent year for which Home Mortgage Disclosure Act data is available, ACC’s Ameriquest Mortgage made 185,833 loans, while its Argent Mortgage unit made 215,403 loans, more than half of them over the federal regulators’ high cost definition, of three percent over comparable Treasury securities on a first lien, and over five percent on a subordinate lien.  Studies of the data have shown that ACC and Argent direct a much higher percent of their high cost loans to African Americans and Latinos than is true of other, prime-priced lenders.

            Inner City Press in mid-2005 submitted Freedom of Information Act requests to many states’ attorneys general, for copies of consumer complaints against ACC and Argent. ACC’s legal department opposed the release of any information, resulting in ongoing litigation, including in Texas.

            ACC and its predecessors have previously purported to reform their practices, as far back as 1996 with the Department of Justice and Office of Thrift Supervision (when the company was named Long Beach Mortgage), in 2000 with the Federal Trade Commission, and since. Among those questioning the settlement are class action lawyers, by means of a press release. Consumer protection advocates, however, emphasize the need for binding reforms at ACC including Argent, and not only monetary settlement for past loans.  This is a developing story.

   The settlement has also given rise to questions about the due diligence performed by the investment banks which have helped package Ameriquest’s loans and sell them as mortgage-backed securities, including the three largest banks in the United States: Citigroup, JP Morgan Chase and Bank of America. Each of these three banks has securitized Ameriquest loans, while claiming to screen out predatory loans. With today’s settlements, questions are being raised about these banks previous defenses of their practices.

Other recent Inner City Press reports

Mine Your Own Business: Explosive Remnants of War and the Great Powers, Amid the Paparazzi

Human Rights Are Lost in the Mail: DR Congo Got the Letter, But the Process is Still Murky

Iraq's Oil to be Metered by Shell, While Basrah Project Remains Less than Clear

At the UN, Dues Threats and Presidents-Elect, Unanswered Greek Mission Questions

Kofi, Kony, Kagame and Coltan: This Moment in the Congo and Kampala

As Operation Swarmer Begins, UN's Qazi Denies It's Civil War and Has No Answers if Iraq's Oil is Being Metered

Cash Crop: In Nepal, Bhutanese Refugees Prohibited from Income Generation Even in their Camps

The Shorted and Shorting in Humanitarian Aid: From Davos to Darfur, the Numbers Don't Add Up

UN Reform: Transparency Later, Not Now -- At Least Not for AXA - WFP Insurance Contract

In the Sudanese Crisis, Oil Revenue Goes Missing, UN Says

Empty Words on Money Laundering and Narcotics, from the UN and Georgia

In Locked Down Iraq, Oil Flows Unmetered While Questions Run in Circles

What is the Sound of Eleven Uzbeks Disappearing? A Lack of Seats in Tashkent, a Turf War at UN

In a Bronx Basement, Complaints Linger Long After Lease Is Signed

Kosovo: Of Collective Punishment and Electricity; Lights Out on Privatization of Ferronikeli Mines

Predatory Super Bowl: Ameriquest and the Big Banks in Detroit

Abkhazia: Cleansing and (Money) Laundering, Says Georgia, Even Terror’s Haven

Post-Tsunami Human Rights Abuses, including by UNDP in the Maldives

Halliburton Repays $9 Million, While Iraq’s Oil Remains Unmetered

Argent Mortgage Layoffs, One Week After Ameriquest's $235 Predatory Lending Settlement

Ameriquest Settlement: What Does $325 Million Buy? Carte Blanche to Gouge Consumers (and Get Out of Jail as Ambassador to Holland)

Predatory Lending Settlement Leaves Out Ameriquest’s Largest Lender, Argent, Critics Say

Darfur on the Margins: Slovenia’s President Drnovsek’s Quixotic Call for Action Ignored

Who Pays for the Global Bird Flu Fight? Not the Corporations, So Far - UN

Royal Bank of Scotland Has Repeatedly Been Linked to Terrorist Finance and Money Laundering, Not Only in the Current Brooklyn Case

From Appalachia to Wall Street: Behind the Mining Tragedy, UBS and Lehman Brothers

Iraqis Absent from Oil Oversight Meeting on Development Fund for Iraq, Purportedly Due to Visa Problems

Watching the Detectives: Oversight of the Development Fund for Iraq Will be Discussed at the UN on December 28, 2005

From the UN Budget, Transit Strike, to the USA Patriot Act, 2005 Ends with Extensions

Some previous highlights and special reports:

Citigroup Dissembles at United Nations Environmental Conference

The United Nations' Year of Microcredit: Questions & No Answers

Other Inner City Press reports are archived on -  if you have trouble finding previous articles, please contact us


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