NEW YORK -- A nationwide, grass-roots organization hopes to spur increased community reinvestment lending by creating a secondary market in loans to low-income and minority borrowers.

"We want to create a mortgage-backed security that really goes beyond what is available today," said Bertha Lewis, the Brooklyn-based director of loan counseling for the Association of Community Organizations for Reform Now (ACORN).

Ms. Lewis, speaking at an Oct. 7 fair-lending conference at New York Law School, said her group expects banks, insurance companies, and private investors to purchase the securities.

Within in the next three years, Ms. Lewis said, ACORN will start issuing loans to low4ncome and minority borrowers with imperfect credit histories which it will repackage and sell as securities.

The more than 200 participants in attendance greeted Ms. Lewis's proposal with extensive applause, although the community activists appeared much more supportive than the bankers.

Ms. Lewis said ACORN cannot wait for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp, (Freddie Mac) to buy loans that do not conform to current underwriting standards.

Ms. Lewis said ACORN's efforts could rob commercial banks of home mortgage business in low-income areas, making it harder to meet community reinvestment obligations. "Home mortgages are no longer going to be your cover," Ms. Lewis said.

Mark Willis, president of Chase Community Development Corp. and the lone banker on the panel, said bankers know they must invest in their home cities.

"We really do understand that the future. of Chase depends on the future of New York," Mr. Willis said.

He said community groups and banks must cooperate to meet fully the lending needs of low-income and minority neighborhoods. In many cases, that might involve having local credit unions and development agencies make loans with Chase's backing, he said.

"We are in this together," he said. "Banks have a role."

--Jaret Seiberg

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