Who Really Gets Higher-Cost Home Loans?

Who Really Gets Higher-Cost Home? Home Loan Disparities By Income, Race and Ethnicity of Borrowers and Neighborhoods in 12 California Communities in 2004 December 2005 California Reinvestment Coalition 474 Valencia Street, Suite 110 San Francisco, California 94103 (415) 864-3980 www.calreinvest.org CRC is a nonprofit membership organization of more than two hundred (200) nonprofit organizations and public agencies across the state of California. We work with community-based organizations to promote the economic revitalization of California s low-income communities and communities of color. CRC promotes increased access to credit for affordable housing and community economic development, and to financial services for these communities. CRC promotes community reinvestment through negotiation with and regular monitoring of major California financial institutions, as well as through the provision of technical assistance to local communities in California. This report was researched and written by Kevin Stein. CRC wishes to thank Maeve Elise Brown (Housing and Economic Rights Advocates), Ilene Jacobs (California Rural Legal Assistance), Sharon Kinlaw (Fair Housing Council of the San Fernando Valley), Heidi Li (Housing and Economic Rights Advocates), and Caroline Peattie (Fair Housing of Marin) for their thoughtful comments on earlier drafts of this report. Jim Campen (Mauricio Gaston Institute for Latino Community Development and Public Policy) and Victoria Leon Guerrero (California Reinvestment Coalition) also provided helpful edits. 1

Executive Summary This report is CRC s twelfth annual analysis of federal Home Mortgage Disclosure Act (HMDA) data. This year represents the first in which the data include information about how much home loans actually cost consumers. This report looks at one window into the home loan market in California how much higher-cost lending is occurring here, and whether it appears targeted to certain borrowers and neighborhoods within the state based on race and ethnicity, and income. Whether a home loan is a higher-cost loan or not will have great impact on the borrower, and the borrower s community. The average interest rate on a 30-year fixed rate home loan in 2004 was 5.84%. In contrast, the average higher-cost home loan in California carried an Annual Percentage Rate (APR) of approximately 9.81%. In practical terms, the average higher-cost borrower in California paid $691.76 more per month on her home loan. Who Really Makes Higher-cost Home? There were 264,348 higher-cost loans made to homeowners in California in 2004. These loans carried annual percentage rates of approximately 8% and higher. Many of these higher-cost loans were made by some of the largest banking and financial services companies in the world, including: General Electric, Countrywide, Lehman Brothers, Washington Mutual, HSBC, Wells Fargo, Citigroup, H&R Block, and Bank of America. Indeed, Citigroup, HSBC and Wells Fargo made hundreds of loans in the state with APRs of approximately 13% and higher. When extremely high-cost loans are sold in California, both homeowners and communities are greatly impacted. Homeowners who face a greater burden in making mortgage payments will have a greater likelihood of falling behind and possibly losing their homes to foreclosure. More money spent on housing costs means less money to meet basic necessities, provide routine home maintenance, and respond to emergencies that may arise. Communities are also adversely affected when homeowners have less money to support local businesses, make needed home repairs that uplift neighborhoods, and avoid the devastating ripple effect that comes with foreclosure. Who Really Gets Higher-Cost Home? As is the case every year, the HMDA data reveal that African American and Latino borrowers are paying more for their home loans, as are minority and low-income neighborhoods. Conservatively, people of color in California are paying nearly $50 million more per month than white borrowers as a result of higher-cost home loans. This figure most likely underestimates the added costs to people of color, since the HMDA data only capture a fraction of the subprime lending occurring in California. 2

African Americans pay more. Statewide, African American borrowers were more than twice as likely as White borrowers to have a higher-cost home purchase or refinance loan. Latinos pay more. Statewide, Latino borrowers were three times as likely as White non-hispanic borrowers to get a higher-cost home purchase loan, and Latino borrowers were twice as likely as White non-hispanic borrowers to get a higher-cost refinance loan. Minority neighborhoods pay more. Residents of minority neighborhoods were nearly four times as likely as those in White neighborhoods to get a higher-cost home purchase loan, and minority neighborhoods were more than three times as likely as white neighborhoods to get higher-cost refinance loans. Low-income neighborhoods pay more. Low-income neighborhoods were three times as likely as upper income neighborhoods to receive higher-cost home purchase and refinance loans. Who Really Regulates Higher-Cost Lenders? There are six regulatory agencies that have responsibility to ensure that their lenders are complying with fair lending and related laws: The Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board (FRB), Department of Housing and Urban Development (HUD), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Office of Thrift Supervision (OTS). These regulatory agencies must exercise their full authority to investigate illegal lending practices and to enforce fair lending and consumer protection laws. CRC analyzed the lending patterns of different lenders, separated out by regulator, and found: HUD-regulated lenders made, by far, the most higher-cost first lien home purchase and refinance loans in California, having originated 102,040 highercost loans. HUD regulates the largest number of lenders, more than 500 lenders in California alone, and these lenders include some of the largest subprime lenders in the nation, such as Ameriquest and New Century Mortgage. FDIC-regulated lenders had the largest percentage of higher-cost loans to underserved borrowers and communities. For example, 43.27% of all FDICregulated refinance lending to low-income neighborhoods was higher-cost lending. National banks regulated by the OCC displayed the greatest disparities. Of the eight categories of lending analyzed, the OCC-regulated lenders had the greatest disparities in five areas. Further, the national banks had the second highest disparities in two additional areas. For example, national banks were 4.15 times as likely to make higher-cost refinance loans to African Americans as they were to make higher-cost loans to white borrowers. 3

Savings associations regulated by the OTS exhibited the next largest disparities. OTS lenders had the highest disparities in three of the eight areas analyzed, and had the second highest disparity ratio in three additional areas. For example, OTS lenders in the aggregate were more than eight times as likely to make a higher-cost home purchase loan in minority neighborhoods as they were to make a higher-cost loan in predominantly white neighborhoods. Which Communities Are Most Impacted by Higher-Cost Lending? CRC analyzed higher-cost lending patterns in 12 California cities: Delano, El Centro, Fresno, Los Angeles, Modesto, Oakland, Oxnard, Sacramento, San Diego, San Francisco, Salinas, and Yuba City. This analysis focuses on high rate lending to African American and Latino borrowers, and to minority and low and moderate-income neighborhoods. In looking at the overall rate of higher-cost lending: Cities that can be characterized as rural had the greatest incidence of highercost lending, with Delano, El Centro, Fresno, Modesto, and Yuba City having 25% to 15% of all home loans coming at higher-cost. Despite relatively low rates of higher-cost lending in California, African Americans continued to receive a large share of higher-cost loans. o In Oxnard, 28.21% of home purchase loans made to African Americans were higher-cost. Rural areas saw the greatest rates of higher-cost lending to Latino borrowers, while urban areas exhibited greater disparities between Latino and White non- Hispanic borrowers. o San Francisco and Los Angeles had the largest disparities for higher-cost lending to Latinos as compared to White non-hispanics. In San Francisco, Latino borrowers were 6.42 times as likely as white borrowers to get a higher-cost home purchase loan, and 2.72 times as likely to get a higher-cost refinance loan. In Los Angeles, the figures were 4.28 and 2.63, respectively. Rural communities witnessed a high percentage of higher-cost lending in minority neighborhoods, while the cities saw the greatest disparities and the largest number of higher-cost loans. o Delano had the largest percentage of higher-cost loans in its minority neighborhoods, for both home purchase lending (17.37% of loans in these neighborhoods were higher-cost) and refinance lending (30.10% were higher-cost). 4

o There were 7,957 higher-cost refinance loans originated in minority neighborhoods within the city of Los Angeles alone. Higher-cost lending to low and moderate income neighborhoods was prevalent o The city of El Centro saw a very large percentage of loans in its lowmoderate income neighborhoods come with higher-costs. This was true for both home purchase (29.41%) and refinance (31.55%) loans. o El Centro also had the highest home purchase loan disparity, with low and moderate-income neighborhoods 4.27 times as likely as middle and upper-income neighborhoods to get higher-cost loans. Fringe Finance versus Access to Mainstream Credit Banks that avoid locating branches in certain neighborhoods may be missing significant business opportunity. They also are leaving those communities vulnerable to high cost check cashers and payday lenders. In looking at the 12 survey cities, disparities between check casher presence and bank presence are stark: The number of check cashers in eight cities equaled or exceeded the number of bank branches there. Oxnard had the greatest disparity, with nearly 3 times as many check cashers as banks. Los Angeles has an astounding 568 check cashers. San Diego has 224. The prevalence of check cashing establishments in survey cities suggests that access to mainstream banks and low cost credit are impaired. Check cashers have clearly found a niche, are serving a large number of consumers, and are making money doing so. Banks and prime mortgage lenders should actively compete for this market. Recommendations In order to address the higher-cost lending disparities highlighted in this report, CRC recommends: Ensuring that borrowers get the best loan. For those companies that have both prime and subprime lending channels, it is imperative that they offer all borrowers the best loan product for which they qualify, regardless of how they look or where they live. 5

Vigorously examining lending practices and enforcing anti discrimination laws. Federal and state regulators must more vigorously examine lending practices and enforce anti predatory, fair housing/fair lending, and consumer protection laws and regulations. Expanding branches and CRA requirements. Lending disparities are smaller where banks lend within their Community Reinvestment Act (CRA) assessment areas. Loopholes in the CRA must be closed so that banks like Countrywide Bank and the potential H&R Block Bank cannot take deposits and conduct banking nationally, while reinvesting only in a few local areas. Eliminating YSPs and discretionary pricing. Home loan sales where brokers or loan officers have discretion to charge different prices to different consumers is an invitation to discriminate. Yield Spread Premiums, which provide financial incentives for loan brokers to charge borrowers a higher rate than they deserve, should be eliminated. Providing more flexible products for immigrants and people of color, and better outreach in rural areas and minority urban neighborhoods for prime products. Lenders should develop more flexible lending products that meet the needs of immigrants and people of color, and should aggressively market to the rural and inner city urban areas that are prey to higher-cost lenders. Lenders must get beyond their over reliance on credit scores, and focus on a borrower s ability to repay the loan. Expanding HMDA reporting requirements. The Federal Reserve should expand HMDA data by requiring lenders to report the very information that lenders say is needed to assess whether discrimination is occurring. Such information should include credit score, debt-to-income ratios, loan-to-value ratios and points and fee data. Shedding light on lending patterns inevitably leads to better lending. 6

