Home Mortgage Disclosure Act (HMDA) data does not include a field that identifies whether an individual loan application is a subprime or manufactured home loan application. HUD has annually identified a list of lenders who specialize in either subprime or manufactured home lending for over ten years. Beginning with 2004 HMDA reporting, lenders are required to identify loans for manufactured housing and loans in which the APR on the loan exceeds a comparable Treasury APR.
After reviewing data from the additional HMDA reporting fields, HUD will continue to produce its HUD List for the following reasons. First, subprime loans do not necessarily have APRs that are 3 percentage points above a comparable Treasury APR. Second, some lenders who we contacted stated that their APR information was incorrectly reported after we asked why their lending portfolios had significant percentages of high APR loans. Third, a number of lenders were multi-purpose lenders and their high percentage of loans -- with spreads 3 percentage points above a comparable Treasury -- were due to their broker channels. These lenders didn't feel they were necessarily subprime. Fourth, some prime lenders told us that their higher APR loans were not necessarily subprime loans and could reflect fees and yield spread premiums. Fifth, the designation of a loan with an APR above a comparable Treasury security is dependent on the yield curve.
There were 210 HMDA reporters who specialize in subprime lending in 2005. The attached excel file contains the names of the 210 HMDA reporters, their agency codes, and lender identification numbers. The agency code and lender identification numbers should be used to link to the individual HMDA loan application records (LARS). The file also contains a concatenated field, IDD, which is a combination of the agency code and lender identification number.
The 2004 and 2005 HUD Lists differ slightly from past lists. First, since 2004, the HUD List is restricted to subprime lender specialists since HMDA analysts can now easily determine whether a lender specializes in manufactured home loans. Second, we have provided the 1993-2004 HUD Lists for convenience but we have not updated them to reflect lenders who have identified themselves as subprime specialists in 2004. For example, if Bank XX identifies itself as a subprime specialist in 2004, HUD did not update its prior lists to reflect that Bank XX was a subprime lender since some lenders enter and exit the subprime market depending on interest rates and other economic factors. Third, the list contains a few Alt-A specialists that had similar loan characteristics as subprime lenders. In particular, these Alt-A specialists were more likely to have higher proportions of higher-APR loans.
Previous Lists. The subprime and manufactured home lender list has annually been updated and revised in response to feedback from lenders, policy analysts, housing advocacy groups, and other users of the list. HUD deletes lenders and adds others based on that feedback.
HUD uses a number of HMDA indicators to identify potential subprime lender specialists. First, subprime lenders typically have lower origination rates than prime lenders. Second, home refinance loans generally account for higher shares of subprime lenders' total originations than prime lenders' originations. Third, lenders who sell a significant percentage of their portfolios to the GSEs do not typically specialize in subprime lending. The rate spread variable available for the first time with the 2004 HMDA data can also be used as a screen to identify potential subprime lender specialists. As would be expected, the ranking of potential subprime lenders using the HUD indicators is very similar to the ranking of potential subprime lenders using the rate spread premium variable alone.
HUD called the lenders identified on the potential list or reviewed their web pages to determine if they specialized in subprime lending. A large number of lenders told us that they offer subprime loans but they do not constitute a large percentage of their overall conventional mortgage originations. Most lenders readily identified themselves as prime or subprime lender specialists. Some lenders identified themselves as all-purpose lenders and broke out their loan portfolios by mortgage product. In a couple of cases, we identified a lender as subprime if their subprime percentage exceeded 50 percent.
III. Additional Information
There are a number of additional issues that should be recognized when using the lists to interpret subprime lending trends. First, we treat all credit unions as prime lenders. Second, we treat the loans sold to the GSEs by subprime lenders as prime loans. Similarly, the government-insured loans originated by subprime lender specialists are treated as government-insured loans. Third, it appears that the HMDA data provided by the two Conseco reporters in 2002 reflect duplicate reporting. Fourth, users of the list should be reminded that not all of the loans reported by subprime lender specialists are subprime loans. In fact, a number of subprime lenders also originate prime loans. Similarly, a number of large and predominantly prime lenders originate a significant number of subprime loans.
Users of the HUD List should treat the list as a research tool to identify subprime mortgage lending trends when using HMDA data. The HUD List was not intended as a contact list for consumers or brokers in search of a lender. HUD neither endorses these lenders nor claims that subprime lenders are predatory lenders.
Download Excel file (.xls, 319 KB)
Contact: Randall M. Scheessele
Phone: (202) 708-0421