Refinancing Home Mortgage in Massachusetts

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					   The Case for Updating the Massachusetts CRA to Cover Mortgage Companies

What does this bill do?
Senate bill #4 would require licensed mortgage lenders making more than 500 loans per
year in Massachusetts to comply with the state Community Reinvestment Act. Current
state law covers banks and state-chartered credit unions. CRA requires lenders to make
an affirmative obligation to meet the credit needs of all income groups, including low-to-
moderate income households.

Why is this bill needed?
•Studies by UMass Boston economics professor Jim Campen and the Massachusetts
Community Banking Council have found a significant shift in the mortgage lending
                •In 1990, banks covered by CRA accounted for 78% of home-purchase
                loans made in Boston
                •In 2001, the bank share of home-purchase mortgage lending had
                decreased to 26.4%
                •Banks covered by CRA lend to Black, Latino and low income borrowers
                at a rate double or triple that of non-CRA regulated mortgage companies

•An April, 2002 study by the Joint Center for Housing Studies at Harvard showed less
than 30 percent of home purchase loans are now subject to intensive review under the
Community Reinvestment Act (CRA) - in some markets this share is less than 10 percent.
The report finds that lending not subject to detailed CRA scrutiny is the fastest growing
segment of the market. The report recommends that policymakers consider expanding
CRA to cover mortgage companies. The report can be found at

•A May, 2002 study by the non-profit Center for Community Change, finds that upper-
income African-American homeowners in Boston were 1.66 times more likely than
lower- income whites to receive a subprime loan when they refinanced their homes,
making it the city with the second highest "upper-to- lower- income" disparity ratio in the
country in 2000.

Significant racial disparities in home refinancing loans were found in other
Massachusetts metro areas, as well. In Springfield, 59.50% of all African-American
homeowners who refinanced in 2000 received subprime loans, well above the national
average of 49.28%. These homeowners were 3.02 times more likely to receive to receive
a subprime loan than whites.

Hispanic borrowers also faced disparities in home refinancing. The national level of
subprime refinance lending for Hispanic homeowners was 30.33%. Seven Massachusetts
cities exceeded this level: New Bedford (73.33%), Springfield (50.65%), Fitchburg-
Leominster (50%), Lowell (35.71%), Lawrence (35.36%), Brockton (32.26%) and
Worcester (32%). In Lawrence, Hispanic homeowners were 2.15 times more likely than
whites to receive a subprime loan, the ninth highest Hispanic:White d isparity ratio in the

Who supports this bill?
Senate Chair of the Joint Committee on Banks and Banking Andrea Nuciforo, Senator-
elect Jarrett Barrios, Senator Dianne Wilkerson, Senator Jack Hart, and State
Representatives Marie St. Fleur, Shirley Owen-Hicks, and Marty Walsh are among the
bill’s supporters. The bill (Senate 2405) passed the Senate last July on a 38-0 roll call
vote. Mayors Thomas Menino (Boston), David Cohen (Newton) and Dorothy Kelly Gay
(Somerville), the Massachusetts Bankers Association and groups like CHAPA, MACDC,
ACORN, and many others support MAHA’s efforts to pass this bill.

Can we afford it?
Thousands of homebuyers and homeowners would benefit from the passage of a
mortgage company CRA bill. Many would save thousands of dollars in the form of
better mortgage products that would be available from mortgage companies. The better
question may be, “can we afford not to pass this bill?”

Based on information provided by state Division of Banks, MAHA estimates that this
legislation would cost the Commonwealth only $58,860 per year.

Who would be covered?
If this bill were in effect in last year, 25 lenders would have been covered, five of them
being in-state mortgage companies (DeWolfe, Hunneman, H&R Block, Leader, and
Mortgage Financial Services). These 25 lenders accounted for approximately 22% of all
mortgage lending in Massachusetts in 2000. Passage of this legislation concerning
mortgage companies would mean that eight of the top twelve subprime lenders in
Massachusetts would be covered under a state Community Reinvestment Act.

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