Introduction This report is CRC s twelfth annual analysis of federal Home Mortgage Disclosure Act (HMDA) data. HMDA data are important for several reasons, including: They speak to whether financial institutions are helping people obtain and maintain the largest asset most Americans may ever own a home. They represent one of the most detailed publicly available data sets concerning lending and banking practices. They have as one of their important stated purposes, the lofty goal of assisting in identifying possible discriminatory lending patterns. Over the years, CRC s analysis of the HMDA data has evolved as the home loan market and HMDA data have evolved. In the early years, the focus was on whether home loan applications to underserved borrowers were approved or denied. The main concern was that lenders were actively discriminating against African American, Latino and other minority borrowers, and refusing to lend to, or redlining, the neighborhoods in which these borrowers lived. While redlining remains a sad reality in our lending landscape, we have seen a shift from redlining to reverse redlining, where minority borrowers and neighborhoods are now targeted for higher-cost, or subprime, loans they can ill afford. Subprime lending refers to lending that is targeted to borrowers who have, or are perceived to have, blemishes on their credit reports. Subprime loans carry higher interest rates and fees, and more onerous loan terms. With the explosion of subprime lending, CRC has looked at whether loans to underserved borrowers and neighborhoods are coming from banks or higher-cost, subprime lenders. CRC has attempted in recent years to look at the relationship between higher-cost lenders and the mainstream banks that often own, or are affiliated with, these subprime lenders. This year represents the first in which the public has access to loan pricing data. Several excellent reports on the new data have already been issued since the data have been made public. 1 A major problem arises when subprime lending goes beyond fairly compensating the lender for taking on the added risk of lending to a person with a poor credit history. CRC, 1 ACORN Fair Housing, The High Cost of Credit: Disparities in High Priced Refinance to Minority Homeowners in 125 American Cities, September 27, 2005; Center for Responsible Lending (Ernst, Keith S, and Goldstein, Deborah N.) Comment on Federal Reserve Analysis of Home Mortgage Disclosure Act Data, September 14, 2005; Consumer Federation of America (Fishbein, Allen, and Woodall, Patrick) Subprime Cities: Patterns of Geographic Disparity in Subprime Lending, September 8, 2005; Greenlining Institute (Gee, Peter) The Price of Credit: Prime and Subprime Lending in California 2004; National Community Reinvestment Coalition, The 2004 Fair Lending Disparities: Stubborn and Persistent, April 2005; Woodstock Institute, New Mortgage Pricing Data Sheds Light on Subprime Market, Reinvestment Alert, May 2005. 7

Fannie Mae, and others have estimated that up to half of all borrowers with subprime loans could qualify for a lower cost prime loan. 2 Subprime loans are also more likely to include additional terms that are not in the borrower s interest, such as prepayment penalty provisions which trap borrowers into higher-cost loans, and mandatory arbitration provisions which deny borrowers equal access to the courts to seek redress for violations of law. The issue of subprime lending takes on added significance in California. The National Mortgage News has estimated that subprime lending accounted for more than $600 Billion in 2004. 3 CRC believes that 25 to 50 percent of all subprime lending is occurring in California, based on reviews of SEC filings relating to subprime securities. California receives the largest share of higher-cost loans in the nation. 4 Further, CRC believes that the new HMDA loan pricing data are only capturing about 50% of the subprime loan market. Many loans are priced just under the thresholds. Brokers and lenders are aggressively marketing interest-only, option ARM (Adjustable Rate Mortgage) and other exotic loan products that have an artificially low introductory rate but that will inevitably rise. Next year, we may begin to see not only an increase in subprime loan reporting under HMDA, but also an increase in the number of foreclosures in California as interest rates rise and homeowners face mounting challenges in meeting their monthly payments obligations. This report looks at one window into the home loan market in California how much higher-cost lending 5 is occurring here, and whether it appears targeted to certain borrowers and neighborhoods within the state. Whether a home loan is a higher-cost loan or not will have great impact on the borrower, and the borrower s community. According to Freddie Mac, the average interest rate on a 30-year fixed rate loan in 2004 was 5.84%, and the average points and fees paid was.7%. 2 A poll of the 50 most active subprime lenders found that 50% of their clients could qualify for a conventional loan, according to Inside Mortgage Finance, a trade publication. (Paul D. Davies, Beg, Borrow, Besieged, Philadelphia Daily News, February 5, 2001.) A Freddie Mac publication cited the same poll, attributing it to Inside B&C Lending, and estimated based on its own findings that between 10% and 35% of subprime borrowers could qualify for prime loans (Freddie Mac, Automated Underwriting: Making Mortgage Lending Simpler and Fairer for America s Families, September 1996). 3 American Banker, Subprime Market Share Nears 25%, from National Mortgage News, Monday, February 28, 2005. 4 Inside B&C Lending, Californians Get Most Rate-Spread, HMDA Show, estimating that California received $47.48 billion in Higher-cost loans, roughly 20% of the national market. 5 Higher-cost loans is defined in this report as those loans that were reported as rate spread loans under the new HMDA reporting requirements. More specifically, this includes first lien loans with Annual Percentage Rates (APRs) that exceed the rate on Treasury securities of comparable maturity by 3%, and second liens with APRs that exceed the rate on Treasury securities of comparable maturity by 5%. Using the Federal Financial Institutions Examination Council "Treasury Securities of Comparable Maturity under Regulation C" Table, CRC estimates that the average comparable Treasury rate for 2004 was 5%, and that higher-cost loans in 2004 therefore carried APRs of approximately 8% or higher for first lien loans, and 10% or higher for second lien loans. See, www.ffiec.gov. 8

In contrast, the average higher-cost home loan in California in 2004 carried an APR of 9.81%. 6 For a home loan borrower getting Freddie Mac s low cost prime rate on a $275,000 loan, the monthly payment would be approximately $1620.58, and the interest payments over the life of the loan could reach $308,409.71. 7 A borrower with the same $275,000 loan but with the average higher-cost APR of 9.81% would pay considerably more each month. Assuming a consumer s 9.81% APR translates into a higher-cost home loan with an interest rate of 9.5% 8, the monthly payment will rise to a much higher $2,312.34, and total interest payments that could reach $557,445.66. This means that a borrower with a higher-cost home loan will pay $691.76 more per month, and a whopping $249,035.95 more in interest payments over the life of the loan, than the majority of borrowers who obtain a lower cost prime loan! Conservatively, people of color in California are paying $47.5 million more per month than white borrowers as a result of higher-cost home loans. 9 Who Really Makes Higher-Cost in California? Top Higher-Cost Lenders There were 264,348 higher-cost home loans made to homeowners in California in 2004. 10 These loans carried annual percentage rates of approximately 8% and higher. 11 Many of these higher-cost loans were made by some of the largest banking and financial services companies in the world. The following chart depicts the lenders with the largest share of higher-cost loans in the state. 6 The average rate spread for higher cost loans in California in 2004 was 4.81%. A 4.81% average rate spread + 5% average comparable Treasury rate = 9.81% APR for the average higher cost home loan. 7 Payments were calculated using East West Mortgage Mortgage Payment Calculator, www.eastwestmortgage.com. 8 The remainder of the APR (9.81% APR 9.5% interest rate) represents fees paid by the consumer. Here, CRC estimates that the consumer will pay slightly more than 2 points, or more than 2% of the loan amount, or more than $5,500 in points and fees. 9 Estimate based on the following: The average higher-cost APR to owner occupants in single family and manufactured homes in California in 2004 was roughly 9.81%. If American Indians, Pacific Islanders, African Americans, and Latino borrowers all were as likely to receive a higher-cost home loan as White non Hispanic borrowers, who saw a relatively low 8.59% of home loans come with higher-cost rates, nearly 70,000 additional residents of color would NOT be paying the increased monthly costs (an extra $691.76/month) that come with the average higher-cost loan. This would yield a monthly cost savings of $47,488,311.15 million to people of color and the communities in which they live in California. 10 The 264,348 loans were single-family and manufactured housing loans made to owner occupants that exceeded the new pricing thresholds. 11 See note 5, above. 9

Top Higher-Cost Lenders in California: 2004 Single Family and Manufactured Housing to Owner Occupants Market Share Report $ Amount Rank Lender # (+000) 1 Ameriquest 32009 7046607 2 Fremont Investment & Loan 22094 4973816 3 General Electric/WMC Mortgage Corp 18937 3294060 4 New Century Mortgage Corporation 17888 3100483 5 Countrywide Home 15579 2564458 6 Lehman Brothers 14006 3314950 7 Washington Mutual 8744 1090752 8 National City Bank, Indiana 7352 873804 9 Encore Credit Corp. 7229 1589194 10 Accredited Home Lenders, Inc. 7119 930966 11 HSBC 6179 777467 12 MortgageIT, Inc. 5946 1506923 13 Wells Fargo 5480 819970 14 Citibank 5066 553197 15 H&R Block 4626 839239 16 Aames Funding Corporation 4103 602519 17 First NLC Financial Services 3820 641672 18 Fieldstone Mortgage Company 3816 659896 19 Peoples Choice Home Loan Inc 3050 377228 20 Bank of America 3043 480375 This list includes some of the largest financial service corporations in the world, many of which own lenders that make higher-cost loans to minority borrowers and in minority neighborhoods. Ameriquest includes: Argent Mortgage Company, Ameriquest Mortgage Company, Olympus Mortgage Company, Town & Country Credit Corp, and Bedford Home, Inc. Countrywide includes: Countrywide Home, Treasury Bank, NA, and Countrywide Mtg. Ventures, LLC Lehman Brothers includes: Lehman Brothers Bank and Finance America, LLC Washington Mutual includes: Long Beach Mortgage and Washington Mutual Bank, FA H&R Block includes: Option One Mortgage Corp. and H&R Block Mortgage Corporation Wells Fargo includes: Wells Fargo Financial Services, California, Wells Fargo Bank, NA, and Wells Fargo Funding, Inc. HSBC includes: Decision One Mortgage, Beneficial and HFC Bank of America includes: OwnIt Mortgage Solutions, Inc. and Bank of America, N.A. Bank of America recently reported it has reduced its interest in OwnIt. 12 Citibank includes: Citifinancial Services, Inc., Citicorp Trust Bank, FSB, Citifinancial Mortgage Co, Inc., Washington Mutual Finance Corp (which Citi purchased), and Citimortgage, Inc. 12 In a recent filing regarding the proposed acquisition by Bank of America of MBNA, Bank of America asserts, as of March 2, 2005, Ownit is no longer an affiliate of Bank of America. Bank of America indirectly owns 24.9% of the voting common equity of Ownit, through a passive limited partnership interest in CIVC Fund IIIA, L.P. No Bank of America associates serve on Ownit s Board of Directors. 10

