Lenders at the Savings and Community Bankers of America conference on real estate lending last week displayed an uneasiness that could be summed up in three letters: CRA.

Anuone mingling with the meeting's more than 300 attendees would quickly conclude that the Community Reinvestment Act and the fair-lending laws with which they are intertwineed are thorns in the side of lenders.

"The general anxiety on the economy and the pressure that is coming from HUD and Justice is causing a widespread anxiety," said F. Weller Meyer, president of Acacia Federal Savings Bank, Annandale, Va.

The talk generally turned to the recent proposal by the Inter-agency Task Force on Fair Lending that would require lenders to prove the "business necessity" of lending practices that had disparate impact, such as setting minimum loan amounts.

HUD Goal

The Department of Housing and Urban Development wants lenders to adopt practices that will increase the approval rate of loans to minorities by 20% within 12 months.

"If these proposals go through, we'd never be able to fulfill the requirements without quotas," an Indiana banker said. That sentiment was echoed across the meeting room, particularly among thrift executives and community bankers.

Acacia's Mr. Meyer agreed, saying that the "imposition of stated or unstated quotas" was causing an inordinate amount of worry.

"There's an underlying concern that they might be forced to make loans that don't have good economic footing," he said.

Lou Stadler, senior vice president at Security Bank, Milwaukee, said the federal government should concentrate on building an infrastructure -- schools, jobs, and so on -- that can produce eligible borrowers.

In Milwaukee, "realtors are at least promoting the buying of homes in the inner cities," he said.

But Mr. Stadler said many people, including minority borrowers, simply do not want to go back to living in the inner-city areas.

This pushes them out of the very zones the federal government has targeted for an increase in lending.

Speakers such as Andrew Sandler of the law firm Skadden, Arps, Slate, Meagher & Flom warned lenders of what to expect when the fair-lending examiner comes knocking at the door. Here's this sample dialogue:

"Hi, we're the federal government. "We're here to help you evaluate your lending processes. Please help us by providing the following information. But we don't want to be unreasonable -- so you have three weeks."

His advice: take a proactive stance and show the examiner precisely when you have been compliant.

"You have a put a lot of education into showing them what your fair-lending practices are," Mr. Sandler said.

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