Citi among banks banks omitting data about race from home loans—depriving researchers of both positive and negative trends

The importance of the data, which is collected under the Mortgage Disclosure Act, is reflected in the fact that in the last year alone it has been cited by the Consumer Financial Protection Bureau, the Federal Financial Institutions Examining Board, and the Bureau. Comptroller of the Currency, among others.

The problem is that more than 12% of borrowers do not volunteer the information required by law, and 90% of loans sold to third parties are stripped of the data that is obtained. That’s according to the National Community Reinvestment Alliance, a nonprofit that studies issues surrounding racial and social economics.

“The impact is profound,” according to the NCRC a report Published today, “because these gaps hinder our ability to understand who receives loans and on what terms, which is vital to assessing equity and inclusion.”

To help combat the problem, the National Commission on the Rights of the Child today pledged to never again use any data that does not include demographics over race. “Beginning with this report, NCRC is removing records that do not contain demographic data from our calculations of the proportion of loans made to certain races,” the researchers wrote.

NCRC and others say the missing data is largely due to loopholes in the HMDA law. Passed in 1975 to help ensure a more equitable distribution of loans, the HMDA rule requires that applicants in person or by phone provide demographic data. But online applicants can opt out.

“In the past, it was assumed that those who chose not to choose race were more likely to be white,” Richardson said. “However, in this report, we show that loans without data are likely to reflect racial diversity more accurately than previously thought. Therefore the correct approach is to exclude these loans.”

Exacerbating the spotty data, third-party loan buyers don’t need to track demographic information at all. Seven of the 10 largest loan-buying institutions from last year used a loophole that allowed them to erase borrowers’ demographic data on the mortgages they purchased, according to report co-author and NCRC senior researcher Jason Richardson in a conversation with luck.

“A few years ago, it was rare for lenders to purchase loans and delete demographic data, but Citibank pioneered the practice,” Richardson said. “Now, many lenders who purchase loans are using this loophole.” City did not respond to a request for comment.

Sure, many biased lenders could be hiding behind this data black hole, but some of the more positive trends are being obscured as well.

The National Research Center report shows, “in what could be a sign of a historic turning point,” that Hispanic lending for home loans — 16.5% of all home purchases last year — was nearly identical to their share of the overall adult population in the United States. Black borrowers also saw lending rates improve, although they did not approach their overall share of the population.

Unfortunately, these apparently positive trends are difficult to confirm due to incomplete data.

According to the report, “We urgently need more comprehensive data on small business and community investment to formulate effective policies that mitigate the harsh realities of redlining.”

Of course, any increase in data collection about borrowers comes with an increased risk of privacy violations. Although the CFPB He says There are “low, if any, privacy risks” in the HMDA Act 2017 a report Economist Anthony Yeiser has expressed concerns that data collection could lead to widespread privacy violations.

This does not raise the concerns of the National Committee for the Rights of the Child. “The broad benefits of collecting detailed data, which include income, race, sexual orientation, and gender identity, critically outweigh any concerns about burden or privacy,” the authors wrote. “It is imperative that efforts to limit this basic data collection are recognized as not only misleading, but harmful to the health and well-being of our communities.”