- Editor’s Note: This is a guest editorial by Peter Skillern. Mr. Skillern is the Executive Director of the Community Reinvestment Association of North Carolina. His comments also appear in a story published in today’s Charlotte Observer.

I am an advocate who for 20 years has petitioned for lenders to be held accountable for unfair and illegal loan practices.  Yesterday, the Federal Reserve fined Wells Fargo $85 million and ordered up to $200 million in restitution to borrowers. The penalty is meant to address violations made by Wells Fargo Finance, which was a mortgage loan (more…)

The Office of the Comptroller of the Currency (OCC) issued a proposed rule that will allow credit products to return to debit cards.

I have suspected that the credit issue was far from resolved. The Office of Thrift Supervision (OTS) issued a directive last fall that forced MetaBank to pull its i-advance product. I-advance was a short-term credit product offered to customers that attached a regular direct deposit to their debit cards. The costs were (more…)

The more things change, the more they stay the same.

Wells Fargo is moving the customers it inherited from legacy Wachovia over to the full-fledged Wells accounts. Wells has always believed in selling mulitple products to each customer. In this 2010 presentation made to the Sloan School of Business at MIT, Wells claims to have sold an average of 6.47 products to each banking customer.

Still, the speed at which Wells has utilized my new status as a Wells customer is surprising. I got my first sales call this morning. What’s even more surprising is what kinds of products they are offering.

It is easy to confuse subprime for a description of a borrower, when really, the term should describe a product. A loan is subprime. A person is not subprime.

It must be that it also easy to forget what happened in 2008. At least, Wells must have forgotten. Judging from a phone call that I got today, there must be some kind of amnesia spreading throughout San Francisco.

Wells is pushing interest-only adjustable rate home equity loans. (more…)

The Dodd-Frank bill will require lenders to disclose more data about their lending, but the fundamental problems with HMDA remain largely unresolved. Dodd-Frank says that it will collect, and then disseminate, the following new categories within an updated HMDA by no later than 2012:

• age of borrower
• borrower credit score
• total points and fees payable at origination
• the spread between the loan’s interest rate and the corresponding treasury note of similar maturity
• value of the collateral pledged against the loan
• non-amortizing loan features
• length before loan reset (months)

Those are some good ideas. I think that there is going to be a substantial discussion about (more…)

More and more, it seems like any changes to the Community Reinvestment Act that come out of a new CFPA will be limited to data collection requirements. That is a missed opportunity. Still, if updates to the CRA can repair the framework for data, that is still a plus.

Everyone knows that HMDA data could be better. It doesn’t really offer a means to separate the prime loans from those that are subprime. There is one clue: since 2004, the data has included information about interest rates. Even that data is limited, though. It isn’t sensitive to adjustable rates that reset. Moreover, the exotic loan terms that are the feature of so many subprime loans are also ignored. There is no indicator for a stated income product, or for a balloon, or for an unusual loan term. In general, if it isn’t a practice that was characteristic of the mortgage market in 1985, then it isn’t in HMDA.

This frustrates bankers and policy wonks alike. Bankers cringe when prime loans are indistinguishable from subprime.

I spoke with the head of the mortgage division at one of the larger banks in the country yesterday. I put the question to him. “If you could change one thing (more…)