data show concentrations of higher - cost lending. competitive pressures in these markets will increase efficiency and ensure that prices for mortgages are commensurate with risk rather than with a lack of lower - cost options. lenders, community groups, and other mortgage market participants, such as realtors, will all have an interest in establishing new partnerships and strengthening existing ones in an effort to serve their communities better. there will undoubtedly be an increased emphasis on financial education to help consumers shop for and obtain mortgage loans at the best price and with the terms that best meet their needs. finally, i think we can look forward to thought - provoking research exploring both structural and behavioral aspects of the mortgage market to further our understanding of why racial differences among borrowers persist. 4 / 4

the institution's auditors and, if need be, its regulator, that pricing differences resulting from the exercise of discretion are a function of market factors and not unlawful discrimination. a related issue is loan products originated through or purchased from loan brokers. when evaluating your institution's involvement with these products, you may want to ask whether existing policies place parameters on fees for brokers. you should also ask whether your institution performs adequate due diligence and regular testing of its broker channels to verify that third parties are acting in accordance with your policies. in this regard, the financial institution regulators issued joint guidance on credit - risk management for home - equity lending in may, urging banks, thrifts, and credit unions that use brokers and correspondents to monitor the quality of loans by origination source in order to uncover problems and take appropriate action - - including terminating the relationship - - against any third - party originators that do not produce quality loans. a broader question regarding pricing involves price differences based on risk, property characteristics, or type of loan product. any time a lender differentiates or prices based on these factors, the burden of proof shifts to the lender to demonstrate that pricing differentials are based on empirical analysis. for an institution that adopts the practices i just outlined, and also tests to ensure that these policies are not contravened by flaws in compensation or loan - purchase practices, the changes in hmda reporting should hold few surprises. by now, each of you has carefully reviewed your revised hmda data to identify any potential legal or reputational risks. it is also important to maintain perspective. the inherent limitation of the hmda 3 / 4 data collection must be understood if it is to promote market efficiency and legal compliance. it is not intended to discourage lenders from entering or remaining in higher risk segments of the market. ultimately, the cost of credit to higher - risk borrowers is lower when there is a competitive marketplace. although the discussion of the impact of the new hmda pricing data has just begun, it is clear that there is, and will continue to be, some heated debate about what the data show. the data cannot support definitive conclusions but can be a useful screen that allows enforcement and supervisory agencies to better target their resources. the data will also give lenders an increased awareness of the lending and pricing practices of their organizations, as well as of their competitors. as a result, the data may give lenders opportunities to compete in areas where the