Jim Campen
Title: Professor emeritus of economics, UMass-Boston, author of “Changing Patterns” reports
Age: 70
Experience: 37 years
Jim Campen became interested in the economic impact of community banking way back in the 1970s, when he first began doing research on small business lending. For more than 20 years, he’s been the lead author of a series of reports for the Massachusetts Community and Banking Council that monitor the state of lending to low-income minority borrowers and the communities in which they live.
Q: So, how did you first become involved in writing the “Changing Patterns” reports?
A: Way back in 1989, at the beginning of the year, there was a leak of a draft Fed report – it never appeared in final form – that showed the finding that discrimination [in mortgage lending] was statistically significant and economically significant. That set in motion a whole year of maneuverings and struggling about the issue. A number of community groups formed a coalition, the Community Investment Coalition, and the banks all got together and hired a consultant. Joe Kennedy, the congressman, was involved; the Fed was involved; the mayor was involved. And at the end of the whole year, basically, the banks announced their community investment program, which included more community investment in areas where they hadn’t been doing it, more bank branches, more support for minority-owned business, and more support for affordable housing development.
One of the things they set up was the Mortgage and Community Banking Council, which was to monitor what they were doing, how they were adhering to their programs. So after a few years, they decided to do a study to check up on how they were doing in various areas, and that was [the first] “Changing Patterns,” which came out in 1992-93. Then I did a follow-up with 1994 data, and I’ve been doing them ever since.
Q: One of the things you talk about in the report is how a higher proportion of minority borrowers tend to take out Federal Housing Administration (FHA) or other government-backed loans. With the FHA trying to shrink its market share these days, and conventional underwriting standards so tight, do you think there will be products out there to fill in for the FHA and serve those borrowers?
A: No one’s said anything to me that the new mortgage lending requirements are anything that a responsible bank wouldn’t have been doing all along. Making sure borrowers can repay a loan, doing a credit check, that’s just standard practice. Banks tend to worry about making a technical mistake and putting a foot wrong, but in terms of the substance of [the regulations] it doesn’t impose any higher standards.
Generally, I think what the report showed is that we’re returning to very much where we were when the whole thing started. Not very much lending to low- and moderate-income folks, and not much access to conventional lending for blacks and Latinos.
“Redlining” refers to geography, discriminating geographically in relation to the race of the borrower. In the very early years of the report, as the [Community Reinvestment Act (CRA)] came in, we saw that was making a difference in Boston and elsewhere, and the share of lending to blacks and Latinos went up. Since then, it’s gone down. When subprime came along, instead of redlining, you got reverse redlining, where instead of not getting loans these neighborhoods were getting deluged with bad loans. And what’s happening now again is that credit is relatively scarce for blacks and Latinos and their neighborhoods.
Q: You were saying how one of the most consistent findings in the report after all these years is that there’s still a difference in denial rates among white borrowers and minority borrowers.
A: You know, part of me thinks, it’s the 21st century now. Will someone really be treated differently if they walk into say, Cambridge Savings Bank, if they’re black or white? But we find that they are … people are told different things. It’s discrimination with a handshake and a smile, and people don’t feel they’ve been treated badly, but if you compare [the outcomes] for a black applicant and a white applicant, they’re treated differently. It remains part of the problem, and it’s not just banking, it’s because of the way our society works. It’s disheartening, but the denial rates for blacks and Latinos remain higher, and that’s persistent.
Top 5 Improvements In Mortgage Lending Over The Past 20 Years:
- Creation of national licensing to catch bad actors.
- Lenders now have to make sure consumers can afford loans.
- Disclosures must be timely.
- Loan officers aren’t incentivized to drive consumers into bad loans.
- Banks now rated on community lending practices.
