The rapid rise in bank mergers has not hurt mortgage lending to low- and moderate-income borrowers, according to a Federal Reserve Board study.

Researchers found that consolidating banks reduced lending in markets where they operate offices. These cuts, however, disproportionately affected lending to white and upper-income borrowers. Lending to minorities and low-income borrowers actually rose as a percent of loans in these counties.

"These results are consistent with the view that the Community Reinvestment Act has been effective in encouraging banking organizations, particularly those involved in consolidation, to serve lower-income and minority borrowers and neighborhoods," Fed researchers said in the study, which was released Friday.

The Fed studied the effect of bank mergers in 726 counties in the United States. Researchers found little difference in mortgage lending between counties undergoing rapid consolidation and those with few bank mergers.

For instance, between 1993 and 1995, mortgage lending rose 4% in low- consolidation counties and 2% in high-consolidation areas. Those same growth rates between 1995 and 1997 were 17% and 19%, respectively. Statistically, that is a dead heat.

"Consolidation has not had significant anticompetitive effects on home purchase lending," concluded the Fed's Robert B. Avery, Raphael W. Bostic, Paul S. Calem, and Glenn B. Canner.

Still, the researchers said the composition of lending changed. Consolidating banks tended to reduce lending in areas where they operated offices. Thrifts, other banks, credit unions, and nonbanks, however, moved quickly to fill the gap, they wrote.

The study is available at www.federalreserve.org.

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