A Look Inside...
This issue of Community Developments focuses on the new data reporting requirements of the Home Mortgage Disclosure Act (HMDA) and the opportunities that the data will create for bankers and other financial institutions to target mortgage products and services to millions of households who are eager to own their own homes — but who may represent an elevated credit risk to lenders.
As the so-called subprime market has grown in recent years, so have efforts to serve it efficiently and fairly. For banks, partnering with community-based housing counseling organizations can be an especially effective way to improve outreach to underserved households, leveraging banks’ internal resources and reducing the risks associated with lending to borrowers with credit blemishes or a nontraditional credit profile.
Key to the success of these partnerships is proactive financial education — helping prospective borrowers understand what’s involved in managing money and creating creditworthiness, and then helping them develop strategies to meet their regular, ongoing financial obligations. Partnering with housing counseling groups to promote financial literacy can help bankers create — and serve — a pool of creditworthy borrowers that might otherwise be ignored or beyond reach. And, in so doing, bankers can broadly improve their outreach to communities in need.
Clearly, it’s important for all concerned to know more about the subprime mortgage market and to know how the new HMDA reporting requirements can help participants in that market meet the needs of more prospective homeowners. We offer the articles and insights in this issue as part of the OCC’s contribution to this initiative.