Reno cites Shawmut agreement as blueprint for entire industry.

WASHINGTON -- In announcing the Justice Department's settlement with Shawmut National Corp. on lending discrimination, Attorney General Janet Reno suggested Monday that the lending industry study the agreement carefully.

That settlement, which ended a yearlong investigation into discrimination at the New England lender, provide a blueprint that the department views as innovative and pro-active, she said.

"We cannot tell all banking industry leaders what exactly they must do to rid racial factors from their decision-making process -- it is up to them to review their own policies and determine if race plays a role in their lending practices," she said.

"But the remedial actions taken by Shawmut long before the Justice Department came on to the scene can serve as a guidance to the lending industry," she added.

Somewhat in the Dark

The settlement comes as industry leaders are expressing growing frustration with the uncertainty they have about what is expected of them by regulators and law-enforcement officials.

The attorney general's comments on the Shawmut decision provide the first clear guidance for the industry of what the department during her tenure will be expecting.

The Shawmut settlement included a $960,000 commitment by the lender to compensate black and hispanic applicants who were unfairly denied mortgages between January 1990 and October 1992. Each victim will get $10,000 to $15,000.

|Guidance to Lenders'

Joel Alvord, Shawmut's chairman and CEO, urged lenders Monday to take "pro-active steps" to satisfy law-enforcement officials. "We believe this agreement offers guidance to lenders who are genuinely unsure about somee of the things they should be doing," he said.

The 24-page consent decree lays out the many fair-lending initiatives Shawmut has taken in the last few years that have appeased the Justice Department. They include:

* New underwriting standards and policies. Shawmut has trained loan counselors, originators, and underwriters on fair-lending issues and hired several minority employees. It has added financial incentives for loan originators to make loans on lower-valued homes. Loan processing and underwriting procedures have also been altered.

* Added marketing and outreach. Shawmut has increased advertising to minority-oriented media, published English and Spanish versions of a brochure on its low-cost products, and created a community advisory committee made up of neighborhood groups to advise it on community needs. In addition, the bank has hired a minority member with affordable housing experience to serve as an advocate for all minority applicants.

* Mortgage review committees. Shawmut has set up committees of managers and underwriters to re-eevaluate all denied minority applications. The groups include minority employees with housing expertise to serve as advocates for the applicants. The company widely distributes the minutes of the meetings so underwriters can better understand why denials were overturned.

* Special loan products. The lender has committed millions of dollars to below-market rate and other portfolio mortgage loan programs for low-to-moderate income and minority homebuyers.

* Self-evaluation. The lender has begun a fair-lending compliance program, with help from an outside consultant, to review its lending policies and files to review whether minorities have been treated differently.

* Testing. Shawmut hired an outside company to bring in "mystery shoppers" to document how minority and white applicants were being treated differently.

* Branching. Shawmut has announced plans to open a full-service branch in the minority community of Roxbury, Mass.

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