Delay in impact of mortgage lending changes complicates U.S. action on discrimination.

Home Mortgage Disclosure Act data that show a continued pattern of higher turndown rates for blacks and Hispanics than for whites in similar income classes have produced the expected congressional reaction--an admonition to regulators that Congress will crack down on lenders that discriminate if the regulators can't or won't do it.

The regulators are also resisting pressure from the Justice Department to participate in investigations that could lead to criminal indictments.

"The problem is that it takes two years for changes in behavior to work their way into the data," said Robert P. Chamness, partner in the San Francisco office of McKenna & Fitting, a Los Angeles-based law firm.

He said many clients have aggressively instituted changes in lending practices in an attempt to avoid even unintentional discrimination. The effects of those programs won't show up at the earliest until 1992 data are reported next October, he noted.

Meanwhile, Congress, pushed by housing advocates, can be expected to take action if it is not satisfied that the regulators are moving effectively against discrimination.

In letters to the heads of each of the four bank and thrift regulatory agencies, Chairman Donald W. Riegle, D-Mich., of the Senate Banking, Housing and Urban Affair's Committee, expressed disappointment in the fact that the HMDA data for 1991 show little improvement over those for 1990, the first year in which the data permitted analysts to relate the race and sex of applicants to their income levels.

Riegle noted that when the Federal Reserve Bank of Boston released a study of banks in its area that showed a 60% discrepancy in turndown rates for white and minority applicants, he wrote the agencies requesting that they formulate a concrete plan for increased enforcement of anti-discrimination laws and regulations.

"I reiterate that request today and put you on notice that I will follow up on my request shortly after the start of the next session of Congress," he said.

If such administrative efforts don't do the job, he concluded, "the committee may consider some specific remedies."

Riegle's counterpart, U.S. Rep. Henry B. Gonzalez, D-Texas, chairman of the House Banking, Finance and Urban Affairs Committee. used the report as an occasion to criticize the regulators. The agencies, he said, "must create an environment in the banking industry that is receptive to all creditworthy citizens, regardless of race, sex or religion."

Part of the problem, he said, is that the individual Federal Reserve banks are wedded to the status quo. The banks "should admit that they don't want to rock the boat by elevating more women and minorities to decision-making posts," he said.

The HMDA data for 1991 showed an increase in denials of applications for conventional home purchase loans for all groups, reflective, possibly, of the continued recession. Turndowns were made for 37.6% of black applicants, 26.6% of Hispanic applicants, 17.3% of the white applicants and 15% for Asians/Pacific Islanders. The figures for 1990 were 33.6% for blacks, 21.4% for Hispanics, 14.2% for whites and 12.8% for Asians/Pacific Islanders.

The Federal Reserve Board, which collects and analyzes the data for the Federal Financial Institutions Examination Council, said the difference in denial rates "partly reflects differences in the proportion of each group with relatively low incomes."

But the Fed said "other factors account for most of the differences. This conclusion is evident because, after controlling for income, white applicants for conventional home loans in all income groupings have lower rates of denial than black and Hispanic applicants."

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