Top Higher Cost Lenders in CA 2004 35000 30000 25000 20000 15000 10000 5000 0 Ameriquest Fremont Inv & Loan WMC Mortgage Corp New Century Mortgage Top Highest Cost Lenders Countrywide Home Lehman Brothers Washington Mutual National City Bank Encore Credit Corp. Accredited Home Lenders HSBC Mortgageit, Inc. Wells Fargo Citibank H&R Block Aames Funding Corp First NLC Fincl Serv Fieldstone Mortgage Peoples Choice Bank of America/OwnIt Beyond showing whether a loan was higher-cost or not, the new HMDA data for the first time revealed how much lenders actually charged borrowers. The highest category of loans is listed as having Annual Percentage Rates (APRs) that exceed the comparable Treasury Rate by 8 percentage points. The following 10 lenders had the largest share of loans made with the highest rates charged APRs that approximated 13% or higher in 2004. 13 13 See footnote 7. classified as having a rate-spread of 8% or more over comparable Treasury are estimated to carry APRs of 13% and higher. 11

Top Highest Cost Lenders in CA: Single Family and Manufactured Home to Owner Occupants in 2004 1200 1000 800 600 400 200 0 American General Greenlight Financial Citibank HSBC Wells Fargo Fremont Inv & Loan 21st Mortgage U.S. Financial Mortgage NetBank/Meritage Accredited When such extremely high cost loans are charged in California, both homeowners and communities are greatly impacted. Homeowners who face a greater burden in making mortgage payments will have a greater likelihood of falling behind and possibly losing their homes to foreclosure. More money spent on housing costs means less money to meet basic necessities, provide routine home maintenance, and respond to any emergencies that may arise. Communities are also adversely affected when homeowners have less money to support local businesses, make needed home repairs that uplift neighborhoods, and avoid the devastating ripple effect that comes with foreclosure. Who Really Gets Higher-Cost in California? Community groups are most concerned when higher-cost loans are more prevalent in certain communities and with certain borrowers. As is the case every year, the HMDA data reveal lending disparities by race and income. One of the new additions to HMDA this year is the inclusion of data relating to ethnicity. For the first time, the data show disparities between Latino borrowers and White non-hispanic borrowers. The data also this year distinguish between first lien loans and junior or second lien loan. The ensuing analysis of lending disparities focuses only on first lien loans to owner occupants for both home purchases and refinances. Importantly, the Federal Reserve Board s own analysis confirms that lending disparities do exist, and that they cannot be fully explained by valid underwriting criteria. 14 14 Adjusting the HMDA data for borrower-related factors plus lender is insufficient to account fully for racial or ethnic differences in the incidence of higher-priced lending; significant differences remain unexplained. Avery, Robert B., and Canner, Glenn B., New Information Higher-Cost Under HMDA and Its Application in Fair Lending Enforcement, Federal Reserve Bulletin, Summer 2005, p. 379. 12

Home Purchase Loan Disparities by Race and Ethnicity of Borrower: Statewide, 7.52% of all first lien home purchase loans were higher-cost loans. For White borrowers statewide, 7.16% of home purchase loans were higher-cost. For African American borrowers, the figures were more than twice that for whites, with 16.29% of home purchase loans constituting higher-cost loans. The figures were also large for higher-cost home purchase lending to American Indians (12.39% of loans were higher-cost) and Pacific Islanders (10.84%). Looking at lending patterns relating to ethnicity, a mere 4.69% of home purchase loans to White non-hispanic borrowers were higher-cost. In comparison, 14.03% of home purchase loans to Latino borrowers were highercost, reflecting that Latino borrowers in California were roughly 3x as likely as White non Hispanic borrowers to get a higher-cost, first lien, home purchase loan. Higher Cost Lending by Race and Ethnicity of Borrowers: First Lien Home Purchase to Owner Occupants in California 2004 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% American Indian Asian African American Pacific Islander White Latino White Non Hispanic 13

Home Purchase Loan Disparities by Race and Income of Neighborhood: In addition to looking at which borrowers are more likely to receive higher-cost home loans, HMDA data also permit an analysis of which neighborhoods are more vulnerable to higher-cost lending. The analysis below compares lending to neighborhoods that are predominantly white (less than 10% minority) to neighborhoods that are predominantly of color (more than 80% minority). Similarly, lending in low-income neighborhoods (less than 50% of the area median income) is compared to lending in upper-income neighborhoods (more than 120% of area median income). A scant 3.51% of home purchase loans in neighborhoods characterized as predominantly white had higher-cost loans. Minority neighborhoods were nearly 4 times as likely to see home purchase loans coming with higher-cost rates (13.59% of loans to neighborhoods characterized as predominantly minority were higher-cost). Similarly, a low 4.41% of home purchase loans to upper-income neighborhoods were higher-cost. For low-income neighborhoods, the figure was 3 times as high. 14.67% of home purchase loans to these neighborhoods were higher-cost. Higher Cost Lending by Race and Income of Neighborhood: First Lien Home Purchase to Owner Occupants in California 2004 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% <10% minority 80-100% minority Low Income Upper Income Refinance Loan Disparities by Race and Ethnicity of Borrower: 14

Statewide, 8.49% of all first lien refinance loans were higher-cost. For White borrowers statewide, 7.93% of refinance loans were higher-cost. For African American borrowers, the figures were more than twice that for whites, with 17.31% of refinance loans being higher-cost. The figures were also high for American Indians (14.24% of loans were highercost), and Pacific Islanders (11.74%). Looking at lending patterns relating to ethnicity, only 6.42% of refinance loans to White non-hispanic borrowers were higher-cost. In contrast, 12.95% of refinance loans to Latinos borrower were higher-cost, twice that for White non-hispanic borrowers. Higher Cost Lending by Race and Ethnicity of Borrower: First Lien Refinance to Owner Occupants in California 2004 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% American Indian Asian African American Pacific Islander White Latino White Non Hispanic 15

Refinance Loan Disparities by Race and Income of Neighborhood: Only 4.37% of home purchase loans in predominantly white neighborhoods had higher-costs. Minority neighborhoods were more than 3 times as likely to see home purchase loans coming with higher-cost rates (13.88% of loans to minority neighborhoods were higher-cost). Similarly, a low 5.01% of home purchase loans to upper-income neighborhoods were higher-cost For low-income neighborhoods, the figure was more than 3 times as high, as 16.51% of home purchase loans to these neighborhoods were higher-cost. Higher Cost Lending By Race and Income of Neighborhood: First Lien Refinance Lending to Owner Occupants in California 2004 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% <10% minority 80-100% minority Low Income Upper Income Who Really Regulates Higher-Cost Lenders in California? Mortgage lenders are primarily regulated by one of six regulatory agencies. Savings associations are regulated by the Office of Thrift Supervision (OTS). National Banks are regulated by the Office of the Comptroller of the Currency (OCC). Member banks and subsidiaries of bank holding companies are regulated by the Federal Reserve Board (FRB). Non-member, state chartered banks are regulated by the Federal Deposit Insurance Corporation (FDIC). Credit unions are regulated by the National Credit Union Administration (NCUA). 16

Mortgage companies are regulated by the Department of Housing and Urban Development (HUD). The regulatory agencies have tended to respond to concerns about predatory lending by asserting that the institutions they regulate are not the problem actors. CRC believes that each of the regulatory agencies must exercise its full authority to investigate illegal lending practices and to enforce fair lending and consumer protection laws. Indeed, HMDA data raise legal issues of compliance with fair lending laws. 15 Looking at first lien home purchase and first lien refinance lending, broken out by regulatory agency, CRC finds: HUD regulated lenders made, by far, the most higher-cost first lien home purchase and refinance loans, having originated 102,040 higher-cost loans. FDIC-regulated lenders originated the second highest total, at a much smaller 16,887 higher-cost loans. HUD regulates the largest number of lenders, more than 500 lenders in California alone, and these lenders include some of the largest subprime lenders in the nation, such as Ameriquest and New Century Mortgage. Total Higher Cost by Agency: First Lien Home Purchase and Refinance to Owner Occupants 120000 100000 80000 60000 40000 20000 0 OCC FRB FDIC OTS NCUA HUD Of all the agencies, the FDIC regulates lenders that, in the aggregate, had the largest percentage of higher-cost loans to underserved borrowers and communities. FDIC lenders were much more likely than other lenders to make 15 Federal Reserve Governor Susan S. Bies, quoted by Reuters, Warning to Bankers on Real Estate, nytimes.com, October 13, 2005. 17

higher-cost loans for both home purchase and refinance to African American borrowers, Latino borrowers, minority neighborhoods and low-income neighborhoods. For example, 43.27% of all FDIC-regulated refinance lending to low-income neighborhoods was higher-cost lending. The next largest rate of higher-cost lending was by HUD lenders, with 25.52% of HUD regulated lending to lowincome neighborhoods consisting of higher-cost loans. It is important to note that the lending patterns of FDIC-regulated institutions were skewed substantially by Fremont Investment & Loan, which accounted for roughly 95% of the higher-cost lending at FDIC institutions. Percentage of First Lien Refinance to Owner Occupants in Low-Income Neighborhoods That Are Higher Cost: By Agency 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% FDIC HUD FRB OTS OCC NCUA National banks regulated by the OCC displayed the greatest disparities. Of the eight categories of lending analyzed, the OCC-regulated lenders had the greatest disparities in five areas (home purchase lending to African Americans, refinance lending to African Americans, refinance lending to Latinos, refinance lending to minority neighborhoods, refinance lending to low-income neighborhoods). Further, the national banks had the second highest disparities in two additional areas (home purchase lending to Latinos, home purchase lending to low-income neighborhoods). For example, national banks were 4.15 times as likely to make higher-cost refinance loans to African Americans as they were to make higher-cost loans to white borrowers. This compares to the second place FDIC lenders that were 2.36 times as likely to make higher-cost loans to African American borrowers as they were to white borrowers. 18

