We wanted to provide an update on this issue and reiterate Hills Bank’s unwavering commitment to providing equal opportunity to housing for everyone.
As we shared earlier, Hills Bank erroneously over-reported a significant number of loan denials. This, in turn, led to Hills Bank being named in the Reveal organization’s report and painted an inaccurate picture of our bank’s lending practices.
We have since corrected these numbers, re-filed them with the federal reporting agency, and shared this information with Reveal. Over the last few weeks, we have also had positive discussions with the League of United Latin American Citizens of Iowa (LULAC) and bank regulators to further explain the findings of our internal investigation and share a more complete representation of all we are doing to work with diverse groups of people in our communities.
This experience has also made us reconsider our views on not using a loan prequalification process. We previously believed prequalification could potentially discourage people from applying for loans, which is why we have traditionally gone to great lengths to work with (and encourage) everyone to apply, even if their credit score or debt-to-income ratio may disqualify them through a prequalification process. After reviewing this more, we realized that our process clearly differed from industry standards, so this is something we have already begun changing.
Our goal is to make the dream of homeownership possible for individuals and families in our area. We will continue to do all we can to demonstrate this commitment to the communities we serve.
In a continued effort to be transparent, we wanted to share our updated findings for greater clarity.
We have further reviewed the files for the 10 denials to Latino applicants in 2015-2016. In that review, we discovered that Hills Bank worked with the applicants after the original denials and was able to subsequently approve and close loans for 4 of the 10 applicants. As a result, the total number of denied applicants for those two years is 6. Two of those 6 applicants had previously applied at other area institutions and were not approved.
Our deeper review of the situation shows that we had a data-reporting issue rather than a fair lending issue. We realize the details of data-reporting can be complex as shown in our 2/15/18 response, and we have a strong obligation to our coworkers, customers and the community for this to be clearly explained.
We further want to express our gratitude for all of the examples our customers have shared with us over the past week in support of our long-standing dedication to diversity and our community.
Hills Bank and Trust Company has approved and closed more loans to Latino borrowers than any other institution in our market and is proud of its service to a wide diversity of customers. We strongly dispute any inference of discrimination.
The data referenced from the Reveal study referenced in recent media does not accurately reflect the reality of our service to a diverse customer base and is the result of our internal reporting procedures rather than any discrimination. Hills Bank has determined that it unfortunately over-reported data due to procedures which are inconsistent with other financial institutions.
First, there are varying practices within the industry of reporting loan applications. Many institutions have a prequalification process in which potential denials are not reported or are classified as withdrawals rather than denials. In contrast, Hills Bank has lacked such a prequalification process and has erred on the side of encouraging all people to apply whether qualified or not. This approach eliminates any potential discouragement of applications yet comes with the risk of higher denial rates.
Second, in reviewing our data, we discovered that we double-reported loan denials to both Latino and non-Latino applicants in 2015 and 2016, resulting in overstated denials. We will continue to review our internal policies and reporting procedures that contributed to this disparity.
The American Bankers Association published a response to the study in which it strongly refuted the analysis in the Reveal study. A link to this statement can be found by clicking here.
We value the diversity of our customer base and look forward to continuing to expand and develop this diversity in the years to come.