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March 25, 2003
Guide Rates Best and Worst Lenders in Terms of Reaching the Underserved
    by William Baue

When it comes to reaching minorities, women, and low- and middle-income borrowers, Bank of America rates as one of the best and ABN AMRO rates as one of the worst.


Minorities, women, and low- and middle-income (LMI) borrowers are the most likely to be underserved by lending institutions and victimized by predatory lending practices in metropolitan areas in the U.S. So says a report released earlier this month by the National Community Reinvestment Coalition (NCRC) entitled America's Best and Worst Lenders: A Consumers' Guide to Lending in 25 Metropolitan Areas. The guide covers the years 2000 and 2001.

Social investors might be surprised by the guide's assessment of ABN AMRO. ABN AMRO (ticker: ABN) is a Dutch bank that is respected for its progressive social and environmental policies regarding Indonesian tropical rainforests.

"A lender that was consistently among the worst lenders in reaching traditionally underserved communities was ABN AMRO," the guide states.

ABN AMRO scored in the 63rd percentile in 2001 for both home purchase lending and refinancing. That means that 62 percent of its peers outperformed ABN AMRO in reaching underserved individuals and communities with such loans. In 2000, ABN AMRO scored in the 64th percentile in home purchase lending and in the 62nd percentile in refinancing.

Both Robin Boon, ABN AMRO's head of press relations, and Jochem van de Laarschot, a spokesperson in the press relations department, were unable to respond to requests for commentary.

The guide reveals a correlation between poor performance in reaching women, minorities, and LMI borrowers and a less comprehensive exam of bank lending practices under the Community Reinvestment Act (CRA). The CRA, which was passed in 1977, requires federal regulatory agencies such as the Office of the Comptroller of Currency (OCC) to examine and grade lending institutions on how well they serve LMI borrowers.

"It is noteworthy that ABN AMRO and its U.S. affiliates, La Salle Bank and Standard Federal Bank, had CRA exams that were much less comprehensive and covered significantly fewer geographical areas than Bank of America, one of the best lenders in this study," the guide states.

Bank of America (BAC) scored in the 17th percentile in home purchase lending in 2001, and in the 20th percentile in 2000. With regard to refinancing, Bank of America scored in the 32nd percentile in 2001 and in the 35th percentile in 2000.

The guide makes a series of recommendations, many of which call for reinforcing the Community Reinvestment Act. For example, the National Community Reinvestment Coalition "strongly endorses" the CRA Modernization Act (HR 865). This act mandates that banks undergo CRA exams not only where their branches are located but also in all geographical areas in which they make a significant number of loans.

The guide also recommends that CRA should base its examinations not only on income but also on race. NCRC's research found that non-prime lending, or lending at above-market rates, increases as the level of segregation between communities increases.

"It is profoundly troubling that non-prime lending surges as communities become more segregated by race," said John Taylor, president and CEO of NCRC. "This is one more piece of evidence that [there is] a segment of non-prime institutions [that] is predatory and takes advantage of vulnerable communities confronted with fewer product choices."

As a result, the guide recommends the CRA exams must scrutinize non-prime lending more rigorously and that Congress should enact anti-predatory legislation.

 

 
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