Higher Cost Disparity Ratio by Agency: Greater Likelihood of Higher Cost Lending to African Americans 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 OCC FDIC OTS FRB NCUA HUD Savings associations regulated by the OTS exhibited the next largest disparities, having the highest disparities in three of the eight areas analyzed (home purchase lending to Latinos, home purchase lending to minority neighborhoods, home purchase lending to low-income neighborhoods), and had the second highest disparity ratio in three additional areas (home purchase lending to African Americans, refinance lending to Latinos, refinance lending to low-income neighborhoods). For example, OTS lenders in the aggregate were more than eight times as likely to make a higher-cost home purchase loan in minority neighborhoods as they were to make a higher-cost loan in predominantly white neighborhoods. The next greatest disparity was with Federal Reserve regulated lenders, which were 5.32 times as likely to make a higher-cost loan in a minority neighborhood than they were to make such a loan in a white neighborhood. Higher Cost Disparity Ratio by Agency: First Liend Home Purchase Lending to Minority Neighborhoods 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 OTS FRB FDIC OCC HUD NCUA 19

Which Communities Are Impacted by Higher-Cost Lending? CRC analyzed higher-cost lending patterns in 12 California cities: Delano, El Centro, Fresno, Los Angeles, Modesto, Oakland, Oxnard, Sacramento, San Diego, San Francisco, Salinas, and Yuba City. 16 This analysis focuses on high rate lending to African American and Latino borrowers, and to minority and low and moderate income (LMI) neighborhoods. 17 In looking at the overall rate of higher-cost lending: Cities that can be characterized as rural had the highest rates of higher-cost lending, with Delano, El Centro, Fresno, Modesto, and Yuba City having 25% to 15% of all home loans coming at higher-cost. Higher Cost Lending to Owner Occupants in 12 California Cities 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Delano El Centro Fresno Modesto Yuba City Sacramento Salinas Los Angeles Oxnard Oakland San Diego San Francisco Higher-Cost Lending to African American Borrowers in 12 Cities: Despite relatively low rates of higher-cost lending in California, African Americans continue to receive a large share of higher-cost loans. o In Oxnard, 28.21% of home purchase loans made to African Americans were higher-cost. 16 Tables with additional lending data, sorted by city, are located in the back of this report. 17 As the geographic area of analysis becomes much smaller, we consider neighborhoods with less than 20% minority concentration ( white ), and neighborhoods with more than 50% minority concentration ( minority ); and we look at middle and upper-income neighborhoods combined ( middle and upperincome ), and low and moderate-income neighborhoods combined ( LMI ). Without aggregating census tracts in this way, certain cities would yield no low-income, upper-income or white neighborhoods. 20

o Higher-cost refinance loans to African Americans exceeded 25% of lending to African Americans in Fresno (27.88%) and Modesto (25.07%). o In 11 out of 12 cities, African Americans were more likely to receive higher-cost home purchase loans than whites. San Francisco had the greatest disparity, with African Americans in that city nearly five times as likely as whites to receive a higher-cost loan. Higher Cost Home Purchase Loan Disparities: Lending to African Americans in 12 Cities 6.00 5.00 4.00 3.00 2.00 1.00 0.00 San Francisco Oakland Oxnard Fresno Sacramento Los Angeles Salinas San Diego Yuba City Modesto Delano El Centro o In 10 of 12 cities, African Americans were more likely to receive highercost refinance loans than whites. San Francisco saw the greatest disparity, where African Americans were 3.78 times as likely to get a higher-cost loan. Higher-Cost Lending to Latino Borrowers in 12 Cities: Rural areas saw the greatest rates of higher-cost lending to Latino borrowers, while urban areas exhibited greater disparities between Latino and White non Hispanic borrowers. o Latino borrowers in Delano, Fresno, and Yuba City were most likely to have higher-cost loans. In Delano, 18.82% of home purchase loans and 25.64% of refinance loans to Latinos were higher-cost. 21

In Fresno, the figures were 17.13% and 23.36% respectively. In Yuba City, it was 17.06% and 18.37%. In El Centro, 25.13% of refinance loans to Latino borrowers were higher-cost. Higher Cost Refinance Lending to Latinos in 12 Cities 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Delano El Centro Fresno Yuba City Sacramento Modesto Los Angeles Oakland Salinas Oxnard San Diego San Francisco o San Francisco and Los Angeles had the largest disparities for higher-cost lending to Latinos as compared to White non Hispanics. In San Francisco, Latino borrowers were 6.42 times as likely as white borrowers to get a higher-cost home purchase loan, and 2.72 times as likely to get a higher-cost refinance loan. In Los Angeles, the figures were 4.28 and 2.63. Higher-Cost Lending to Minority Neighborhoods in 12 Cities: Rural communities witnessed a high percentage of higher-cost lending in minority neighborhoods, while the cities saw the greatest disparities and the largest number of higher-cost loans. o Delano had the largest percentage of higher-cost loans in its minority neighborhoods, for both home purchase lending (17.37% of loans in these neighborhoods were higher-cost) and refinance lending (30.10% were higher-cost). o Fresno came in second in both categories, with 15.99% of home purchase loans carrying higher-cost rates, and 24.42% of refinance loans doing so. o The urban areas of Oakland, San Francisco, and Los Angeles had the largest higher-cost disparities for home purchase loans (10.89 times, 9.03 22

times, and 6.35 times, respectively) and refinance loans (4.96 times, 6.23 times, and 7.51 times, respectively) to minority neighborhoods. o No disparity ratio could be calculated for the communities of Delano, El Centro, Salinas and Yuba City, as no loans were made to white census tracts (less than 20% minority). o There were 7,957 higher-cost refinance loans originated in minority neighborhoods within the city of Los Angeles alone. Higher Cost Refinance Lending in Minority Neighborhoods 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Los Angeles Sacramento San Diego Fresno Oakland Modesto Oxnard Salinas San Francisco Delano El Centro Yuba City # high cost loans made Higher-Cost to Low-Moderate Income Neighborhoods in 12 Cities: Higher-cost lending to low and moderate-income neighborhoods was prevalent. o The city of El Centro had a very large percentage of loans in its low and moderate-income neighborhoods that came with higher-costs. This was true for both home purchase (29.41%) and refinance (31.55%) loans. o El Centro also had the highest home purchase loan disparity ratio, with low and moderate-income neighborhoods 4.27 times as likely as middle and upper-income neighborhoods to get higher-cost loans. 23

Higher Cost Home Purchase Disparity Ratio: Greater Likelihood that in LMI Neighborhoods Will Be High Cost 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 El Centro Oakland Los Angeles Fresno San Diego Sacramento Modesto Oxnard Salinas San Francisco Yuba City Delano o Oakland and Los Angeles had the highest refinance loan disparity ratios, at 3.55 times and 2.59 times, respectively. Fringe Finance v. Mainstream Access Importantly, in its own analysis of the new HMDA data, the Federal Reserve noted that lending disparities are smaller around the assessment areas of banks. 18 This is an argument for a strong Community Reinvestment Act and for financial institutions to develop strong reinvestment programs in underserved areas. Banks that avoid locating branches in certain neighborhoods may be missing significant business opportunity. 19 They also leave those communities vulnerable to the high cost check cashers and payday lenders. In Where Are the Bank Branches in My Community? An Analysis of Branch Distribution in Low-Income Neighborhoods, CRC finds that the largest banks are not well serving low and moderate income areas. 20 18 However, whether the loan was originated by an institution in its CRA assessment area does matter. Differences across groups for lending within an assessment area are about one-third of those for lenders outside the assessment area. Moreover, for all racial and ethnic groups, lending within an assessment area exhibits a much lower incidence of higher priced lending, (Avery, Robert B., and Canner, Glenn B., New Information Higher-Cost Under HMDA and Its Application in Fair Lending Enforcement, Federal Reserve Bulletin, Summer 2005, p. 382). 19 A recently released report from the National Community Investment Fund notes, Banks looking for new customers and more deposits might be able to find them in low-income neighborhoods mostly served by check cashers, payday lenders, and other fringe financial institutions. (as reported by Ben Jackson in Study Argues for Prospecting in Poorer Markets, American Banker, December 6, 2005). 20 Serna, Rhea, California Reinvestment Coalition, Where Are the Bank Branches in My Community? An Analysis of Branch Distribution in Low-Income Neighborhoods (November 2005), available at www.calreinvest.org 24

In looking at the 12 survey cities, disparities between check casher presence and bank presence are stark 21 : The number of check cashers in eight cities equaled or exceeded the number of bank branches there. Oxnard had the highest concentration of check cashers, with nearly 3 times as many check cashers as banks. Fringe v Mainstream Access Disparities: # of Check Cashers Compared to # Bank Branches in 12 Cities 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Oxnard Delano Fresno Los Angeles El Centro Sacramento Salinas San Diego Yuba City Modesto Oakland San Francisco Check Casher/Branch Disparity Oakland, with a relatively low ratio of check cashers (59) to banks (79) compared to other survey cities, addressed concerns about the prevalence of check cashers and the negative impacts they have on the community by passing a land use ordinance restricting the location of new check cashing establishments. Likewise in San Francisco, which has the lowest check casher/bank ratio of survey cities, more than one-third of the 98 check cashers in the city are located in the Mission District, the City s predominantly working class Latino 21 Branch data was obtained from fdic.gov website. Check casher data was obtained from the California Department of Corporations. Analysis reflects only those establishments that are identified as being located within 1 of the 12 survey cities. This analysis does not account for bank branches or check cashers that are identified by a different neighborhood name, though that neighborhood and that establishment may be included within the boundaries of 1 of the 12 survey cities. 25

neighborhood. San Francisco is also considering an ordinance to restrict the prevalence of check cashers in the community. While check cashers are a growing presence, banks are not keeping pace. The cities of Delano and El Centro each only have six bank branches in their midst, though Delano has eleven check cashers and El Centro eight check cashers. City # banks # check cashers fringe ratio Oxnard 21 56 266.67% Delano 6 11 183.33% Fresno 85 155 182.35% Los Angeles 352 568 161.36% El Centro 6 8 133.33% Sacramento 115 145 126.09% Salinas 28 35 125.00% San Diego 226 224 99.12% Yuba City 14 13 92.86% Modesto 50 41 82.00% Oakland 79 59 74.68% San Francisco 246 98 40.24% Los Angeles has an astounding 568 check cashers. San Diego has 224. Check Cashers in 12 Cities 600 500 400 300 200 100 0 Oxnard Delano Fresno Los Angeles El Centro Sacramento Salinas San Diego Yuba City Modesto Oakland San Francisco The prevalence of check cashing establishments in survey cities suggests that access to mainstream banks and low cost credit are impaired. Check cashers have clearly found a niche, are serving a large number of consumers, and are making money doing so. Banks and prime mortgage lenders should actively compete for this market. 26

