Home Loans To Minorities Surged in '94, U.S. Reports

WASHINGTON - Stung by charges of racial bias, banks and other lenders dramatically increased their business with members of minority groups.

Federal regulators reported Tuesday that home mortgage lending to blacks jumped 54.7% last year, to 125,796 loans. That was more than 2.5 times the volume of loans extended to blacks in 1990, the year the government began publicly reporting such data.

Mortgages for Hispanics, meanwhile, jumped 42% last year, to 129,695. Loans to whites rose by a more modest 15.7%, to 2.2 million.

"It sounds like increasing numbers of minorities are able to get loans, which is a very positive development," said Allen Fishbein, general counsel to the Center for Community Change.

Regulators also were upbeat.

"The data suggest that the affordable home loan programs that mortgage originators have initiated in recent years ... may be having an impact," the Federal Financial Institutions Examination Council said in releasing the numbers. The data were gathered under authority of the Home Mortgage Disclosure Act.

The increases in minority lending were especially strong in low-income neighborhoods. Conventional home loans written for low-income blacks and Hispanics jumped 62.8% and 67.9%, respectively, the regulators said.

The increases came after several years of heavy criticism of mortgage lending practices in minority and other low-income neighborhoods. Charges of discrimination heated up in 1991 when the government began disclosing racial patterns in mortgage lending by banks, thrifts, and mortgage companies.

Despite the improvement, lenders continued to reject minority applicants at much higher rates than they did whites, though the disparity narrowed somewhat. The data show that 33.4% of black applicants for mortgages were rejected last year, versus 16.4% of white applicants.

On the whole, however, housing activists and bankers cheered the new data.

The increased lending to minorities "is definitely an indication that we are headed (on the) right course," said John Taylor, president of the National Community Reinvestment Coalition.

"It reflects the efforts banks have undertaken to reach out to their entire communities," added James McLaughlin, director of regulatory affairs at the American Bankers Association. "It really shows that our efforts have been successful."

Catherine Bessant, vice president and Community Reinvestment Act leader at NationsBank Corp., said the data bode well for further industry inroads into low-income communities.

"When we target a market in such a focused way and when we see results that have outpaced the market, that definitely spells continued momentum and continued success," she said.

Some community group leaders sought to put a political twist on the numbers. Mr. Taylor, for example, said the data prove that "CRA is working."

"That makes it even more (incredible) that Congress would consider moving us off this course," he said, referring to efforts to repeal parts of CRA.

But bankers said factors other than CRA caused the lending increases.

"It is economic factors that are driving this, not CRA or other types of pressures," ABA chief economist Jim Chessen said. Banks learned how to market in these communities, and the secondary market has relaxed some of its standards, he said.

Successful borrower education programs in low-income communities also helped, said Rob Rowe, regulatory counsel at the Independent Bankers Association of America. "The better educated the borrower is, the better able they are to qualify," he said.

While efforts to boost lending are commendable, the rejection rate disparities remain disturbing, said Mr. Fishbein of the Center for Community Change.

Mark Willis, president of Chase Community Development Bank, said disparities are inevitable as banks move into the low-income market. "I don't think that is indicative of anything," Mr. Willis said. "It just shows we are trying harder."

Lending data are now available at the 9,800 lenders who filed 1994 HMDA reports. The FFIEC will distribute the data on microfiche and CD-ROM in August to central depositories in most major cities.

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