The American Civil Liberties Union on Thursday stepped into the fight against racial bias in lending, filing a complaint against a prominent mortgage company.

The prestigious and powerful civil liberties group accused New Jersey's PHH U.S. Mortgage Corp. of discriminating against African-American homebuyers in Philadelphia.

The complaint, filed with the Pennsylvania Human Relations Commission, is expected to set off an "avalanche" of filings against lenders, said Larry Platt, a lawyer who defends lenders in fair-housing enforcement cases.

"There is no good news in this for the mortgage industry," he said.

In a written statement, PHH said it has a long-standing policy of not discriminating. The company said it has no record of any complaint alleging race discrimination in Philadelphia, and was therefore surprised by the ACLU's action.

PHH noted that last year it signed a fair-lending agreement with the Department of Housing and Urban Development, and was one of the first companies to do so.

The complaint is the first in a series of actions the ACLU is planning against big mortgage companies, according to Christopher Hansen, chief counsel for the ACLU on the case.

"There's clearly an interest in focusing on the larger players," he said. "We want to have the largest impact we can."

The ACLU decided to look into lending discrimination because of its dissatisfaction with the Department of Justice, said Stefan Presser, legal director for the ACLU of Pennsylvania.

"They have not moved zealously enough to enforce Title 8, which Congress gave them the authority to do," he said. Title 8 is the department of Housing and Urban Development's Fair-Housing Act, which prohibits discrimination in residential real estate transactions.

The ACLU has been analyzing data released by lenders under the Home Mortgage Disclosure Act (HMDA), looking for disparities between treatment of black and white borrowers.

Mortgage companies have a much poorer minority-lending record than banks, Mr. Hansen said, in part because they don't have to comply with the same Community Reinvestment Act requirements.

PHH has "persistently" discriminated against African-Americans by denying them home loans, the ACLU complaint says.

It also accuses PHH of "redlining" - rejecting mortgage loans for properties in African-American neighborhoods.

PHH, based in Laurel, N.J., turned down black borrowers almost twice as often as white borrowers in 1995 and more than three times as often in 1994, HMDA data show.

The company also receives very few applications from predominantly black neighborhoods in Philadelphia, according to the ACLU.

"We tried to see if we could explain this away by looking at income and other factors, but there were no factors to explain these huge disparities," Mr. Hansen said.

"Our real complaint with PHH is that the disparities have been there since there has been HMDA data, and they have taken no steps to improve their lending record," Mr. Hansen added. Plaintiffs in the claim number in the thousands, he said.

The ACLU also plans to investigate PHH's hiring practices to determine the number of minority employees on its staff.

PHH did not respond to requests for comment by press time.

Mr. Platt expressed surprise at the ACLU's actions.

"Their focus is predominantly constitutional rights," he said. Because PHH is mainly a direct marketing and affinity lender without any actual retail offices, he said, it should be an "interesting case."

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