WASHINGTON -- The American Bankers Association on Thursday acknowledged that there are patterns of discrimination in mortgage lending and launched a campaign to help banks make more loans to minorities.
The ABA plans to form a clearing house this fall that will use training programs, manuals, workshops, and other means to educate banks about making home loans to "minorities and low/moderate-income people."
The initiative comes seven months after the Federal Reserve Board released data showing that black and Hispanic mortgage applicants were rejected at significantly higher rates than whites.
"This effort is intended to reflect an understanding of the seriousness of the problem," said Robert M. Freeman, chairman and chief executive officer of Signet Banking Corp., Richmond, Va., and co-chairman of an ABA task force looking into the issue.
Planks of the Platform
The clearing house, which will be called the Centor for Community Development, will aim to help bankers:
* Comply with equal-credit and other anti-discrimination rules.
* Analyze of minority applicants' loan documentation.
* Sell applicable mortgage loans into the secondary market.
The center will also make efforts to meet with community groups and provide information about the mortgage-application process to prospective borrowers.
The Fed data, derived from banks under the Home Mortgage Disclosure Act, has had a "sobering effect on the banking industry," said James M. Culberson, chairman and chief executive of First National Bank & Trust Co., Asheboro, N.C., the other co-chairman of the task force.
Statistics Beyond Debate
The numbers "have made us painfully aware that we need to do more," he said. "We do not want to debate the statistics."
The ABA announcement received qualified praise from a community-lending activist.
Deepak Bhargava, legislative representative with the Association of Community Organizations for Reform Now, better known as Acorn, called it a "watershed event" but said the ABA could go much further.
"For the first time ever, here is acknowledgment that the problem exists," Mr. Bhargava said. But "to make loans in minority neighborhoods you have to throw out the suburban cookie-cutter mold and think about the inner-city market," he added.
Allen Fishbein, general counsel of the Center for Community Change, criticized the ABA for emphasizing the need to provide more loans to "low-income people," when the real problem is racial discrimination.
"One of the most troublesome [findings in] the HMDA data was that affluent blacks were being rejected more often than low-income whites," he said.
Regulatory pressure on mortgage lenders has intensified. The Office of the Comptroller of the Currency said last week that it is scrutinizing 250 national banks that have questionable track records for loans to minorities.
Mr. Freeman said bankers must change their evaluation methods, giving more weight to income stability, for example, than employment stability. And they must be more sensitive to subtle forms of bias, such as not offering enough help or information during the application process.
Acknoweldging that his own bank turns down minority applicants at a higher rate, Mr. Freeman said: "These are not deliberate, overt attempts to not make the loans."
