The Clinton administration's crusade against racial bias by mortgage lenders will not be slowed down by inconsequential matters like ethics.

A case in point is the $1 million contract that Henry Cisneros and the Department of Housing and Urban Development recently awarded to the nonprofit National Fair Housing Alliance to "test" bankers for bias in three cities over a 13-month period.

At the same time the alliance's scalp hunters are masquerading as minority loan applicants on behalf of HUD, the organization is hawking an educational program to banks and other mortgage lenders so they can avoid bias suits.

A Blind Eye

In fact, the alliance announced last week that it was on the verge of signing a nationwide contract with Sears Mortgage to purge its operations of biased underwriting standards and train the troops to be even handed. (I would bet the farm that Sears Mortgage has locations in all three cities targeted by the HUD investigation.)

For some peculiar reason, the ethics police at HUD didn't view this arrangement as the blatant conflict of interest that it is.

HUD's response, when I brought the situation to their attention last week, was to feign ignorance and confusion. (At least, I hope they were feigning.)

A double-assistant something-or-other in Roberta Achtenberg's office (she's the assistant secretary for fair housing and equal opportunity) said HUD had no idea that the alliance was playing for both the offense and the defense.

Shanna Smith, director of programs for the alliance, told me later that her group had been talking to Sears for nearly eight months and that she had told the HUD-ites all about it.

Minor Details

Perhaps their memories are being affected by this town's obscene August humidity.

Or may be, since the mandate for the holy war on mortgage bias emanated from Mr. Cisneros and Ms. Achtenberg, the foot soldiers are not focusing on petty details like prohibiting the testers from working for mortgage companies too.

Ms. Smith, who sounds sincere if somewhat naive, told me that no conflict exists because subscribers to her group's educational and self-testing program will not be immune from investigations and suits from the alliance members doing the testing.

(The alliance farms out the testing work to member groups in the cities that are not directly connected to the educational program. But the alliance oversees the operation and signs the checks.)

She doesn't buy my argument that bankers might buy the educational service in the belief that they would be immune from the HUD sting operation.

Carrot and Stick

I listened to a tape of a spiel Ms. Smith gave June 23 at a conference sponsored by the Consumer Bankers Association, and the program sounded like pretty good protection to me.

"You're wasting time with self-testing," she began. "Most programs won't protect you from suits."

She added, "I am extremely concerned that the testing you are doing won't go to the core of what is a civil rights or a fair-housing act violation, and that you in fact might be spending a lot of money on mystery shopper-type of activities with the illusion that you are protecting our institution from a fair-housing act challenge. I'm here to tell you that those programs aren't going to protect you from our perspective."

She told the bankers that the alliance was working with Sears and that the group hoped to duplicate the arrangement with other lenders.

Action Needed

She then said by way of a warning, "One violation of the act is enough to bring a lawsuit. We don't have to prove a pattern of practice."

HUD in the least ought to investigate the alliance's pending arrangement with Sear's, ASAP.

Better yet, it ought to amend the testing contract and prohibit the alliance from working any mortgage lender in the area during the 13 months the program will be in effect.

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