MBA Study Shows Negative Effects of North Carolina Mortgage Lending Law Hit Minorities and Low-Income Borrowers the Hardest
|September 14, 2004|
North Carolina Abusive Lending Law Study|
Washington, D.C. (September 14, 2004) – The Mortgage Bankers Association (MBA) today released a study on the effects of the 1999 North Carolina anti-predatory lending law showing the law has caused a decline in lending among minority and low-income borrowers. In addition, the study demonstrates the North Carolina law has had negative effects on the availability of credit for all income and racial groups.
The study, conducted by Abt Associates Inc., Cambridge, Massachusetts, looked at lending volumes before and after the law was passed on a census-tract-by-census-tract basis and compares the results with what took place in states with economies similar to North Carolina's.
"The study reveals, vis-à-vis the anti-predatory lending bill, the North Carolina state legislature has imposed a modern-day form of redlining on its citizens by choking off mortgage credit to minority and low-income neighborhoods," said Robert M. Couch, CMB, MBA's chairman and president and chief executive officer of Birmingham, Alabama-based New South Federal Savings Bank.
The study analyzed the changes in lending in North Carolina and neighboring states of Tennessee and South Carolina before and after passage of the North Carolina law. Abt Associates looked at lending volumes on a neighborhood-by-neighborhood basis for prime and subprime lenders. Among the study's major findings:
"Despite the good intentions of its supporters, the North Carolina law has choked off credit to large numbers of North Carolina residents," continued Couch. "We know fraudulent operators exist, and we abhor abusive lending practices. While no one has been able to quantify the size of the abusive lending problem, beyond citing anecdotes, this study shows that the size of the problem was nowhere near the size of the reduction in lending that has taken place in North Carolina."The study also gave rise to another important discovery: Lending in North Carolina would have been even lower had it not been for increased lending by bank and thrift-owned subprime firms, which were essentially exempt from the provisions of the North Carolina law.