Recent government studies have confirmed that rejection rates on mortgage applications are consistently higher for minorities. Community groups have grown vocal in their call for the government to hire "testers" - people who pose as mortgage applicants - to identify unfair practices at banks. American Banker reporter Claudia Cummins asked:

* David C. Fynn

Vice president

National City Corp., Cleveland

Testing is a tool that can be used by lending institutions to great advantage. If testing can help lenders identify language or situations that negatively impact the credit process for minorities, NCC will advocate testing. If, however, the results of that testing are used by government agencies to pursue legal remedies, lenders will be discouraged from taking such affirmative steps as self-testing, and a great opportunity will be lost.

Maud Hurd


Association of Community Organizations for Reform Now, Washington

It is imperative that the federal banking regulatory agencies begin to use testers to identify instances of mortgage discrimination. While the use of testers by individual lenders is commendable, the guarantee of equal treatment across the mortgage lending industry can only be accomplished through the adoption of testing as a regular compliance technique.

One remarkable conclusion of the Boston Federal Reserve's recent study of mortgage discrimination was that most lenders do not receive enough applications from minorities to make statistical tests for discrimination valid. In addition, regulators admit that normal compliance techniques cannot detect prescreening - the practice of discouraging minority applicants from applying for loans.

These facts.. together with the agencies' atrocious record to date of enforcing fair-lending laws using business-as-usual compliance techniques, underscore the need for the systematic use of testers.

* Doug Woodruff

Chief operating officer

Boatmen's Community Development Corp., St. Louis

The data provided by the Home Mortgage Disclosure Act and the recent Boston Fed study make it clear that banks should be concerned with equitable treatment in their lending practices and should take proactive steps to ensure discrimination does not exist.

Matched-pairs testing is certainly a tool that can be utilized by banks to assess their efforts, similar to other marketing assessment methods employed within the industry. This type of testing is being undertaken by many banks and does not warrant direct government intervention.

* Stephen B. Ashley


Mortgage Bankers Association, Washington

The association designated a task force to examine the HMDA data and make recommendations to the industry relative to the elimination of discriminatory practices or lending policies that, while on their surface may not be discriminatory, result in tilted approval and disapproval rates. One of the recommendations of that task force was that companies use testers to check their own systems, branch officers, and underwriting departments to insure that companies were not either willfully or unknowingly engaging in racially biased discrimination.

* Deborah Goldberg

Neighborhood reinvestment specialist

Center,for Community Change, Washington

I have been urging the regulatory, agencies to adopt testing as one fair lending enforcement technique since the 1970s. It is the only way we know to uncover illegal prescreening, or discrimination that occurs before an application is filed.

However, I believe that the agencies must also improve their ability to find discrimination that occurs after an application has been filed. The regulators are best positioned to uncover discrimination at this stage, because they have full access to all of a lender's loan files, but their track record has been very poor.

As far as lenders' conducting their own tests, I think it's a great idea, but I would have two caveats. First, they should make sure that whoever they hire to help them with the testing knows something about fair-lending laws. Second, they should be prepared to take immediate steps to correct any problems uncovered by the testing.

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