Recommendations In order to address the higher-cost lending disparities highlighted in this report, CRC recommends: Ensuring that borrowers get the best loan. Most of the top 20 lenders identified in the report offer both prime and subprime loans. The Federal Reserve has noted that much of the lending disparity by race and ethnicity can be explained by the fact that people of color are more likely to use a higher-cost subprime lender. 22 The Fed paper goes on to note that the greater use of higher-cost lenders by people of color may reflect that lower-cost prime lenders are not well serving these communities, or that these borrowers are being steering improperly into higher-cost loan products. For those companies that have both prime and subprime channels, it is imperative that they offer all borrowers the best loan product for which they qualify, regardless of how they look or where they live. Vigorously Examining Lending Practices and Enforcing Anti Discrimination Laws. Federal and state regulators must more vigorously examine lending practices and enforce anti predatory, fair housing/fair lending, and consumer protection laws and regulations. Banking regulators, like the OCC, should not be allowed to thwart the efforts of state officials seeking to investigate and enforce violations of fair housing or state consumer protection law. This is especially so where the regulators have not shown themselves ready to aggressively combat lending abuses. Additionally, HUD, as the regulator of the largest number of subprime lenders, as well as some of the largest subprime lenders, must develop a mechanism for systematically monitoring compliance of the companies it ostensibly regulates. HUD has made recent statements suggesting it may pursue a more robust approach to enforcement. 23 Additionally, the Department of Justice may be examining HMDA data in order to target enforcement action. 24 22 Most of the reduction in the difference in the incidence of higher-priced lending across groups comes from adding the control for lender to the control for borrower-related factors. Avery, Robert B., and Canner, Glenn B., New Information Higher-Cost Under HMDA and Its Application in Fair Lending Enforcement, Federal Reserve Bulletin, Summer 2005, p. 379. 23 Zindler, Ethan, In Focus: 200 Facing Scrutiny of HMDA Data, citing Floyd O. May, HUD s head of the Office of Fair Housing and Equal Opportunity, as saying HUD was considering a full-scale investigation, American Banker, September 19, 2005. 24 The Justice Department has asked a number of mortgage lenders for more information on how they priced loans to minorities, the agency said. Paletta, Damian, Justice Dept. Activates Its Own HMDA Data Probe, American Banker, November 30, 2005. 27

Expanding branches and CRA requirements. A strong retail branch presence is an effective outreach mechanism for lenders seeking to make good loan products readily available to minority borrowers and neighborhoods. Additionally, the Federal Reserve notes that lending disparities are smaller where banks are lending in CRA assessment areas, which are determined in large part, by where bank branches are located. It is time for the Community Reinvestment Act to be updated so that the requirement to reinvest within CRA assessment areas captures banks like Countrywide Bank and the potential H&R Block Bank whose business models call for taking deposits and conducting banking nationally, but reinvesting only in a few local areas. Eliminating YSPs and discretionary pricing. Home loan sales where brokers or loan officers have discretion to charge different prices to different consumers is an invitation to discriminate. Federal Reserve Governor Mark Olson recently noted that institutions must examine if loan originators have discretion in pricing and receive incentives to extract fees from vulnerable or less well-informed borrowers. 25 Lenders should eliminate this practice and regulators should vigorously pursue those lenders who do not. Yield Spread Premiums provide financial incentives for loan brokers to charge borrowers a higher rate than they deserve. YSPs are an inherently abusive product that only heightens the problem of borrowers of color paying more for their loans, and, as such, should be eliminated. Providing more flexible products for immigrants and people of color, and better outreach in rural areas and minority urban neighborhoods for prime products. Lenders should develop more flexible lending products that meet the needs of immigrants and people of color, and should aggressively market to the rural and inner city urban areas that are prey to higher-cost lenders. Lenders must get beyond their over reliance on credit scores, and focus on a borrower s ability to repay the loan. Expanding HMDA reporting requirements. As HMDA data reveal more information about lending patterns, the lending industry appears to suggest that the data somehow is less meaningful. The Federal Reserve should put an end to this ongoing debate, by making available through HMDA data the very information that lenders say is needed to assess whether discrimination is occurring. Such information should include credit score, debt-to-income ratios, loan-to-value ratios and points and fee data. Shedding light on lending patters inevitably leads to better lending; 25 Zindler, Ethan, Olson: Pay Packages May Spur Predatory Lending, American Banker, November 8, 2005. 28

Lending in State State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost American Indian 9507 1344 12.39% Asian 70515 3158 4.29% African American 16869 3282 16.29% Pacific Islander 6827 830 10.84% White 310082 23899 7.16% Latino 112997 18446 14.03% White Non Hispanic 199812 9830 4.69% <10% Minority Tracts 8985 327 3.51% 80-100% Minority Tracts 62599 9842 13.59% Low Income Tracts 12339 2121 14.67% Upper Income Tracts 223298 10297 4.41% TOTAL 529467 43037 7.52% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost American Indian 17621 2925 14.24% Asian 108395 4532 4.01% African American 47353 9916 17.31% Pacific Islander 13013 1731 11.74% White 676082 58215 7.93% Latino 212196 31557 12.95% White Non Hispanic 464590 31899 6.42% <10% Minority Tracts 19913 909 4.37% 80-100% Minority Tracts 168873 27215 13.88% Low Income Tracts 20980 4148 16.51% Upper Income Tracts 484341 25525 5.01% TOTAL 1145622 106321 8.49% 29

Lending by Agency: Office of the Comptroller of the Currency State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties OCC Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 2004 45 2.20% 2.31 Asian 20504 95 0.46% 0.49 African American 3237 112 3.34% 3.52 Pacific Islander 1169 17 1.43% 1.51 White 75276 722 0.95% 1.00 Latino 17585 504 2.79% 4.26 White Non Hispanic 54200 357 0.65% 1.00 <10% Minority Tracts 2437 16 0.65% 1.00 80-100% Minority Tracts 10630 272 2.49% 3.83 Low Income Tracts 2513 55 2.14% 3.65 Upper Income Tracts 60147 355 0.59% 1.00 TOTAL 126072 1400 1.10% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 4632 192 3.98% 3.64 Asian 36860 117 0.32% 0.29 African American 7301 347 4.54% 4.15 Pacific Islander 2276 48 2.07% 1.89 White 169943 1880 1.09% 1.00 Latino 38511 981 2.48% 2.85 White Non Hispanic 128038 1126 0.87% 1.00 <10% Minority Tracts 5993 35 0.58% 1.00 80-100% Minority Tracts 30336 784 2.52% 4.34 Low Income Tracts 3627 120 3.20% 5.04 Upper Income Tracts 135538 866 0.63% 1.00 TOTAL 270454 3703 1.35% Top Higher-Cost Lenders # $ Amount (+000) Higher-Cost Market Share National City Bank of Indiana 7352 873804 56.56 Wells Fargo Bank, NA 1732 275018 13.33 30

Lending by Agency: Federal Reserve Board State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties FRB Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 3039 120 3.80% 1.02 Asian 8356 174 2.04% 0.55 African American 1875 198 9.55% 2.58 Pacific Islander 670 29 4.15% 1.12 White 40891 1574 3.71% 1.00 Latino 15015 1121 6.95% 2.80 White Non Hispanic 26111 664 2.48% 1.00 <10% Minority Tracts 989 12 1.20% 1.00 80-100% Minority Tracts 7973 543 6.38% 5.32 Low Income Tracts 1483 110 6.91% 3.13 Upper Income Tracts 30198 682 2.21% 1.00 TOTAL 68463 2611 3.67% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 3033 421 12.19% 1.54 Asian 6635 314 4.52% 0.57 African American 4839 1033 17.59% 2.23 Pacific Islander 969 185 16.03% 2.03 White 62016 5312 7.89% 1.00 Latino 19572 2960 13.14% 1.89 White Non Hispanic 41365 3086 6.94% 1.00 <10% Minority Tracts 1458 72 4.71% 1.00 80-100% Minority Tracts 14179 2461 14.79% 3.14 Low Income Tracts 1590 322 16.84% 3.10 Upper Income Tracts 41068 2357 5.43% 1.00 TOTAL 97124 9870 9.22% Top Higher-Cost Lenders # $ Amount (+000) Higher-Cost Market Share Countrywide Home 15497 2554750 63.41 Wells Fargo Financial 3732 540389 15.27 Citifinancial Services 2455 146709 10.05 31

Lending by Agency: Federal Deposit Insurance Corporation State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties FDIC Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 356 163 31.41% 1.18 Asian 2391 483 16.81% 0.63 African American 659 805 54.99% 2.07 Pacific Islander 233 133 36.34% 1.37 White 11882 4287 26.51% 1.00 Latino 3690 2604 41.37% 2.18 White Non Hispanic 8015 1878 18.98% 1.00 <10% Minority Tracts 484 58 10.70% 1.00 80-100% Minority Tracts 1802 1303 41.96% 3.92 Low Income Tracts 446 331 42.60% 2.22 Upper Income Tracts 7380 1750 19.17% 1.00 TOTAL 18240 6873 27.37% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 454 135 22.92% 1.12 Asian 4055 506 11.09% 0.54 African American 1331 1247 48.37% 2.36 Pacific Islander 465 175 27.34% 1.34 White 22014 5670 20.48% 1.00 Latino 5427 2929 35.05% 2.29 White Non Hispanic 15889 2869 15.29% 1.00 <10% Minority Tracts 721 71 8.96% 1.00 80-100% Minority Tracts 4265 2439 36.38% 4.06 Low Income Tracts 548 418 43.27% 2.86 Upper Income Tracts 14685 2614 15.11% 1.00 TOTAL 35109 10014 22.19% Top Higher-Cost Lenders # $ Amount (+000) Higher-Cost Market Share Fremont Investment & Loan 22094 4973816 94.89 Bank of the West 313 19826 1.34 Greenpoint Mortgage Funding 305 48262 1.31 32

