Sunday, January 16, 2011

Federal Reserve Study Finds No Evidence of Disparate Impact Discrimination in Loan Mods

The San Francisco Federal Reserve recently issued the results of its study, conducted with assistance by the Institute for Research on Poverty at the University of Wisconsin-Madison, regarding potential disparate impact discrimination in the area of mortgage loan modifications.
The study found no evidence of disparate impact discrimination.
Specifically, the Federal Reserve study concludes as follows:
"The results suggest although loan modifications remain a rarely used option among the servicers in these data, there is no evidence that minority borrowers are less likely to receive a modification or less aggressive modification. These borrowers are more likely to be delinquent, but controlling for delinquencies we find no evidence of disparate impact. We also find that preliminary performance of loans post-modification is positive, particularly for minority borrowers."
The study also notes that, "[g]enerally modifications involve modest interest rate reductions and increasing loan balances."
The Federal Reserve study used data on 105,769 non-agency securitized subprime loans made in 2005.  The researchers examined the incidence of defaults and modifications among loans managed by one large trustee of securitized loans covering 94 loan servicers in California, Oregon and Washington. HMDA data was used to assess borrower characteristics.
Let me know if you have any questions.  Thanks.


Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

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