De facto law by consent decree? A synopsis of the Chevy Chase-Justice Dept. settlement.

When Chevy Chase Federal Savings Bank and its mortgage banking subsidiary, B.F. Saul Mortgage Co., decided to settle with the Justice Department rather than face a l ong legal battle for allegedly failing to market their business in minority neighborhoods, some m ortgage industry analysts speculated the agreement was meant to create de facto fair lending laws . If thats the caseand many analysts believe it isthe 30-page consent decree signe d by both parties might make a good how-to list for lenders while they wait for HUD to develop reg ulations to the Fair Housing Act that experts believe will more clearly define what lenders must do to comply. As part of the agreement, both parties agreed to take all reasonable actions to obtain a market share of mortgage loans in African- American neighborhoods that is comparable to the bank and mortgage companys market share in white residential neighborhoods. It will do th is by: Opening another three mortgage offices in African-American residential neighborh oods in the metropolitan area; Investing $11 million in the African-American community over the next five years to settle claims of U.S. for damage caused by the alleged redlining and to further commitment to better serve community; and Providing at least $7 million of the $11 million in lending subsidies for the sp ecial home mortgage loans, which may rise depending on how many bank branch/mortgage office location s are opened. Advertising and Marketing The bank and mortgage company will further augment the advertising program to in clude special provisions to target residents of predominantly African-American neighborhoods. During the next five years, it will place at least 960 column-inches of advertis ing during each one-year period in newspapers or other publications oriented toward African-Amer icans in the Washington metropolitan area. These ads will be for mortgage products, and will mention the availability of FHA and VA loans, and may also include references to other loan products that have comparable advantages. The mortgage company will create special point-of-sale materials, such as poster s and brochures, to advertise products and services of interest to African-American home buyers a nd place the materials in branches and mortgage offices in predominantly African- American ne ighborhoods. The mortgage company will develop a brochure describing its special products for first-time home buyers, community home buyers program, its FHA and VA loan programs, and/or comp arable programs. It will distribute at least 2,500 of these per year. All of the mortgage companys advertising that uses human models in video, photos , drawings or other graphic techniques will reasonably represent African-Americans as well as white residents and other minorities of the area that the bank and mortgage company serve. Model s, if used, will portray people in an equal social setting and indicate to the general public tha t the the bank and mortgage companys products are available on a nondiscriminatory basis. The mortgage company will place 360 30-second spots per one-year period of the c onsent decree on at least three radio stations oriented to the African-American communities in the D.C. metro area. Advertising will be for home mortgage products, and the mortgage companys advertising program will include advertising of the availability of FHA and VA loans and oth er comparable loan programs. Ascertainment of Credit Needs Representatives of the lender will meet each year with members of at least three African-American community or civic groups to examine mortgage loan products, services and advert ising, and discuss ideas for improvements if improvements are necessary. Other Efforts to Solicit Business B.F. Saul will continue to target real estate agents and builders active in neig hborhoods in predominantly African-American census tracts within its delineated communities f or sales calls. The lender will maintain a list of names and addresses of real estate agents, bu ilders and developers on whom it intends to make calls. Each loan officer will maintain a log of all sales calls. A supervisor will be responsible for overseeing the activities of all loan offic ers regarding soliciting and originating home mortgage loans in predominantly African-American neighborhoods in the metro area. Special Programs The mortgage company will conduct seminars for real estate agents or agencies ac tive in African-American neighborhoods. It also will conduct programs, such as the Commu nity Home Buyers Program developed by Fannie Mae, in the African-American neighborhoods. Remedial Credit Justice gave credit in the agreement to actions taken prior to the signing of th e consent decree as positive remedial steps that address the issues which were the subject of the co mplaint: In January 1994, the mortgage company revised the method of compensating loan of ficers in an effort to increase loan originations in residential areas with lower housing val ues. The revised method provides for a commission payment of 10 basis points more than the standa rd commission of 50 basis points for all loans of $60,000 or less in D.C. metro area. The mortgage company estab-lished a special salary plus commission compensation structure for four D.C. originators. It also increased sub-stantially the number of African-Am er-ican employees in loan- production positions.