The preliminary 2022 HMDA data recently released by the CFPB is the first glimpse into aggregate lending distributions geographically based on the new 2020 Decennial Census data. Lenders were required last year to begin reporting census tracts based on the new Census. This is the first public release of this lending data for 2022.
From a fair lending and CRA monitoring standpoint, this new data will be used to determine peer penetration levels and, thus, target thresholds for lenders in terms of geographic penetration with respect to race and ethnicity. As we have noted in earlier posts, these determine where the bar will be set in terms of lending geographically within a bank’s assessment area.
Although it is widely recognized that the demographics of the nation are changing, it was unknown up until this point how these changes would ultimately impact aggregate HMDA reportable lending. Analysis of the recently released HMDA data indicates some large increases in majority-minority census tracts (MMCT’s) in a number of markets.
Of the 412 MSA’s as defined by the Office of Management and Budget (OMB), 75% had at least some increase in proportion of aggregate lending in MMCT’s. Roughly 21% had no increase, and less than 5% had a decline in the proportion of aggregate lending in MMCT’s. The average overall change was roughly a 5% increase in proportion of MMCT aggregate lending.
However, some MSA’s experienced very large increases in the proportion of lending in MMCT’s between 2021 and 2022 based on the change in the census tracts. Nearly 20% of MSA’s experienced a 10-percentage point or more increase, and the top 10 MSA’s had increases of 19-percentage points or more. The top 2 MSA’s, Midland, TX and Lakeland-Winter Haven, FL had increases of 30 percentage points or more.
The 10 MSA’s with the largest increases in the proportion of lending in terms of originations in MMCT’s were:
1. Midland TX (+32.2%)
2. Lakeland – Winter Haven, FL (+30.7%)
3. Modesto, CA (+29.8%)
4. Greenville, NC (+29.5%
5. Warner Robins, GA (+23.0%)
6. Farmington, NM (+21.7%)
7. Port St. Lucie, FL (+21.5%)
8. Memphis, TN-MS-AR (+19.2%)
9. Fresno, CA (+19.2%)
10. Odessa, TX (+18.7%)
This data will guide regulatory expectations with respect to redlining risks and CRA performance. As we have stressed in previous posts, it is critical for lenders to analyze this data and begin making needed adjustments as quickly as possible.