Julia Seward, community reinvestment officer for Signet Banking Corp., represented the Consumer Bankers Association when she testified at a joint congressional hearing on how to guard against discrimination in mortgage lending. Her forum was a session of the Consumer Affairs and Coinage Subcommittee and the Banking, Housing and Community Development Subcommittee of the House Banking, Finance and Urban Affairs Committee. Excerpts from her testimony follow. Additional excerpts appeared in the May 25 issue of The Mortgage Marketplace.

Many other CBA members, after self-evaluation and a great deal of communication with their communities, have also determined that counseling and education can be of tremendous value in low- to moderate-income communities. The resulting examples of educational and training programs are far too numerous to mention, but a few representative examples show the variety that are being tried.

The National Bank of Detroit, as well as many other institutions, have a number of educational programs. They have a video series and textbook program entitled "Credit: Tool or Trap," which teaches consumers how credit works, what it costs and how to use it effectively. This program is currently being used as part of the curriculum of the Detroit secondary school system, as well as by church groups and community-based organizations. NBD also works with local non-profit credit counseling centers and representatives of credit reporting agencies to hold seminars on establishing a credit history and resolving credit problems.

NationsBank, with headquarters in Charlotte, N.C., also has a number of counseling programs. Together with the NAACP and ACORN, they have recently established pilot counseling programs that will offer credit-related counseling to consumers and independent business owners. In addition, NationsBank offers counseling with many local community groups including Urban League affiliates, churches and ethnic chambers of commerce.

Programs on home buying are springing up across the country, with the help and sponsorship of banks. For example, one East Coast bank provides free home-buying seminars through churches and other similar community organizations. These programs outline everything the applicant needs to know, from working with real estate agents to selecting a closing attorney. They also cover how to apply and qualify for a mortgage. Boatmen's First National Bank in Kansas City, Mo., helped draft a home buyer training program offered by a local community development corporation umbrella organization. It includes budgeting, credit, shopping for a home, calculating what each buyer can afford, home negotiation strategies, review of sales contracts and the lending process.

Examples of community home buyer programs abound. Marine Midland Bank launched a Community Home Buyers Program in 1990. It offers $5 million in mortgage loans, with credit, income and employment criteria structure so that many people in the low- to moderate-income categories can qualify. Two educational seminars are part of the program, and more than 733 people have attended the seminars in order to meet eligibility requirements. Marine Midland Mortgage Corp. also has offered free seminars in the Buffalo, N.Y., area geared to first-time home buyers.

Another example is Mellon Bank N.A., which participates in the GE Capital Community Home Buyers Program. In addition to home ownership counseling, the home buyers program permits the bank to provide more flexible underwriting criteria. When coupled with Mellon's Community Mortgage Loan Program, the program can offer high ratio conventional mortgage loans at below-market interest rates and fees, with broader and more inclusive qualifying criteria.

Some CBA members have discovered even more creative approaches. The First National Bank of Chicago, for example, has set up a BankMobile, which it patterned after bookmobiles. Although it is not permitted to accept deposits and is not a branch, the BankMobile roams Chicago neighborhoods and provides an opportunity for the people in low-and moderate-income communities to obtain some informal credit counseling.

CBA members banks are also engaging in variety of other activities to stimulate lending to minorities and low- to moderate-income sectors of their lending communities. One problem many members have faced is an inadequate number of minority applicants. While education and counseling should help to increase applications, other approaches are also being employed. To reach out to more potential applicants in low- and moderate-income neighborhoods and to better inform them about their borrowing options, more CBA members are advertising to a greater extent through minority-owned or minority-targeted publications and broadcasts, and foreign-language media. In addition, greater use has been made of minority (real estate agents) and mortgage brokers, and an increasing number of minority and bilingual or multilingual personnel are staffing mortgage loan marketing, credit review and servicing functions. Many banks are trying to attract a greater number of minority loan officers.

Special lending programs of various kinds have been available for years, and new ideas are always being tried. The number and variety for such programs are too great for detailed review. However, many CBA member banks have learned that operating independently often does not give them the flexibility to provide the kind of loans necessary to make a substantial dent in the housing needs of the low- and moderate-income communities they serve. They have discovered that working in consort with other lenders, in groups of lenders known as consortia, has provided them with the skilled underwriting and reduced cost that allow lenders to dedicate funds to the community and continue to operate profitably.

Lending consortia now exist in most major metropolitan areas, and have shown great promise as a means of investing in the future of low- and moderate-income communities. One example is the Delaware Valley Mortgage Plan. This consortium of nine Philadelphia-area banks, has originated $218 million in mortgages to 15,000 low- and moderate-income borrowers since it was founded in 1975, and $24.4 million in such mortgages last year alone.

Another example of a successful program is the California Community Reinvestment Corp., principally founded by Bank of America and others in 1989. CCRC is a consortium of more than 50 California banks providing a $100 million loan pool for permanent financing of low-income rental housing in California. CCRC has served as the model of the development of similar consortia in several other states.

In order to provide the needed focus and expertise in special lending programs, many CBA member banks have also set up or participate in the work community development corporations, known as CDCs. CDCs are not a new idea, but they have received increased attention in recent years in response to the desire of banks to find workable approaches to the problem of affordable housing.

Examples of CDCs abound. NationsBank, for one, operates a CDC which focuses on affordable housing acquisition, rehabilitation and development. It also operates a Small Business Investment Corporation, and participates in several multibank CDCs.

One money center bank in the East that is a member of CBA has a CDC that provides financing for the development of low- and moderate-income communities in the New York metropolitan area. Their CDC is one of the largest bank community development corporations in the country, and has committed over $220 million in various housing and economic development projects in the three years it has been in existence. The CDC is engaged in a residential mortgage lending, community-based development lending, and small business lending.

The vast majority of banks in the country also participate in local, state and federal loan, grant and technical assistance programs that benefit the development of minority businesses. For example, Mellon Bank, with headquarters in Pittsburgh, Pa., is one of the primary sponsors of the URA/Mellon Bank Minority Contractors Program, which is a lending program to aid minority contractors.

Another excellent example of banks working with communities is the City of Tampa's Community Reinvestment Challenge Fund. It is a public/private partnership between the city of Tampa, local financial institutions and Tampa United Methodist Center, a local non-profit agency. Established in 1987, Challenge Fund I brought a commitment of $13 million from 12 local banks and provided for the rehabilitation of over 2,500 housing units through reduced cost home improvement loans. This success resulted in the continuation of the program and Challenge Fund II, with more than $27 million pledged by 18 local banks, is expected to help renovate 5,000 substandard homes over a five year period.

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