Lending by Agency: Office of Thrift Supervision State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties OTS Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 852 77 8.29% 3.50 Asian 17285 311 1.77% 0.75 African American 2805 221 7.30% 3.09 Pacific Islander 1078 47 4.18% 1.76 White 60340 1463 2.37% 1.00 Latino 18914 1617 7.88% 4.85 White Non Hispanic 41299 682 1.62% 1.00 <10% Minority Tracts 2209 19 0.85% 1.00 80-100% Minority Tracts 11137 839 7.01% 8.22 Low Income Tracts 2065 164 7.36% 4.27 Upper Income Tracts 48893 858 1.72% 1.00 TOTAL 106117 3444 3.14% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 3245 219 6.32% 2.64 Asian 32779 517 1.55% 0.65 African American 13604 770 5.36% 2.24 Pacific Islander 3384 130 3.70% 1.54 White 176123 4324 2.40% 1.00 Latino 62253 3385 5.16% 2.75 White Non Hispanic 117115 2238 1.88% 1.00 <10% Minority 5454 76 1.37% 1.00 80-100% Minority 50440 2388 4.52% 3.29 Low Income Tracts 6323 372 5.56% 3.37 Upper Income Tracts 132969 2232 1.65% 1.00 TOTAL 314802 9036 2.79% Top Higher-Cost Lenders # $ Amount Higher-Cost Market (+000s) Share Lehman Brothers Bank 8968 2105470 51.42 Citicorp Trust Bank, FSB 2135 368962 12.24 AIG FSB 1666 297813 9.55 ING Direct 1599 530958 9.17 33

Lending by Agency: National Credit Union Administration State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties NCUA Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 60 0 0.00% 0.00 Asian 484 3 0.62% 0.38 African American 228 5 2.15% 1.33 Pacific Islander 65 0 0.00% 0.00 White 3355 55 1.61% 1.00 Latino 564 6 1.05% 0.64 White Non Hispanic 2522 42 1.64% 1.00 <10% Minority Tracts 105 2 1.87% 1.00 80-100% Minority Tracts 368 2 0.54% 0.29 Low Income Tracts 91 0 0.00% 0.00 Upper Income Tracts 2872 38 1.31% 1.00 TOTAL 6171 77 1.23% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost Disparit % Higher-Cost y American Indian 438 3 0.68% 0.62 Asian 1539 7 0.45% 0.41 African American 1435 35 2.38% 2.18 Pacific Islander 355 5 1.39% 1.27 White 15637 173 1.09% 1.00 Latino 3488 39 1.11% 0.89 White Non Hispanic 11321 143 1.25% 1.00 <10% Minority Tracts 379 6 1.56% 1.00 80-100% Minority Tracts 2872 35 1.20% 0.77 Low Income Tracts 393 4 1.01% 1.21 Upper Income Tracts 12109 102 0.84% 1.00 TOTAL 28460 290 1.01% Top Higher-Cost Lenders # $ Amount Higher-Cost Market (+000s) Share CU Factory Built Lending 216 14954 18.48 Educational Employees CU 121 3805 10.35 34

Lending by Agency: Housing and Urban Development State of California Conventional First Lien for 1-4 Unit Owner Occupied Properties HUD Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 3196 939 22.71% 1.93 Asian 21495 2092 8.87% 0.75 African American 8065 1941 19.40% 1.65 Pacific Islander 3612 604 14.33% 1.22 White 118338 15798 11.78% 1.00 Latino 57229 12594 18.04% 2.15 White Non Hispanic 67665 6207 8.40% 1.00 <10% Minority Tracts 2761 220 7.38% 1.00 80-100% Minority Tracts 30689 6883 18.32% 2.48 Low Income Tracts 5741 1461 20.29% 2.47 Upper Income Tracts 73808 6614 8.22% 1.00 TOTAL 204404 28632 12.29% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 5819 1955 25.15% 1.67 Asian 26527 3071 10.38% 0.69 African American 18843 6484 25.60% 1.70 Pacific Islander 5564 1188 17.59% 1.17 White 230349 40856 15.06% 1.00 Latino 82945 21263 20.40% 1.58 White Non Hispanic 150862 22437 12.95% 1.00 <10% Minority Tracts 5908 649 9.90% 1.00 80-100% Minority Tracts 66781 19108 22.25% 2.25 Low Income Tracts 8499 2912 25.52% 2.43 Upper Income Tracts 147972 17354 10.50% 1.00 TOTAL 399673 73408 15.52% Top Higher-Cost Lenders # $ Amount (+000s) Higher-Cost Market Share Ameriquest and Argent Mortgage 26687 5965822 14.42 WMC Mortgage Corp 18937 3294060 10.23 New Century Mortgage 17888 3100483 9.67 Long Beach Mortgage 8574 1073939 4.63 35

DELANO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 1151 384 25.02% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent/Olympus 73 7992 19.01 Accredited Home Lenders 29 2236 7.55 Countrywide Home 24 2415 6.25 H&R Block/Option One 23 2180 5.99 New Century Mortgage 22 2252 5.73 WMC Mortgage Corp 18 1297 4.69 Fremont Investment & Loan 17 1413 4.43 HSBC/Beneficial/Decision One 16 1177 4.16 Washington Mutual/Long Beach 15 1022 3.9 Wells Fargo/Wells Fargo Financial 11 1015 2.86 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 15 3 16.67% 1.04 Asian 17 4 19.05% 1.19 African American 5 1 16.67% 1.04 Pacific Islander 6 1 14.29% 0.89 White 121 23 15.97% 1.00 Latino 151 35 18.82% 3.76 White Non Hispanic 19 1 5.00% 1.00 <20% Minority Tracts 0 0 0.00% 0.00 50-100% Minority Tracts 214 45 17.37% 0.00 Low Moderate Income Tracts 174 33 15.94% 0.69 Middle Upper Income Tracts 40 12 23.08% 1.00 TOTAL 214 45 17.37% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 46 7 13.21% 0.39 Asian 51 19 27.14% 0.81 African American 8 1 11.11% 0.33 Pacific Islander 14 8 36.36% 1.08 White 232 117 33.52% 1.00 Latino 348 120 25.64% 0.76 White Non Hispanic 37 19 33.93% 1.00 <20% Minority Tracts 0 0 0.00% 0.00 50-100% Minority Tracts 562 242 30.10% 0.00 Low Moderate Income Tracts 390 174 30.85% 1.09 36

Middle Upper Income Tracts 172 68 28.33% 1.00 TOTAL 562 243 30.19% EL CENTRO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 1705 482 22.04% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent/Olympus 68 9220 14.11 Fremont Investment & Loan 53 6579 11 Accredited Home Lenders, Inc. 51 4814 10.58 Countrywide Home 33 3045 6.85 National City Bank, Indiana 21 2070 4.36 New Century Mortgage Corp 20 2123 4.15 Wells Fargo Financial California 16 2216 3.32 WMC Mortgage 14 1546 2.9 American Home Mortgage 12 550 2.49 Encore Credit Corp 10 1335 2.07 Conventional First lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 17 1 5.56% 0.55 Asian 25 0 0.00% 0.00 African American 7 0 0.00% 0.00 Pacific Islander 6 1 14.29% 1.42 White 295 33 10.06% 1.00 Latino 226 33 12.74% 2.24 White Non Hispanic 116 7 5.69% 1.00 <20% Minority Tracts 0 0 0.00% 1.00 50-100% Minority Tracts 443 41 8.47% 0.00 Low Moderate Income Tracts 24 10 29.41% 4.27 Middle Upper Income Tracts 419 31 6.89% 1.00 TOTAL 451 50 9.98% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 27 14 34.15% 1.50 Asian 9 3 25.00% 1.10 African American 15 3 16.67% 0.73 Pacific Islander 8 1 11.11% 0.49 White 474 140 22.80% 1.00 Latino 441 148 25.13% 1.56 White Non Hispanic 156 30 16.13% 1.00 <20% Minority Tracts 0 0 0.00% 1.00 50-100% Minority Tracts 792 215 21.35% 0.00 37

Low Moderate Income Tracts 115 53 31.55% 1.63 Middle Upper Income Tracts 677 162 19.31% 1.00 TOTAL 804 233 22.47% FRESNO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 28103 6057 17.73% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent/Olympus 1002 141874 16.54 Fremont Investment & Loan 440 62242 7.26 Countrywide Home 434 53176 7.17 Citicorp Trust Bank/Citifinancial 420 45302 6.93 Wells Fargo Financial/Wells Fargo Bank, NA 355 44668 5.87 New Century Mortgage 308 40538 5.09 HSBC/Decision One Mortgage 290 33376 4.79 Accredited Home Lenders 231 23359 3.81 Washington Mutual/Long Beach Mortgage 178 18019 2.94 WMC Mortgage Corp 168 18622 2.77 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 118 27 18.62% 2.00 Asian 1036 97 8.56% 0.92 African American 217 63 22.50% 2.41 Pacific Islander 89 7 7.29% 0.78 White 4985 513 9.33% 1.00 Latino 1819 376 17.13% 2.61 White Non Hispanic 3064 215 6.56% 1.00 <20% Minority Tracts 645 27 4.02% 1.00 50-100% Minority Tracts 2827 538 15.99% 3.98 Low Moderate Income Tracts 1345 293 17.89% 2.16 Middle Upper Income Tracts 6522 590 8.30% 1.00 TOTAL 7890 889 10.13% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 307 122 28.44% 1.90 Asian 810 122 13.09% 0.88 African American 533 206 27.88% 1.87 Pacific Islander 146 45 23.56% 1.58 White 9941 1746 14.94% 1.00 Latino 3553 1083 23.36% 1.90 White Non Hispanic 6598 924 12.28% 1.00 <20% Minority Tracts 992 52 4.98% 1.00 50-100% Minority Tracts 6415 2073 24.42% 4.90 38

