~FINDINGS OF THE STUDY~

Subprime lending has grown substantially in rural Iowa in the last six years.

A higher percentage of refinance loans than home purchase loans are made by lenders on the HUD subprime lender list.

Subprime loans carry interest rates that are substantially higher than the rates for prime loans.

Although subprime lending in rural areas is growing, county mortgage records illustrate that the subprime share of the mortgage market in non-MSA counties is much lower than a simple review of the HMDA/LAR would indicate.

Small commercial banks account for a significant percentage of mortgage lending in rural counties.

There is little evidence that small banks are considerably more conservative in their loan products than larger institutions.

A smaller percentage of loans from the more rural counties were sold to the Government Sponsored Enterprises like Fannie Mae and Freddie Mac in 1999.

Some small community banks have lower than average loan to deposit ratios. These low ratios indicate that they have the financial capacity to meet more of the credit needs of their communities and they should be encouraged to do so as part of any comprehensive effort to expand access to affordable housing in rural Iowa.

Some large banks do not appear to be providing mortgage lending at levels that their deposit share in particular counties would appear to warrant. They should be encouraged to provide more services and community development investment as well as increased lending in the communities from which they take deposits.

Some subprime lending is clustered in particular geographies that have higher levels of minority residents.

Minority borrowers have a higher share of the subprime market even when controlled for income.

There is only a slight difference between prime and subprime lenders in the reasons for non-originations, and thus little evidence that subprime borrowers are particularly savvy or particularly poor shoppers.

Subprime lenders dominate mobile home lending.

In addition the study identified all the prime and subprime lenders in Iowa.

In the course of this study we have encountered examples of other worrisome practices such as payday lending, car title lending and abusive land contracts that require the attention of Iowa policy makers. Abusive land contract “lending” has been documented by other parties in Des Moines and Davenport and appears to have gained a foothold in some rural counties as well. Providing enough evidence to document this phenomenon is, however, beyond the scope of this study.