The National Credit Union Administration (NCUA) Chair Todd Harper, in his address at NCUA’s 2022 DEI & ACCESS Summit, said federally insured credit unions must be “all in” on diversity, equity, and inclusion (DEI). He further stated credit unions’ commitment to these principles should be reflected in the results of credit union lending and performance.
“If we want to achieve the full potential of the credit union system and live up to its statutory mission, then all credit unions must do more to lend in a safe, fair, affordable manner,” Harper said. “These collective efforts through strategic action will not only advance diversity, equity, and inclusion for people of color applying for and getting a mortgage, but they will also create new revenue and attract new members for credit unions that embrace this opportunity.”
Harper additionally discussed the disparities in mortgage lending to credit union members of color and highlighted the critical role of fair lending oversight. He underscored the key role minority depository institutions play in ensuring the extension of safe, fair, and affordable credit to these underserved communities.
In his remarks, he discussed a recent research note from the NCUA Office of Chief Economist, which evaluated credit union lending in 2020 and 2021. It utilized data for credit union 30-year, fixed rate loans, factoring in a number of credit risks and other variables. The research concluded many minority credit union borrowers faced higher loan denial rates, and Black and Hispanic credit union borrowers paid higher interest rates than white borrowers.
“The differences we see in lending to minority credit union members are concerning and need to be addressed,” Harper said. “Credit unions can – and must – do better, as an industry, to live up to the system’s statutory mission of meeting the credit and savings needs of members, especially those of modest means, and especially when armed with information on the industry’s current performance shortcomings. In this instance, knowledge is definitely power.”
In addition to finding that minority borrowers were more likely to be denied their credit union loan applications, the NCUA’s research showed:
- When minority borrowers did obtain credit union loans, pricing for many was more expensive.
- Among credit union members able to obtain purchase-money mortgages from HMDA-filing credit unions and credit union service organizations in 2020, Hispanic and Black borrowers were estimated to have paid interest rates that were about 10 basis points higher than white borrowers.
- The analysis of the 2021 HMDA data produced similar findings, with an average excess interest rate for Hispanic and Black credit union members ranging between about 8 and 13 basis points, respectively.
- For credit union mortgage applications by Black, Hispanic, and Asian members, the estimated denial likelihood was up to two times greater than for non-minority applicants.
- HMDA data indicate about 20 to 30 percent of credit union mortgage loans were extended to minority credit union members during 2020 and 2021, which is a somewhat lower proportion than for other loan originators.