Low Moderate Income Tracts 2984 1106 27.04% 1.91 Middle Upper Income Tracts 12412 2051 14.18% 1.00 TOTAL 15430 3173 17.06% LOS ANGELES Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 164389 23855 12.67% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share WMC Mortgage Corp 3362 627595 14.09 Ameriquest/Argent/Olympus 2806 707180 11.77 New Century Mortgage Corp 1666 317140 6.98 Fremont Investment & Loan 1494 383267 6.26 Countrywide Home 1450 271154 6.08 Lehman Brothers Bank/Finance America 1103 282633 4.62 Encore Credit Corp 1036 244409 4.34 Washington Mutual/Long Beach Mortgage 579 74960 2.43 Accredited Home Lenders 485 81191 2.03 National City Bank, Indiana 469 68091 1.97 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 672 129 16.10% 2.18 Asian 4088 291 6.65% 0.90 African American 2105 426 16.83% 2.28 Pacific Islander 429 57 11.73% 1.59 White 24560 1955 7.37% 1.00 Latino 10158 1899 15.75% 4.28 White Non Hispanic 15552 594 3.68% 1.00 <20% Minority Tracts 6794 136 1.96% 1.00 50-100% Minority Tracts 21468 3058 12.47% 6.35 Low Moderate Income Tracts 10673 1916 15.22% 2.63 Middle Upper Income Tracts 30159 1854 5.79% 1.00 TOTAL 40838 3770 8.45% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 2046 311 13.19% 1.80 Asian 6760 475 6.57% 0.89 African American 7729 1624 17.36% 2.36 Pacific Islander 1100 150 12.00% 1.63 White 59624 4730 7.35% 1.00 Latino 24790 3594 12.66% 2.63 White Non Hispanic 37288 1889 4.82% 1.00 <20% Minority Tracts 17125 290 1.67% 1.00 50-100% Minority Tracts 55660 7957 12.51% 7.51 39

Low Moderate Income Tracts 26322 4750 15.29% 2.59 Middle Upper Income Tracts 76542 4794 5.89% 1.00 TOTAL 102872 9545 8.49% MODESTO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 19643 3904 16.58% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent/Olympus 488 86166 12.49 New Century Mortgage 313 42827 8.02 Fremont Investment & Loan 304 53492 7.79 Washington Mutual/Long Beach 265 22106 6.79 Lehman Brothers Bank/Finance America 210 39384 5.37 Countrywide Home 200 26895 5.12 WMC Mortgage Corp 160 23801 4.1 HSBC/Decision One 138 18475 3.53 First NLC Financial Services 105 12889 2.69 National City Bank, Indiana 91 9758 2.33 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 166 25 13.09% 1.42 Asian 396 29 6.82% 0.74 African American 130 25 16.13% 1.75 Pacific Islander 131 21 13.82% 1.50 White 3709 377 9.23% 1.00 Latino 2042 272 11.75% 1.47 White Non Hispanic 1995 174 8.02% 1.00 <20% Minority Tracts 244 17 6.51% 1.00 50-100% Minority Tracts 1309 206 13.60% 2.09 Low Moderate Income Tracts 948 157 14.21% 1.74 Middle Upper Income Tracts 4973 442 8.16% 1.00 TOTAL 5927 601 9.21% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparit y American Indian 257 61 19.18% 1.66 Asian 382 41 9.69% 0.84 African American 254 85 25.07% 2.17 Pacific Islander 156 18 10.34% 0.89 White 6555 858 11.57% 1.00 Latino 2741 417 13.20% 1.21 White Non Hispanic 4170 511 10.92% 1.00 40

<20% Minority Tracts 444 35 7.31% 1.00 50-100% Minority Tracts 2651 549 17.16% 2.35 Low Moderate Income Tracts 2100 443 17.42% 1.49 Middle Upper Income Tracts 8251 1090 11.67% 1.00 TOTAL 10371 1542 12.94% OAKLAND Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 21697 2432 10.08% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Fremont Investment & Loan 551 135242 22.66 Washington Mutual/Long Beach 381 47911 15.67 Countrywide Home 184 35075 7.57 Lehman Brothers Bank/Finance America 121 47481 4.98 Encore Credit Corp 116 26342 4.77 Argent Mortgage Co 82 31913 3.37 MortageIt, Inc 78 23638 3.21 WMC Mortgage Corp 65 22915 2.67 Wells Fargo Financial/Wells Fargo Bank, NA 65 10109 2.67 Aames Funding Corp 63 10211 2.59 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 117 14 10.69% 2.45 Asian 1112 47 4.06% 0.93 African American 716 141 16.45% 3.78 Pacific Islander 62 8 11.43% 2.62 White 2987 136 4.35% 1.00 Latino 1057 112 9.58% 3.33 White Non Hispanic 2025 60 2.88% 1.00 <20% Minority Tracts 127 1 0.78% 1.00 50-100% Minority Tracts 4153 386 8.50% 10.89 Low Moderate Income Tracts 3184 336 9.55% 3.19 Middle Upper Tracts 2983 92 2.99% 1.00 TOTAL 6169 428 6.49% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 150 10 6.25% 1.27 Asian 1642 70 4.09% 0.83 African American 2563 431 14.40% 2.93 Pacific Islander 111 17 13.28% 2.71 White 5346 276 4.91% 1.00 Latino 1564 160 9.28% 2.62 White Non Hispanic 3888 143 3.55% 1.00 41

<20% Minority Tracts 275 6 2.14% 1.00 50-100% Minority Tracts 8047 954 10.60% 4.96 Low Moderate Income Tracts 5746 803 12.26% 3.55 Middle Upper Income Tracts 7156 256 3.45% 1.00 TOTAL 12902 1059 7.59% OXNARD Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 10739 1521 12.41% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share WMC Mortgage Corp 145 30215 9.53 Bank of America/Ownit Mortgage 134 31243 8.81 Ameriquest/Argent Mortgage 123 34974 8.09 Countrywide Home 108 18778 7.1 Fremont Investment & Loan 105 30753 6.9 New Century Mortgage Corp 76 16192 5 Encore Credit Corp 63 16426 4.14 Washington Mutual/Long Beach 48 5947 3.16 Wells Fargo Financial California 48 5888 3.16 HSBC/Decision One 39 10434 2.56 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 178 13 6.81% 0.85 Asian 115 3 2.54% 0.32 African American 28 11 28.21% 3.52 Pacific Islander 60 3 4.76% 0.59 White 1402 122 8.01% 1.00 Latino 1300 176 11.92% 3.31 White Non Hispanic 535 20 3.60% 1.00 <20% Minority Tracts 232 6 2.52% 1.00 50-100% Minority Tracts 2079 221 9.61% 3.81 Low Moderate Income Tracts 1316 149 10.17% 1.45 Middle Upper Income Tracts 1193 90 7.01% 1.00 TOTAL 2512 239 8.69% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 242 28 10.37% 1.39 Asian 335 14 4.01% 0.54 African American 161 17 9.55% 1.28 Pacific Islander 146 9 5.81% 0.78 White 3750 303 7.48% 1.00 Latino 2857 277 8.84% 1.49 White Non Hispanic 1551 98 5.94% 1.00 42

<20% Minority Tracts 388 7 1.77% 1.00 50-100% Minority Tracts 5645 487 7.94% 4.48 Low Moderate Income Tracts 3423 334 8.89% 1.56 Middle Upper Income Tracts 3090 187 5.71% 1.00 TOTAL 6517 522 7.42% SACRAMENTO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 78364 13170 14.39% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Fremont Investment & Loan 1254 232549 9.52 Ameriquest/Argent Mortgage 1250 246270 9.49 New Century Mortgage 951 138628 7.22 Countrywide Home 912 131521 6.92 WMC Mortgage Corp 715 103152 5.43 Lehman Brothers Bank/Finance America 696 134752 5.29 MortgageIt, Inc 622 121789 4.72 Washington Mutual/Long Beach 518 58736 3.93 Accredited Home Lenders 345 40737 2.62 National City Bank, Indiana 338 38673 2.57 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 303 58 16.07% 2.04 Asian 3768 227 5.68% 0.72 African American 1122 256 18.58% 2.35 Pacific Islander 449 54 10.74% 1.36 White 12049 1032 7.89% 1.00 Latino 2885 492 14.57% 2.24 White Non Hispanic 8688 605 6.51% 1.00 <20% Minority Tracts 3849 290 7.01% 1.00 50-100% Minority Tracts 6519 898 12.11% 1.73 Low Moderate Income Tracts 5778 918 13.71% 2.06 Middle Upper Income Tracts 16833 1203 6.67% 1.00 TOTAL 22655 2126 8.58% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 483 135 21.84% 2.06 Asian 3160 263 7.68% 0.73 African American 2797 749 21.12% 2.00 Pacific Islander 589 81 12.09% 1.14 White 23205 2747 10.58% 1.00 43

Latino 4359 777 15.13% 1.50 White Non Hispanic 17904 2004 10.07% 1.00 <20% Minority Tracts 9070 755 7.68% 1.00 50-100% Minority Tracts 13150 2510 16.03% 2.09 Low Moderate Income Tracts 11911 2514 17.43% 1.87 Middle Upper Income Tracts 28441 2919 9.31% 1.00 TOTAL 40452 5460 11.89% SALINAS Higher-cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 7826 1157 12.88% Top Higher-Cost Lenders # Higher Cost $ Amount (+000) Higher-Cost Market Share Lehman Brothers/Finance America 148 44223 12.79 New Century Mortgage 141 29703 12.19 People's Choice Home 85 11410 7.35 Fremont Investment & Loan 79 21911 6.83 Lime Financial Services 61 14461 5.27 Washington Mutual/Long Beach 60 8007 5.19 Ameriquest/Argent Mortgage 58 16234 5.02 MortgageIt, Inc 54 11952 4.67 Countrywide Home 44 8839 3.8 Encore Credit Corp 43 11535 3.72 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 102 5 4.67% 0.47 Asian 119 16 11.85% 1.20 African American 21 6 22.22% 2.25 Pacific Islander 65 12 15.58% 1.58 White 1188 130 9.86% 1.00 Latino 1172 159 11.95% 2.14 White Non Hispanic 389 23 5.58% 1.00 <20% Minority Tracts 0 0 0.00% 1.00 50-100% Minority Tracts 1770 221 11.10% 0.00 Low Moderate Income Tracts 449 65 12.65% 1.35 Middle Upper Income Tracts 1624 168 9.38% 1.00 TOTAL 2074 233 10.10% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 215 29 11.89% 1.69 Asian 301 11 3.53% 0.50 African American 59 6 9.23% 1.31 Pacific Islander 113 20 15.04% 2.14 44

