Consumer experiences with credit insurance: some new evidence

Insurance, Credit

New information on lending to small businesses and small farms: the 1996 CRA data

As a consequence of recent revisions to the regulations that implement the Community Reinvestment Act (CRA), new information is now publicly available on the geographic distribution of small loans to businesses and farms and on community development lending. Because small businesses and small farms are more likely than larger ones to borrow small amounts, the CRA data on small loans are likely to provide a reasonable measure of the extension of credit to such businesses. Thus, the CRA data provide new opportunities to gauge the flow of credit to communities with differing economic and demographic characteristics. This article presents an initial assessment of the new CRA data on originations and purchases of small business and small farm loans during 1996. The focus of the analysis is on the broad patterns that emerge when the data are reviewed from a national perspective rather than on the lending activities of any individual institution.Small business ; Bank loans ; Agricultural credit

Mortgage refinancing in 2001 and early 2002

Over the past ten years, millions of homeowners have taken advantage of lower mortgage interest rates and higher home values and have refinanced their mortgage loans. For many, the decision to refinance was motivated by a desire to reduce their monthly mortgage payments, either by obtaining a lower interest rate or by extending the maturity of their mortgage. When they have refinanced, many homeowners have liquefied some of the equity they accumulated in their homes by borrowing more than they needed to pay off their former mortgage and cover the transaction costs of the refinancing. They have used the funds raised in so-called cash-out refinancings to make home improvements, to repay other debts, or to purchase goods and services or other assets. This article presents estimates, based on recent survey findings, of the incidence of refinancing, the changes in terms and conditions of mortgages after refinancing, the amount of funds homeowners raised in the process, and the ways in which homeowners used the funds. It also provides comparisons with previous surveys of refinancing activity and a statistical analysis of the relative importance of different determinants of refinancing and the amount of home equity liquefied during refinancing. Finally, it gives rough estimates of the effects of recent refinancing on the U.S. economy, including the effects on aggregate consumption spending.Mortgages ; Housing - Finance

The role of specialized lenders in extending mortgages to lower-income and minority homebuyers

Home-purchase lending to lower-income and minority households and neighborhoods has expanded significantly and at a faster rate than lending to other borrowers in recent years. Over the same period, however, an increasing proportion of applicants for conventional home-purchase mortgages, including lower-income and minority applicants, have had their applications denied. The first trend often has been taken as evidence that lenders' efforts to expand credit availability have been successful, whereas the second trend has contributed to concerns about access to credit and the fairness of the lending process. An important but little-recognized force behind the shift of credit toward lower-income and minority borrowers has been a rapid expansion of activity by subprime and manufactured-home lenders, lenders who are oriented toward lower-income and minority households. Using data collected under the Home Mortgage Disclosure Act (HMDA) from 1993 to 1998, this article finds that part of the growth in mortgage lending and most of the increase in denial rates are associated with the substantial and growing share of mortgage activity of institutions that specialize in subprime and manufactured-home lending.Mortgages ; Discrimination in mortgage loans

Credit report accuracy and access to credit

Data that credit-reporting agencies maintain on consumers' credit-related experiences play a central role in U.S. credit markets. Analysts widely agree that the data enable these markets to function more efficiently and at lower cost than would otherwise be possible. Despite the great benefits of the current system, however, some analysts have raised concerns about the accuracy, timeliness, completeness, and consistency of consumer credit records and about the effects of data problems on the availability and cost of credit. ; In this article, the authors expand on the available research by quantifying the effects of credit record limitations on the access to credit. Using the credit records of a nationally representative sample of individuals, the authors examine the possible effects of data problems on consumers by estimating the changes in consumers' credit history scores that would result from "correcting" the problems in their credit records. Moreover, the authors report results for consumer groups segmented by strength of credit history (credit history score range), depth of credit history (number of credit accounts in a credit record), and selected demographic characteristics.Credit cards

The effects of recent mortgage refinancing

Rising home prices and generally falling interest rates in recent years, together with a desire to convert the accumulated equity in their homes into spendable funds, have prompted many homeowners to refinance their mortgages. In the spring of 1999, the Federal Reserve surveyed consumers to determine the extent of refinancing, the extent to which refinancing homeowners "cashed-out" some of their equity when they refinanced, how much equity they took out, and how they spent the funds. Survey results suggest that cash-out refinancings in 1998 and early 1999 likely boosted consumption spending a bit, may have had a larger effect on home improvement spending, and may have moderated the growth of consumer credit during that period.Mortgages ; Housing - Finance ; Interest rates

The 2007 HMDA data

Mortgage loans ; Bank loans

Recent developments in home equity lending

The equity that has accumulated in homes is one of the largest components of U.S. household wealth. In recent years, many homeowners have borrowed large amounts against that equity, frequently to finance new consumption expenditures or pay down outstanding consumer debt. In view of the growing importance of home equity credit in household finances, the Federal Reserve has for a number of years participated in nationwide surveys of the use of home equity loans. This article presents findings from a 1997 survey and from other sources of information on home equity lending.Home equity loans

CRA special lending programs

The Community Reinvestment Act (CRA) of 1977 encourages federally insured banking institutions to help meet the credit needs of their communities, including those of lower-income areas, in a manner consistent with their safe and sound operation. In responding to the CRA, many banking institutions have sought to expand lending to lower-income populations through special lending programs that seek out and assist such borrowers in a variety of ways. These programs, many of which include third parties such as government agencies and nonprofit groups, are often an important element of an institution's CRA-related lending. Many institutions have conducted such programs, some for many years. Although the characteristics of these programs and their implementation vary greatly across banking institutions, little systematic information about them has been available. To further the understanding of CRA special lending programs, this article uses data from a recent Federal Reserve Board survey to provide new information on the nature of these programs, their characteristics, and how these characteristics relate to the performance (delinquency and default rates) and profitability of the loans extended through them.Community Reinvestment Act of 1977 ; Mortgages

An overview of consumer data and credit reporting

For some time, the Board of Governors of the Federal Reserve System has sought to obtain more detailed and timely information on the debt status, loan payment behavior, and overall credit quality of U.S. consumers. For decades, information of this type has been gathered by credit reporting companies primarily to assist creditors in evaluating the credit quality of current and prospective customers. To evaluate the potential usefulness of these data, the Federal Reserve Board engaged one of the three national consumer reporting companies to supply the credit records, without personal identifying information, of a nationally representative sample of individuals. This article describes the way the credit reporting companies compile and report their data and gives background on the regulatory structure governing these activities. This description is followed by a detailed look at the information collected in credit reports. Key aspects of the data that may be incomplete, duplicative, or ambiguous as they apply to credit evaluation are highlighted in the analysis. The article concludes with a discussion of steps that might be taken to address some of the issues identified. ; Also identified as FRB Philadelphia Payment Cards Center Discussion Paper 03-03Credit cards ; Consumer behavior