If you're black, it's twice as likely your mortgage application will be rejected than if you're white.

The statistic isn't pretty. But as a banker whose job it is to improve the access to banking services of blacks, other minorities, and women, I think the numbers send confusing and inaccurate messages.

The figures released last fall by the Federal Reserve Board, as mandated under the Home Mortgage Disclosure Act, don't accurately reflect what is really happening in the banking world.

Good-Faith Efforts Penalized

In fact, the numbers released by the Fed distort reality. They make those banks that work hardest to bring banking services to poor communities look the worst statistically.

Banks are being penalized for the very behaviour the Mortgage Disclosure Act was designed to foster.

The Community Reinvestment Act requires banks to adequately serve poor and minority communities. If a bank doesn't, it leaves itself open to sanctions, such as being denied approval to open a branch or being denied permission to acquire or merge with other banks.

Many banks, including my own, that were drawn back to inner-city communities by the threat of CRA sanctions have learned that providing banking services to low-income people not only helps the communities, but can also be profitable.

Misleading Statistics

Yet the figures released by the Fed make Meridian Bank - one of 90% of banks to gain an "outstanding" CRA rating - appear to lag in serving poor communities.

Our mortgage approval rate for whites was 81%, versus 46% for blacks. The 35-point discrepancy was the worst in Pennsylvania, twice the state average.

How can a bank with an outstanding CRA rating have such a wide racial disparity in its mortgage lending?

By trying harder.

Because it is known as a bank that doesn't discriminate, Meridian attracts low-income, minority mortgage applicants, the type of who have been abandoned by many other banks.

Fully 24% of Meridian's mortgage applicants are minorities. For purely economic reasons, we must reject many of them.

Our experience was confirmed recently by a study a community group did of a Philadelphia-area lending program, the Delaware Valley Mortgage Plan. It was started in 1975, two years before the Community Reinvestment Act was enacted.

Nine banks, including Meridian, participated in the plan to bring bank mortgage lending services to low-income homebuyers.

The program has been successful because of financial counseling, relaxation of lending requirements, and a practice of passing rejected mortgage applications to other participating banks for review.

The study, conducted by the Greater Philadelphia Urban Affairs Coalition, found that the Delaware Valley Mortgage Plan rejected 451, or 31.5%, of mortgage applications last year.

The high rejection rate was not deemed the result of racial discrimination, but was caused by a variety of economic factors.

Poor credit history was responsible for 43% of rejections. Other common reasons were employment history, high debt-to-income ratio, and insufficient collateral.

Disparity in Wealth

At all income levels, a tremendous difference in wealth still exists between blacks and whites. The Department of Commerce's 1988 Survey of Income and Program Participation revealed that the median net worth of white households was $43,279, compared with $4,169 for black households.

One important reason is that black householders are likely to be younger than whites and more likely to be in single-parent households and first-generation middle class.

The differences in wealth often translate into differences in credit experience. At Meridian, 51% of mortgage application denials are due to a poor credit history.

In addition, lower-income people are likely to move frequently from job to job in search of marginally higher wages. Unskilled jobs also offer little security, so gaps occur in employment history.

Secondary-Market Factor

These and other differences work against applicants because certain mortgage underwriting standards must be addressed in order for the bank to sell the mortgage on the secondary market.

Investor pressures somehow must be reconciled with the need to bring banking services to low-income and minority communities.

There is no easy solution to the racial disparity in mortgage lending. But a serious, good faith effort to review and amend the underwriting standards throughout the industry would be a positive step.

We are working with the Federal National Mortgage Association to develop alternatives. And Meridian has signed an agreement with Fannie Mae that will enable our bank to offer mortgages with more flexible terms to low-income home buyers through Fannie Mae's new Community Home Buyer's Program.

Cooperative efforts such as these are needed to give banks the flexibility to experiment with new programs and to develop new lending criteria that are relevant to the economic experience of minorities, without fear of losing access to the secondary markets.

If we are committed to ending racial discrimination in home lending, all parties involved must work together.

Until then, the best way to look good in mortgage-lending statistics based on race will be to take only one minority home-loan application and to approve it, for a 100% approval rate.

Banks that are making an aggressive effort to lend in communities that have been all but abandoned by the banking industry will, on the other hand, be penalized for showing high minority rejection rates.

[Ms. Brownell is vice president, corporate community relations, at Meridian Bancorp, Reading, Pa.]

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