White 2529 191 7.02% 1.00 Latino 2137 214 9.10% 1.68 White Non Hispanic 1080 62 5.43% 1.00 <20% Minority Tracts 0 0 0.00% 1.00 50-100% Minority Tracts 4020 360 8.22% 0.00 Low Moderate Income Tracts 992 110 9.98% 1.35 Middle Upper Income Tracts 3656 291 7.37% 1.00 TOTAL 4656 401 7.93% SAN DIEGO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 127874 11046 7.95% Top Higher-Cost Lenders # Higher Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent/Town & Country 1112 318385 10.07 WMC Mortgage Corp 723 140448 6.55 Fremont Investment & Loan 692 197258 6.26 Countrywide Home 672 125487 6.08 Accredited Home Lenders 670 87339 6.07 New Century Mortgage 659 146732 5.97 Lehman Brothers Bank/Finance America 587 170291 5.31 National City, Indiana 440 58726 3.98 Fieldstone Mortgage Co 414 90629 3.75 First Capital Group 280 68510 2.53 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 415 44 9.59% 2.25 Asian 3812 168 4.22% 0.99 African American 758 76 9.11% 2.14 Pacific Islander 478 33 6.46% 1.52 White 22030 979 4.25% 1.00 Latino 6189 667 9.73% 3.12 White Non Hispanic 14870 479 3.12% 1.00 <20% Minority Tracts 7836 225 2.79% 1.00 50-100% Minority Tracts 13097 1031 7.30% 2.61 Low Moderate Income Tracts 6429 588 8.38% 2.07 Middle Upper Income Tracts 29252 1237 4.06% 1.00 TOTAL 35697 1827 4.87% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 770 96 11.09% 2.59 Asian 5979 242 3.89% 0.91 African American 2274 306 11.86% 2.77 Pacific Islander 941 86 8.37% 1.96 45

White 45169 2021 4.28% 1.00 Latino 10247 947 8.46% 2.35 White Non Hispanic 33027 1236 3.61% 1.00 <20% Minority Tracts 19095 526 2.68% 1.00 50-100% Minority Tracts 26182 2222 7.82% 2.92 Low Moderate Income Tracts 11551 1069 8.47% 2.03 Middle Upper Income Tracts 61712 2682 4.16% 1.00 TOTAL 73318 3761 4.88% SAN FRANCISCO Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 26796 875 3.16% Top Higher-Cost Lenders # Higher- Cost $ Amount (+000) Higher-Cost Market Share Lehman Brothers/Finance America 93 32375 10.63 Fremont Investment & Loan 88 30111 10.06 Ameriquest/Argent Mortgage 84 32295 9.6 WMC Mortgage 78 23049 8.91 New Century Mortgage 54 12567 6.17 Washington Mutual/Long Beach 53 8392 6.06 MortgageIt, Inc 51 23992 5.83 ING Direct 44 17913 5.03 Accredited Home Lenders 24 5041 2.74 Countrywide Home 22 4724 2.51 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 43 2 4.44% 3.49 Asian 2017 30 1.47% 1.15 African American 104 7 6.31% 4.95 Pacific Islander 55 2 3.51% 2.75 White 4723 61 1.28% 1.00 Latino 476 32 6.30% 6.42 White Non Hispanic 3933 39 0.98% 1.00 <20% Minority Tracts 766 2 0.26% 1.00 50-100% Minority Tracts 4194 101 2.35% 9.03 Low Moderate Income Tracts 2715 52 1.88% 1.22 Middle Upper Income Tracts 5608 88 1.54% 1.00 TOTAL 8323 140 1.65% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 89 12 11.88% 6.17 Asian 4378 47 1.06% 0.55 African American 586 46 7.28% 3.78 Pacific Islander 143 3 2.05% 1.07 46

White 7889 155 1.93% 1.00 Latino 1089 52 4.56% 2.72 White Non Hispanic 6329 108 1.68% 1.00 <20% Minority Tracts 1351 7 0.52% 1.00 50-100% Minority Tracts 8956 297 3.21% 6.23 Low Moderate Income Tracts 4671 178 3.67% 2.16 Middle Upper Income Tracts 11507 199 1.70% 1.00 TOTAL 16179 377 2.28% 47

YUBA CITY Higher-Cost Lending - Single Family and Manufactured Housing to Owner Occupants Lower Cost Higher-Cost % Higher-Cost in City 4435 763 14.68% Top Higher-Cost Lenders # Higher-Cost $ Amount (+000) Higher-Cost Market Share Ameriquest/Argent 77 12091 10.09 Countrywide Home 74 8190 9.7 New Century Mortgage 60 7566 7.86 Lehman Brothers Bank 56 9879 7.34 Fremont Investment & Loan 45 7611 5.9 HSBC/Decision One/Beneficial 41 5148 5.37 Accredited Home Lenders 27 2747 3.54 MortgageIt, Inc 22 3482 2.88 National City Bank, Indiana 20 2655 2.62 Washington Mutual/Long Beach 20 1507 2.62 Conventional First Lien for 1-4 Unit Owner Occupied Properties Home Purchase Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 34 4 10.53% 1.3 Asian 256 18 6.57% 0.8 African American 22 4 15.38% 1.8 Pacific Islander 10 4 28.57% 3.4 White 853 78 8.38% 1.0 Latino 209 43 17.06% 2.3 White Non Hispanic 625 49 7.27% 1.0 <20% Minority Tracts 0 0 0.00% 1.0 50-100% Minority Tracts 384 46 10.70% 0.0 Low Moderate Income Tracts 100 13 11.50% 1.2 Middle Upper Income Tracts 1402 144 9.31% 1.0 TOTAL 1503 157 9.46% Refinance Lending Borrowers and Neighborhoods Lower Cost Higher-Cost % Higher-Cost Disparity American Indian 35 6 14.63% 1.2 Asian 149 10 6.29% 0.5 African American 42 9 17.65% 1.41 Pacific Islander 17 6 26.09% 2.09 White 1301 186 12.51% 1.00 Latino 240 54 18.37% 1.46 White Non Hispanic 1000 144 12.59% 1.00 <20% Minority Tracts 0 0 0.00% 1.00 50-100% Minority Tracts 538 82 13.23% 0.00 Low Moderate Income Tracts 153 51 25.00% 2.20 Middle Upper Income Tracts 1854 238 11.38% 1.00 48

TOTAL 2009 290 12.61% METHODOLOGY The California Reinvestment Coalition s (CRC) twelfth annual home mortgage lending report, Who Really Gets Higher-Cost Home? explores the relationship between higher-cost lending, race and ethnicity and income. The report analyzes Home Mortgage Disclosure Act (HMDA) data for 2004, the most recent year for which data is publicly available. CRC uses CRA Wiz, PCI software to analyze the HMDA data. Much of the report focuses on loans that are higher-cost loans under the new HMDA data requirements, either because they were first lien loans with Annual Percentage Rates (APRs) that exceed the rate for a comparable Treasury by 3%, or because they are second lien loans that exceed the comparable Treasury rate by 5%. Listings of the largest higher-cost and highest cost lenders in the state are based on single family and manufactured housing loans to owner occupants. Lending by affiliated companies that are owned by the same holding company was aggregated together. Discussions of lending by race and ethnicity of borrower and race and income of neighborhood focused on first lien home purchase and first lien refinance lending to owner occupants. Analysis of statewide lending focused on lending to neighborhoods that were predominantly white (census tracts less than 10% minority), minority (census tracts more than 80% minority), low-income, and upper-income. In comparison, analysis of lending disparities within each of the 12 cities aggregated certain census tracts. Specifically, census tracts characterized as being less than 20% minority ( white ) were compared to tracts that are over 50% minority ( minority ); and low and moderate-income tracts were considered together (LMI), as were middle and upper income census tracts. This was a result of certain cities not having any census tracts that met the narrower categories. In general, lending to African American borrowers is compared to lending to White borrowers. Lending to Latino borrowers is compared to lending to White non-hispanic borrowers. Lending to low (or, for city analysis, low-mod) neighborhoods is compared to lending to upper (or, for city analysis, middle-upper) income neighborhoods. Lending to minority neighborhoods (over 80% minority for state analysis, or over 50% minority for city analysis) is compared to lending to non-minority neighborhoods (under 10% for state analysis, or under 20% for city analysis). Geography. This report looks at lending patterns in twelve California cities: Delano, El Centro, Fresno, Los Angeles, Modesto, Oakland, Oxnard, Sacramento, Salinas, San Diego, San Francisco, and Yuba City. Past CRC reports have analyzed lending in Fresno, Los Angeles, Oakland, Sacramento and San Diego. San Francisco was added given its 49

size, and the remaining six cities were added to provide a greater representation of rural communities. Data. The analysis relies on Home Mortgage Disclosure Act (HMDA) data that are collected by the Federal Financial Institutions Examination Council. Additionally, the Federal Deposit Insurance Corporation website was used to calculate the number of branches in survey cities. These data are current as of June 2005. The data on check cashing establishments were provided by the California Department of Corporation, and reflects DOC licensee data as of the beginning of 2005. Limitations. This study is subject to the limitations of publicly available data, specifically the Home Mortgage Disclosure Act (HMDA) data. HMDA data is limited in that certain elements of conventional underwriting such as credit scores, loan to value ratios, and debt to income ratios are not available. While CRC and other community groups continue to call for HMDA reporting requirements to be strengthened, the industry continues to fight adamantly against any and all expansions of HMDA. 50