Money Talk: Credit availability, decline in mortgage lending to minorities after housing boom

Editor’s note: Each Monday, Talk Business & Politics provides “Money Talk,” a wrap-up of banking and financial news.

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CREDIT AVAILABILITY, DECLINE IN MORTGAGE LENDING TO MINORITIES AFTER HOUSING BOOM, FEDERAL RESERVE SAYS
Since 2006, the shares of home purchase loans originated to black and Hispanic borrowers have declined considerably. These declines have raised concerns about access to credit for minorities following the financial crisis, and whether banks are meeting their obligations under the Community Reinvestment Act to help safely make credit available throughout their communities, according to a research note by the Federal Reserve.

Demand-side factors could also be playing a role, such as differential unemployment growth by race and ethnicity or differential changes in preferences for homeownership since the housing bust.

The Fed’s report also sheds light on the factors contributing to the disproportionate decline in lending to minorities since 2006. It provides evidence that the bulk of this decline reflects a general reduction in lending to borrowers with low credit scores, regardless of race and ethnicity.

OCC FINES WELLS FARGO $20 MILLION FOR ILLEGAL EVICTIONS, REPOSSESSIONS AGAINST MILITARY PERSONNEL, RESTITUTIONS ORDERED
The Office of the Comptroller of the Currency (OCC) has assessed a $20 million civil money penalty against Wells Fargo Bank and ordered the bank to make restitution to service members who were harmed by the bank’s violations of the Servicemembers Civil Relief Act (SCRA).

The OCC found that between approximately 2006 and 2016, the bank failed to provide the 6% interest rate limit to service member obligations, illegally evicted some military personnel from their homes, and repossessed and failed to obtained court orders prior to repossessing cars owned by service members serving overseas.

The $20 million penalty reflects a number of factors, including the duration and frequency of violations, the financial harm to the service members, deficiencies and weaknesses in the bank’s SCRA compliance program and ineffective compliance risk management. The penalty will be paid to the U.S. Treasury.

DUN & BRADSTREET: MORE BUSINESSES SEEKING CREDIT TO PROTECT AGAINST ‘WORKING CAPITAL” CRUNCH
Although businesses have reported steady increases in access to credit since 2012 and an increase in demand for credit compared to the same time last year, small businesses are still scrambling to secure working capital, according to the 3Q Capital Access Index by Dun & Bradstreet and Pepperdine Graziadio School of Business and Management.

Both small (less than $5 million in revenue) and mid-sized ($5-$100 million in revenue) businesses combined reported a 7.8% increase in access to capital and a 3.1% increase in demand for capital year-over-year. However, about 2% more businesses than a year ago reported seeking financing for “working capital fluctuations” — defined as fluctuations in business funds that are used in day-to-day trading operations and generally considered to be a standard measure of a company’s efficiency and economic health.

https://bschool.pepperdine.edu/about/people/faculty/appliedresearch/research/pcmsurvey/pca-index/

Business concerns about a stable financial future were evident in the 25.7% increase in businesses citing “worsening financial conditions” as a reason for seeking financing, compared to the year-ago period (35.2% in Q3 2016 versus 28% in Q3 2015). Concerns about cash flow were also reflected in the increasing percentage of businesses noting that “slow accounts receivable” were impacting their financial condition.