Despite pouring billions into programs designed to help families deal with troubled mortgages since the 2008 housing meltdown, the Treasury Department still is doing too little to help some minority applicants facing discrimination in the financial marketplace, investigators have found.
Officials largely have been ignoring data showing that foreclosures are disproportionately affecting minorities and only recently set up programs to help those who don’t speak English, according to a new report by the Government Accountability Office, Congress’ investigative arm.
Treasury officials set up the Making Home Affordable (MHA) program in February 2009, giving $29.9 billion to help “struggling homeowners avoid potential foreclosure” as part of the Troubled Asset Relief Program (TARP) started under President George W. Bush.
But although requiring mortgage providers and services to track information on how minorities are being affected, the GAO said Treasury has rarely reviewed the information and hasn’t taken action.
“Treasury requires servicers to collect and report data on the race, ethnicity and gender of MHA applicants, but has not analyzed the data for potential differences in outcomes of groups protected under the laws,” said the report released this month. “Treasury could be taking additional steps to ensure that borrowers are being treated in accordance with fair-lending laws.”
And despite an order from President Clinton in 2000 “to improve access to federal programs for people with limited English proficiency,” followed by another order in 2011 from President Obama’s administration, the agency only recently developed guidelines on helping foreign-language speakers, releasing a plan in November.
GAO analysts said the shortcomings are significant because there’s anecdotal evidence that foreclosures are hitting minority families harder than whites.
“While these variations alone do not indicate that borrowers were treated differently, they suggest that further examination may be warranted,” GAO said.
Timothy Bowler, the acting assistant secretary for financial stability, said the department was still reviewing investigators’ findings, but agreed that the department “should continue to strengthen our program in order to help as many homeowners as possible avoid foreclosure.”
MHA has taken nearly 2 million actions to help homeowners since its inception, he said, including many mortgage modifications.
Data on fair lending practices are often passed on to other regulatory agencies to review, including the departments of Housing and Urban Development and Justice. But GAO investigators said they found troubling information when they reviewed some MHA providers, including a “statistically significant higher” rate of blacks being refused help as opposed to whites. Likewise, Hispanics were less likely to receive mortgage modifications than whites.
But investigators said they were unable to definitively conclude whether the discrimination was deliberate, the results of an error by providers, or an unintended consequence of the mortgage guidelines.
Some advocacy groups have long warned about discrimination. The National Fair Housing Alliance, a coalition of organizations devoted to ending biased mortgage practices, pushed for data on providers to be made public, allowing homeowners to see the track records of individual servicers.
Even if specifics aren’t released to the public, Treasury officials need to review the data, the GAO said. Looking at whether or not providers are discriminating against minorities when adjusting mortgages could allow the department to “gain additional assurance that servicers are implementing the MHA program in compliance with fair lending laws as the servicers contracted to do.”
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