While mortgage lending declined during 1995, loans to blacks increased for the fourth consecutive year, according to statistics compiled under the Home Mortgage Disclosure Act.

African-Americans are still turned down about twice as often as whites - a ratio that has held steady for four years - but observers of minority- lending policies said Tuesday the mortgage industry is making substantial progress in rooting out bias.

"The effects of the past couple of years have really started paying off," said Allen Fishbein, general counsel at the Center for Community Change. "Enforcement actions, community group protests, and regulatory efforts are bearing fruit."

Loans to blacks jumped last year by 12,200 - about 10% - even as the mortgage market total dropped by 8%, to 11.3 million.

The regulators who compiled the Home Mortgage Disclosure data attributed most of the decline to a sharp drop in refinancing as interest rates climbed.

They also attributed part of the increase in low-income lending to special programs that Fannie Mae and Freddie Mac implemented over the past several years.

Although the minority turndown rates remained stubbornly high, the rejection disparity between blacks and whites was smallest among the lowest- income groups, indicating the mortgage industry's success at reaching the most disadvantaged communities.

Mr. Fishbein said it would be a mistake to let the persistent disparity measures overshadow the advances in lending to minorities.

The statistics were based on reports filed in March by 9,539 banks, thrifts, credit unions, and mortgage companies. In the five years since the data have been made public, mortgage lending to blacks has climbed 69.7%, compared with an 11.9% increase to white borrowers.

Although rejection rates are still viewed as important, the focus in recent years has been on making more loans in minority communities. Bankers and community activists were encouraged by the results released Tuesday.

"This is showing real progress," said Agnes J. Bundy, senior vice president and director of corporate community development at Fleet Financial Group. "There are more opportunities for all groups to obtain home mortgages."

"This is a sign that banks are increasing their share of business in minority communities," said Mark Willis, president of Chase Community Development Bank in New York. "We have been able to increase our penetration of the minority marketplace."

Ms. Bundy said higher rejection rates are to be expected as banks continue to push into lower-income communities with fewer qualified borrowers.

"Whenever you open up your pool and have more outreach and more loans, then you are going to have more denials," she said.

Mr. Fishbein added that as banks fine-tune their underwriting criteria, fewer minority applicants will be turned down.

Last year's 10% climb in home loans to blacks was actually smaller than in either of the past two years. These loans were up by 45,000, or 55%, in 1994, and by 25,000, or 44%, in 1993.

Rejection rates of black applicants jumped to 40.5% in 1995 from 33.4% in 1994. White applicants were rejected 20.6% of the time, up from 16.4% in 1994.

Lending to Hispanics also rose last year - by 4.1%, to 134,982 loans. But banks also rejected more Hispanic applicants, at 29.5% compared with 24.6% in 1994.

Native Americans saw the smallest increase: Mortgage loans rose 0.2% in 1995, to 10,712, while rejection rates went up to 41.4% from 31.6%.

Asians were the only group besides whites to show a decrease in the actual number of mortgages. Their 85,571 in 1995 was down 8.3%. Asian- Americans also had the lowest rejection rate, at 12.5%, up just a half- point from 1994.

Asians had the lowest rejection rate, although they also withdrew the most applications of any ethnic group.

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