A spectacular five-year expansion of credit to black and low-income borrowers came to an end in 1996, according to data released Monday.

Home Mortgage Disclosure Act figures show that the number of loans to blacks rose 3.1% in 1996, the first time since 1991 that the group did not experience double-digit loan growth and did not exceed the growth rate for loans to whites.

The picture was especially startling in conventional mortgages - loans not insured by the government. Conventional loans to blacks actually declined from 1995, by 1.5%, the data showed.

Comptroller of the Currency Eugene A. Ludwig said his agency plans to study why the drop occurred. "Some of the (HMDA) results show a need for more detailed analysis," he said.

Lending to low-income borrowers rose 13.5%, which trailed increases in home loans to upper- and middle-income consumers. Last year was the first since 1992 that low-income lending did not grow faster than the other two categories.

Rejection rates on conventional loans to blacks rose 8.3 percentage points, to 48.8%, the highest level ever recorded. Lenders, however, also rejected more white applicants. As a result, lenders continued a four-year trend of rejecting two blacks for every white applicant.

"This raises some grave concerns," said John E. Taylor, president of the National Community Reinvestment Coalition. "We are headed in the wrong direction."

Agnes Bundy Scanlan, senior vice president at Fleet Financial Group, cautioned that minority mortgage borrowing will stagnate without increased inner-city economic development. "Before someone can afford a home, they need a job," she said.

"The new CRA regulations have made institutions focus on numbers rather than paperwork," she said. "Everyone has an incentive to go out and get loans."

But Donna Wilson Castor, senior vice president at Dime Savings Bank, predicted lending to minorities will rise considerably this year as the new Community Reinvestment Act rules take effect.

Overall, mortgage lenders enjoyed a banner year in 1996 as originations and refinancings rose to their second-highest level ever. Lenders approved 14.81 million applications for home purchase, home improvement, and refinancing loans last year, an increase of 32% from 1995. Applications for refinancings alone shot up 68%.

The near-record increase is not surprising, said Ron J. McCord, chief executive of American Mortgage and Investment Co. in Oklahoma City and president of the Mortgage Bankers Association.

"In 1996 rates dropped, which helped expand homeownership opportunities by making home purchases very affordable," he said.

The 1996 numbers are second only to those of 1993, when mortgage lending peaked at 15.38 million loans. It had declined to 12.2 million in 1994 and 11.23 million in 1995.

Every group except blacks benefited considerably from the increased lending: Hispanics up 13.4%, Native Americans up 11.4%, Asians up 8.2%, and whites up 8.1%.

Whites received 2.9 million home loans last year. That is more than 10 times the number of loans Hispanics received, and 12 times the number blacks received.

Asians continued to have the lowest rejection rates, with only 13.8% of applicants failing to receive a loan. Whites, Hispanics, and Native Americans were rejected respectively 24.1%, 34.4%, and 50.2% of the time.

Consumers earning less than 80% of the median income were rejected 34.2% of the time; the rate for upper-income people was 9.8%.

Mortgage companies extended 49% of all home loans, but they controlled 82% of the market for FHA loans and 79% for VA loans. Banks made 31% of all home loans; they dominated the market for home-improvement and multifamily loans.

The Federal Financial Institutions Examination Council compiled the data from 9,328 lenders. Separate data on bank small-business lending are expected in September.

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