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Spitzer Probes Sub-Prime Mortgages

New York's attorney general seeks data to assess whether lenders are targeting minorities.

April 29, 2005|Annette Haddad | Times Staff Writer

Several mortgage lenders, including Wells Fargo & Co. and Washington Mutual Inc., have received requests for information from New York Atty. Gen. Eliot Spitzer's office, which disclosed Thursday that it was probing alleged abuses in the sub-prime lending industry.

The probe comes amid recent revelations that African Americans and Latinos are targeted disproportionately for sub-prime loans, for which lenders charge higher fees and rates on the assumption that the borrowers are less creditworthy.

Consumer advocates say minorities and seniors often are pushed into these loans, regardless of their financial standing.

Spitzer's office sent letters to an unspecified number of lenders asking for "information to help us understand how the loans are being priced and whether they are justified by legitimate business practices," spokeswoman Juanita Scarlett said.

"I can confirm that we did receive a letter from Mr. Spitzer," Wells Fargo spokeswoman Julia Tunis said. "It's not our practice to comment on communication with regulatory agencies or officials."

Washington Mutual spokesman Adrian Rodriguez said his company received a letter and was "working on a response."

Citigroup Inc. and HSBC Holdings told the Wall Street Journal, which first reported the probe, that they also had received requests and were cooperating.

It wasn't clear whether the nation's biggest mortgage company -- Calabasas-based Countrywide Financial Corp. -- had been contacted by Spitzer. In a statement, the company said: "It is Countrywide's practice to communicate and cooperate with its regulators, and it is company policy to not comment publicly on these matters."

Orange-based Ameriquest Mortgage Co., the nation's leading sub-prime lender, declined to comment.

Targeting major consumer-related industries has become a habit for Spitzer, who plans to run for New York governor. In recent years, he has obtained more than $4 billion in settlements from companies including insurance broker Marsh & McLennan Cos. and brokerage Merrill Lynch & Co.

California Atty. Gen. Bill Lockyer's office isn't participating in Spitzer's probe but is engaged in a separate, "ongoing investigation" of sub-prime lenders, spokesman Tom Dresslar said. He declined to offer details.

Lockyer was among various state regulators who forced HSBC subsidiary Household Finance to pay refunds to borrowers in 2003.

In his latest inquiry, Spitzer will review data on sub-prime loans. Under the Home Mortgage Disclosure Act, the nation's mortgage lenders are required to provide data about the race, gender and other characteristics of loan applicants.

Community groups and others have reviewed the lenders' 2004 HMDA data and found that African Americans and Latinos are more likely than whites to get higher-cost loans and are more likely to be denied mortgages.

"The involvement of an aggressive attorney general will be helpful, but we can't go to sleep now," said Matthew Lee, executive director of Fair Finance Watch, a New York-based consumer watchdog group whose analysis of the data found patterns of discrimination.

The industry has vigorously argued that the HMDA data paint a less-than-complete picture of their lending practices, and can easily be misinterpreted when looking for disparities.

Still, "any regulatory investigation of the financial services companies is something that everyone needs to take very seriously," said Charlotte Chamberlain, a Jefferies & Co. analyst.

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