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Residential Department: Q&A: Nikitra Bailey, Center for Responsible Lending: July 2014


Q&A: Nikitra Bailey, Center for Responsible Lending

Nikitra Bailey, executive vice president, Center for Responsible Lending

Consumer-protection groups continue their fight

Since the nadir of the housing crisis, the mortgage industry has seen the advent of a vast array of regulations aimed at protecting borrowers and ensuring their ability to repay their loans. Few would argue, however, that unethical banks and originators are entirely extinct, and consumer-advocate groups continue to promote industry reform.

Founded in 2002, the Center for Responsible Lending is a nonprofit, nonpartisan organization focused on fighting predatory lending practices. We spoke with the center’s executive vice president, Nikitra Bailey, to learn more about the center’s current concerns and reaction to recent housing-related legislation.

When it comes to mortgage lending, what are some of the biggest issues still threatening homebuyers?

One of the largest issues is that access to responsible mortgage credit isn’t available for lower-wealth families and communities of color. One of the direct consequences of the financial crisis was that many lenders shrunk their credit boxes, however what’s troubling about this is that it’s locking out the very borrowers [whom] the market will need to function in a healthy manner. It’s estimated that, by 2020, seven out of 10 new households will be [composed] of borrowers of color, so locking out lower-wealth families and borrowers of color is just going to hurt our housing recovery overall.

When we look at the recent Home Mortgage Disclosure Act data — which is only available through 2012 — we know that 1.3 million conventional mortgages were made [that year], and Latinos received only 69,217 loans, African-Americans received 29,405 loans, and Asian-American Pacific Islanders received only 2,697 loans. So, we’re working to address this tightening of credit and to find ways to advocate for responsible credit to go to all credit-worthy families.

Your center’s president has expressed concerns about the Johnson-Crapo bill that was recently approved by the Senate Banking Committee. What are a few of those concerns?

I’ll talk about three of them specifically. One, Johnson-Crapo pretty much turned over the housing finance system to a handful of the megabanks. Many of the responsibilities of the current government-sponsored enterprises would be turned over to the industry, and there would be a process of vertical integration where [banks] could serve in many roles, meaning that an originator could also be the aggregator of a mortgage or the guarantor of a mortgage. So, it pretty much took away the checks and balances and the quality controls that are currently operated in the system by Fannie Mae and Freddie Mac.

[Second], right now Fannie Mae and Freddie Mac both have a mandate to serve all markets at all times, and particularly they have affordable-housing goals that make sure lower-wealth and lower-FICO borrowers can actually access the system, and Johnson-Crapo — in the drafts that we saw — did away with the affordable-housing goals. And then we also had a concern that it hard-wired the downpayment requirement, and we know that this is something that should be left to the discretion of the regulator. It’d be better in the future to see determinations of downpayment and other factors left to the regulators of the [lending] entities.

Do you think that the Johnson-Crapo bill will pass into law?

Right now, it looks like it didn’t garner enough support. Some news articles reported that there was reluctance to support the legislation by some of the more progressive members of the Senate Banking Committee because of the lack of access and affordability provisions in the bill. It’s passed out of committee and has gone to the Senate floor, but it’s unlikely — I think — to garner the support that it needs there.

What’s your take on the ability-to-repay rule’s qualified mortgage provision?

The rule strikes the right balance as far as providing protections but also ensuring access to credit, and as drafted, the rules cover about 95 percent of current mortgage origination. It was key to have a broad definition, and this means that borrowers of color — who represent 70 percent of the net household growth for 2013 — will be able to access many mortgages and not be boxed out.


Raymond Fleischmann was editor of Scotsman Guide's Residential Edition. For questions about this article, call (800) 297-6061 or e-mail

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