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| Federal Reserve Chairman Ben S. Bernanke, three Fed governors and others heard stories of neighborhoods marked by abandoned homes due to foreclosures and heard warnings, from both lenders and community activists, of even more foreclosures looming on the horizon.
They also listened to a set of recommended actions for the Federal Reserve Board, regulators, lenders, the securities industry and legislators to “combat discriminatory lending and unequal access to fairly priced credit.” The rising incidence of foreclosures led the discussion at Thursday’s meeting of the Federal Reserve Board’s Consumer Advisory Council, which is comprised of community leaders and banking officials, with Lisa Sodeika, executive vice president- corporate affairs at Prospect Heights, Ill.-based HSBC, as this year’s chair. The Board’s governors were all “very engaged” and participated in the discussions, according to council member Edna Sawady, managing director and head of the under-banked practice at Brookline, Mass.-based Market Innovations Inc. “”They were asking questions and taking notes and taking it all to heart.” Council members participating in the meeting, and engaged in the discussions, included Mark K. Metz, senior vice president and deputy counsel at Wachovia Corp., based in Charlotte, N.C.; Louise J. Gissendaner, a senior vice president and community development director at Cleveland-based Fifth Third Bank; North Carolina Fair Housing Center Executive Director Stella Adams; and Marva E. Williams, senior vice president, Chicago-based Woodstock Institute. Both Gissendaner and Williams spoke of the devastating affect of high rates of foreclosures in some of the neighborhoods in their cities. And Metz spoke of the need for responsible underwriting of subprime loans, according to observers. The recommendations were contained in a research study of lending patterns by major mortgage lenders that was presented by Williams and Sarah Ludwig, director, Neighborhood Economic Development Advocacy Project, New York. Those recommendations included establishing additional data fields in HMDA data, more rigorous examination of large bank holding companies for fair lending violations, making the same array of prime and subprime mortgages available to all borrowers regardless of the delivery channel or lender affiliate, developing screens in the securities industry to filter out predatory loans and the promotion and enforcement of legislation that prohibits lenders from steering borrowers into higher-cost loans when they qualify for lower cost alternatives. “Default and foreclosures of subprime loans are skyrocketing,” said Williams. “Stock prices of subprime lenders are crumbling and concerns are being raised on Wall Street about underwriting standards in the subprime lending industry.” The research report by the Woodstock Institute and the Neighborhood Project group, she said, shows that high interest subprime loans have a disproportionate impact on minority neighborhoods and households. The report, based on HMDA and other data, examined loans made by seven major national lenders in six large and mid-size urban areas. One member who was noticeably absent was Stergios “Terry” Theologides, a senior executive at troubled New Century Financial Corp., Irvine, Calif., a leading subprime lender that stopped funding new loans earlier in the week and is currently under criminal investigation by the U.S. Attorney’s office over accounting and trading errors. A formal report of the Advisory Council meeting is expected to be delivered to the Fed’s full Board of Governors, according to a Fed spokesman. The three of the seven Fed Governors who attended Thursday’s meeting were Susan Bies, Randall Kroszner and Frederic Mishkin. The Consumer Advisory Council is scheduled to meet again on June 21 and on October 25. |
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