questions will be critical to understanding racial and ethnic differences in lending outcomes. staff at the federal reserve will continue their research, and we hope and expect others will join them. research would benefit greatly from the input of banks and mortgage lenders such as yourselves. the national bankers association, in particular, has provided valuable insight in the past into the structure and dynamics of mortgage lending markets with substantial minority populations, and into ways lenders could better serve those markets. we value your information as we collectively search for ways to improve the efficient operation of the mortgage market and the health of our economy and society more generally. in the case of conventional first - lien home - purchase loans extended in 2004, 32. 4 percent of blacks and 20. 3 percent of white hispanics obtained higher - priced loans, compared to 8. 7 percent of non - hispanic whites and 5. 9 percent of asianamericans. robert b. avery, glenn b. canner, and robert e. cook, " new information reported under hmda and its application in fair lending enforcement, " federal reserve bulletin, summer 2005, at table 10. a. 4 / 5 conclusion in conclusion, i would like to say that we at the federal reserve value interaction with organizations such as the national bankers association so we can better understand the issues that banks face today, from capital to credit risk to compliance issues. i look forward to continuing our dialogue in the future. 5 / 5

susan schmidt bies : regulatory issues remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the national bankers association annual convention, beverly hills, 12 october 2005. * * * good morning. i would like to thank the national bankers association for inviting me to participate in the annual convention today. i know that regulatory issues are always a critical concern for your members. today, i would like to focus on three regulatory issues that are currently high on the list of both bankers and supervisors : credit risk, particularly in residential and commercial real estate ; the proposed revisions to the current minimum regulatory capital requirements ; and the new disclosures under the home mortgage disclosure act ( hmda ). credit risk first, i would like to talk about credit risk, which has been the leading cause of bank failures over the years and remains the biggest risk for most financial institutions. while credit performance has been very strong lately, and banks of all sizes survived the 2001 recession with only a slight decline in credit quality, banking supervisors have become concerned recently about apparent increased risk - taking in both commercial and residential real estate lending. of course, when property values rise and the loan business grows increasingly competitive, bank supervisors tend to worry that more - aggressive underwriting may set the stage for future deterioration in credit quality. the federal agencies issued joint guidance on home equity lines of credit, or helocs, in may ; we are now working on additional guidance on affordability products in the residential mortgage market and on underwriting practices in the commercial real estate market. residential real estate lending has been a significant focus of supervisory attention this year. average u. s. housing prices have appreciated more than 80 percent since 1997, and were up 13. 4 percent in the second quarter - - the largest year - to - year increase in more than a quarter century. home prices react fundamentally to factors affecting affordability, such as household income growth and mortgage interest rates. but another factor apparently fueling price appreciation has been an increase in speculative buying ; in other words, more property purchases have been made by investors for profit and not for use as their residence. as home prices have risen, lenders have turned to a variety of ways to help their customers buy the homes they want. these include non - traditional, or " affordability, " mortgage products. we've also seen the increased use of helocs as part of purchase financing, supplementing the first lien. at the end of