WASHINGTON -- The Department of Housing and Urban Development and the Mortgage Bankers Association of America are near an agreement on asking bankers to sign voluntary fairlending commitments with the government.
The commitments would include pledges by the institutions to implement a wide range of programs that increase minority lending, as well as specific numerical targets by which performance would be gauged.
HUD Assistant Secretary Roberta Achtenberg has been negotiating with several lenders for several months on the so-called "best-practices" initiative. But the lenders balked after she insisted that these agreements include hard performance targets - like increasing lending minorities by a specific amount each year.
The lenders asked HUD to try to work out an agreement first with the banking trade groups.
The association, which had been talking with the department before the negotiations with individual lenders soured, is expected to be the first trade group to endorse the initiative.
The group's president, Stephen B. Ashley, and HUD Secretary Henry Cisneros hope to jointly announce the accord in' the next few weeks.
As part of the endorsement, the trade group would urge 2,000 mortgage bankers to sign an agreement with HUD to prove its commitment to ending discrimination. A prototype of the agreement - which could be individually tailored - would also be presented.
Lenders that choose to sign the agreements would send annual reports to the department, detailing their programs and their progress. But no action would be taken, HUD officials say, if lenders failed to meet their goals.
75 Agreements Predicted
Mr. Cisneros has told President Clinton that he will have at least 75 agreements with lenders in at least five cities by the end of September.
But HUD ran into problems earlier this spring, when it floated a plan to ask participants to commit to increasing their minority approval records by 20% in one year. The department also suggested specific targets for minority hiring.
Both the industry and banking regulators were caught off guard by the proposal.
"This all takes some getting used to - the notion that the industry is interested in being proactive in this regard and that HUD is interested in encouraging voluntary compliance," Ms. Achtenberg said. "Most bankers didn't understand that HUD has an obligation under the Fair Housing Act to assess the impact of lending practices, let alone that the secretary has a statutory obligation to seek voluntary compliance from the industry.
"The issue of performance-based measures is one that the secretary has been very clear with us on from the very beginning," she added. "That's not negotiable."
Concern About Targets
Trade group officials say they have not worked out a final agreement on this issue with Ms. Achtenberg, and that they are concerned about the targets. But they say they still think a deal is reachable.
And they see three reasons its members should participate in the initiative: it lays out in detail model fair-lending practices, it provides good public relations, and it could provide a "semi-safe harbor" in the event of a discrimination probe.
"When and if you're the object of investigation - if problems should be found - it's going to go a long way toward mitigating the hot water you're in," said Paul Mondor, the Mortgage Bankers Association's associate director for regulatory compliance.
Looking to Other Groups
Ms. Achtenberg wants other banking trade groups to reach similar accords with HUD, urging their members to make commitments as well. Next Tuesday, she will meet with representatives of the American Bankers AssoCiation, the Bankers Roundtable, the Independent Bankers Association of America, and other groups to ask their cooperation.
But the groups so far have been noncommittal, saying they are wary of signing onto any plan that smacks of credit allocation.
"I have strong concerns and reservations about any type of targets or quotas," said James McLaughlin, director of agency relations for the ABA. "But, at the same time, we think banks don't intend to discriminate, and they would be willing to look at their lending practices."
The trade groups also want the banking agencies to be involved in any effort they endorse. This was not an issue for the mortgage group, since its members are not supervised by the banking agencies.
"Any agreement obviously would have to be agreed to by the bank regulators, too," said Diane Casey. "We'd want to make sure they're comfortable about it."
Despite controversy about including numerical targets in the accords, Ms. Achtenberg says that the initiative is on track, and that lenders are "beating down the doors" to sign on.