Question & Answer

Question: Our HMDA reports show that we have improved our ratio of lending to minorities but the percentage of minorities that are borrowers is smaller than the percentage of minorities in our community. Is this a problem and how should we deal with it?

Answer: Maybe it is a problem and maybe not. Whenever you look at information such as this, you should put it into context. In this case, the context is your market. You need to know about the demographics in your market area. For example, it would be important to know how the minority community compares to the entire population in terms of home ownership, income level, and other economic indicators. If all of these indicators are equal, you should work toward getting equal representation of minorities in your lending portfolio.

Another consideration is your competition. You should be familiar with the other lenders in your market. Your lower numbers may be the result of the impact another lender in your market is having. Be familiar with lenders that specialize in certain types of loans that may be highly popular with your minority community. Also watch for advertising, education or counseling programs, and outreach campaigns that may influence applicants in their selection of lenders. If you are losing market share because of that, you should consider ways to compete and regain your share.

Don't let anyone jump to a conclusion using HMDA numbers alone. Research it, understand your market, and use that information to build a better program.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 4, 2/96