CSUF Finance Professor Addresses Congressional Subcommittee

LaCour-Little Discusses the Home Mortgage Disclosure Act

July 30, 2007

CSUF finance professor Michael LaCour-Little testified July 25 before the Subcommittee on Oversight and Investigations on the issue of “Rooting Out Discrimination in Mortgage Lending: Using the Home Mortgage Disclosure Act (HMDA) as a Tool for Fair Lending Enforcement.”

LaCour-Little discussed patterns he found in 2004-05 HMDA data, including an increase in the number and percentage of higher-cost loans and differentials across racial and ethnic groups. Three possible reasons he stated for the increase were changes in lender business practices, changes in borrower credit profile and changes in the interest rate environment.

“It is important to remember that the new HMDA data does not contain information on many of the factors that affect credit risk and the economics of mortgage lending,” he reported. “As a result, the new HMDA data is sufficient neither to explain the pricing of loans nor to draw conclusions about pricing fairness. At best, the bank regulatory agencies can use HMDA data as a preliminary screening tool to identify markets or institutions for further scrutiny.”

LaCour-Little reported that he did not find an increase in average borrower risk in 2005, although “there does appear to be an increase in the use of riskier products, such as loans that allow negative amortization [increase in principal by an amount in which loan payments fall short of the interest due] and the average loan-to-value ratio did appear to increase for home purchase loans during 2006. ”

LaCour-Little’s remarks were based on research he conducted for a paper he presented in May at the midyear meeting of the American Real Estate and Urban Economics Association.

A member of the CSUF’s faculty since 2005, LaCour-Little is executive vice president of the American Real Estate and Urban Economics Association and a former executive at Citigroup and Wells Fargo. More than 20 articles he has written on housing finance have been published.

Related Audio:

Listen to an interview with LaCour-Little about a 2008 study on home mortgage lending in Orange County that aired on KBPK’s “California Commerce.”