INTRODUCTION Disclosure: A Step Toward Neighborhood Reinvestment The Home Mortgage Disclosure Act of 1975 (PL 94-200) was introduced in Congress in May 1975, and signed into law by President Ford on December 31, 1975. Briefly, disclosure requires depository institutions to show where they make loans, what type of loans they grant, and what loans they purchase. The Congressional intent of this legislation is clearly to provide a mechanism enabling citizens to obtain information on lending practices in their neighborhoods. 1 The Act states: SEC. 302 (a) The Congress finds that some depository (b) The purpose of this title is to provide the (c) Nothing in this title is intended to, nor shall it be construed to, encourage unsound lending practices or the allocation of credit. Home Mortgage Disclosure Act of 1975 (PL 94-200). December 31, 1975. The potential of the Home Mortgage Disclosure Act as a tool for community groups working to maintain the viability of their neighborhoods is broad. Its specific impact for your neighborhood will be shaped primarily by your organization's utilization of the information it provides. What kind of, or how many, programs and actions are needed, for example, will affect the extent to which you use disclosure. Some groups might want data on one or two financial institutions where their residents' deposits are concentrated, while other neighborhood organizations may mobilize for actions in between these two. The following are some possible uses of disclosure, summarized in a publication compiled for the State of Pennsylvania.2 It states that the data generated will help to: 1. provide methods for better selection of the CDBG funds and other revitalization projects; 2. spot areas showing early signs of disinvestment and provide assistance to turn this trend around; 3. determine if there is a relationship between new rehabilitation/ revitalization efforts and any increase in private investments for these efforts; 4. determine neighborhood housing needs more precisely; 5. determine which private institutions and public agencies will be most effective in various revitalization efforts based on the lending patterns in specific neighborhoods; 6. identify private institutions which show minimal investments in specific neighborhoods and encourage them to invest in these neighborhoods; 7. use data as a base to evaluate proposed branch openings, re locations and mergers. 2 "Housing Investment and Conservation". Center for Community Change. Draft report to the Department of Community Affairs, State of Pennsylvania, 1976. Prepared by Jeff Zinsmeyer. p. 23-23. It is exciting for all those committed to neighborhood reinvestment to realize that local organizing and research can indeed influence the enactment of Federal policy. Senator William Proxmire, sponsor of the Disclosure bill, affirmed the role of neighborhood groups in the development of this legislation when he wrote: "It is hard to recall an issue where the impetus for reform came so directly and persuasively from But Still, in our satisfaction we must not lose sight of the fact that disclosure legislation is but one step toward saving our cities' declining neighborhoods. It will expose the lending patterns of neighborhood depository institutions, providing clear evidence where it exists of discriminatory lending practices. Hopefully, this data will prod financial institutions to embark upon a more diversified pattern of lending in response to the housing and credit needs of previously redlined neighborhoods. disclosure by itself will not eliminate redlining and disinvestment by financial institutions. It is important for community organizations to learn to use the information generated to best advantage for their particular reinvestment efforts. Toward that end, this handbook outlines various strategies for community groups to use disclosure information. The focus is on working with public officials and private institutions locally-attempting to formulate positive, long-term neighborhood reinvestment programs. 3. Naparstek, Arthur and Cincotta, Gale, URBAN DISINVESTMENT: NEW IMPLICATIONS 80-991 O 77 - 7 FEDERAL REGULATIONS: WHAT YOU NEED TO KNOW Depository institutions subject to the Home Mortgage Disclosure Act include those that are Federally insured or regulated and that have offices within the Standard Metropolitan Statistical Areas (SMSAs) used by the Census Bureau. Institutions with less than $10 million in assets are exempted. Affected by these regulations are an estimated 4,400 commercial banks (out of approximately 15,000), 3,000 savings and loan associations (out of 5,000), as well as 470 mutual savings banks and 600 credit unions. The first filed reports were due September 30, 1976 (for the fiscal year ending June 30, 1976). Information Available Through Disclosure The mortgage loan information to be made available by depository institutions includes: -loans originated by the depository institutions; -loans purchased by one depository institution from another; Each of these categories must be further broken down to specify: -conventional mortgage loans -government insured loans (including Federal Housing Administra tion--FHA--and Veterans Administration-VA-loans) -home improvement loans The data above apply to one- to four-family residences. Loans made on multi-family dwellings will be reported in a separate category. Further, the regulations require institutions to disclose loans made to individuals not intending to live in the purchased property if it is located in an SMSA that includes an office of that particular institution. Other disclosure requirements worth noting are the following: -depository institutions must inform their depositors on a -"reasonable charges" can only amount to xeroxing costs for the data, not costs for actually compiling it; -the assets of a parent institution and its subsidiaries (i.e., bank holding companies) are to be combined in determining whether they qualify for the "under $10 million asset" exemption. This last requirement eliminates a possible loophole contained within the exemption and noted in the regulations: "Within this provision, a deposi tory institution might avoid the Act entirely by originating all its federally related mortgage loans through its subsidiary." Requiring both types of institutions to disclose their mortgage loans, either jointly or in separate reports, ensures a total rather than incomplete picture of their lending activities. 4 Regulation C implementing the Home Mortgage Disclosure Act of 1975. |