WASHINGTON ? Two units of a finance company until recently considered a poster child for abusive lending led the country in making mortgages to American Indians in 2000.
Together, the two units of The Associates, Coppell, Tex., made more than twice as many mortgages to Indians as the third largest lender, a respected California mortgage banker, according to federal Home Mortgage Disclosure Act data.
The top ten lenders to Indians and Alaska Natives made $1.96 billion in loans in 2000. The finance company accounted for 37.5 percent of that volume.
The HMDA data, compiled by Mortgagestats.com of Washington, D.C., shows that Associates Financial Services was the top lender to Indians in 2000 at $433 million. Associates Home Equity Service, sister company to AFS, was next at $320 million.
Associates Financial did a full 10 percent of its $4.36 billion of lending to American Indians. (Its sister company made more than three percent of its loans to Natives.) In comparison, the other companies in the top ten each did less than one percent of their mortgage lending to Indians.
The Associates, a sub-prime credit quality lender, has been named in lawsuits and complaints that allege it engaged in predatory lending practices.
"Some of the most egregious activities of the sub-prime market were practiced at The Associates," said John Taylor, president of the Washington, D.C.-based National Community Reinvestment Coalition. "Rather than Native Americans getting the best product they qualify for, they'd get products that were far more expensive."
As far as targeting for abusive lending, Taylor commented, "Somebody in the hierarchy of The Associates painted a bullseye on the back of American Indians."
However, The Associates was sold on Nov. 30, 2000 to Citigroup, which has made several high-profile moves to clean up its image. It fired several thousand of the mortgage brokers that originated loans for The Associates (more than half of its originators), and it said it would no longer sell single-premium credit insurance along with its mortgages, a practice widely cited as abusive lending. It also instituted curbs on quick foreclosure proceedings, allegedly a practice at The Associates.
Citigroup's own lending units made $60 million in Native mortgages in 2000. Added to The Associates' volume, that strongly suggests it will emerge as the top lender to Indians when the 2001 HMDA data are released this summer.
The National American Indian Housing Council recently released a study showing abusive lending tactics to be common in Indian country. Gary Gordon, executive director of the group, said the news that the two units of The Associates topped the 2000 list "is no surprise to us."
Gordon said the remoteness and lack of economic development among most tribes means "members of tribes are frequently targets of predatory lenders," and he called the high rate of abuses in Indian country "a public disgrace. Predatory lending in Indian country must end."
The director called for the Federal Reserve Board to require lenders to break out on- versus off-reservation volume in future years.
The $753 million in mortgages made by the two units (HMDA figures include both on- and off-reservation lending) dwarfs the third leading lender, Countrywide Home Loans of Rosemead, Calif. Countrywide, the largest overall mortgage lender to minorities in 2000 at $10 billion, made $284 million in loans to American Indians and Alaska Natives in 2001. That amount was just one half of one percent of the company's total loan volume of $58 billion. Adding in the volume of its sub-prime subsidiary, Full Spectrum Lending, Countrywide's total volume was $296 million.
Two units of Wells Fargo Bank also finished in the top ten. They are Wells Fargo Home Mortgage of Des Moines, Iowa, with $129 million, and Wells Fargo Funding, at $82 million. Wells Fargo Home Mortgage made less than a third of one percent of its mortgages to Native Americans, while its affiliate's percentage was slightly higher. Their combined total of $211 million, added to several other reporting units, brings Wells to third place at $233 million.
Not far behind Wells was WestAmerica Mortgage Co., Oakbrook Terrace, Ill., another mortgage banker, at $223 million, some 22 percent of its total production. (Mortgage bankers make loans but do not take in deposits, unlike banks or thrifts, which do both.) However, a spokesman for the company said that WestAmerica did no more than five percent of its volume with Indians.
Next was United Financial Mortgage Corp. of Oak Brook, Ill., at $150 million. With total originations of $328 million last year according to HMDA data, United lent nearly half that volume to Natives. This volume is so high there is a good chance it reflects a reporting mistake. A phone call to United Financial was unanswered at deadline.
Right behind United is Chase Manhattan Mortgage Corp., Edison, N.J. at $148 million. Bank of America, Dallas, came in seventh at $128 million. Washington Mutual Bank of Seattle, the nation's largest mortgage lender, was eighth at $120 million in Native loans in 2000.
Rounding out the top ten are First Union of North Carolina, at $103 million, and National City Mortgage Co. of Cleveland, at $98 million. Each of these five did less than one percent of mortgage lending to Natives, and their volumes were determined by adding up all reporting units belonging to the same parent in the top 500 minority lenders.
The top ten as determined by HMDA data give a somewhat distorted view, as separate units of the same company can report separately. While both The Associates and Wells had two rankings in the top ten, Countrywide, Chase Manhattan, and Washington Mutual all had affiliates reporting Indian volume in the top 500 minority lenders, and Wells had seven more units reporting.
While The Associates was the only pure sub-prime lender in the top ten, many of the banks and mortgage banks on the list do both prime and sub-prime lending, and they are not required to break down their volumes by credit quality. Prime lending is to borrowers of unblemished credit quality, usually expressed as "A" credit. Sub-prime lenders deal with borrowers of "A minus" where there are a few dings on the credit report, down through progressively worse "B," "C" and "D" credit.