WASHINGTON - Despite increased attention to discrimination, mortgage lenders did not significantly improve their racial-bias record last year, the Federal Reserve Board said Tuesday.

Making its second release of data gathered under the Home Mortgage Disclosure Act, the Fed said 37.6% of blacks' loan applications and 26.6% of Hispanic's were denied in 1991. Both denial rates were higher than in 1990, but this was true among all racial groups in the tight economy.

In what has become a benchmark of discrimination, the denial rate for blacks in 1991 was 2.17 times the 17.3% of whites. That was a marginal improvement from 2.35 times in 1990.

Hispanics Faring Worse

Among Hispanics, the trend went to other way: The 1991 denial rate was 1.54 times that of whites, up from 1.49 times in 1990.

"I'm not terribly surprised and only slightly disappointed" at the relatively stagnant patterns, said Fed Governor John P. LaWare. The numbers do not reflect new practices banks have recently adopted - many of them after the release of 1990 data a year ago - to combat discrimination, he said

The data, compiled by the federal bank regulators, are used to monitor compliance with equal-credit laws and the Community Reinvestment Act. The 1991 data releaesed Tuesday cover about 7.9 million applications to 9,358 lenders - including banks, thrifts, credit unions, and mortgage banks.

Bankers said that the recession's impact on lending contributed to the poor showing, and that the late release of the 1990 data left them little time to change their ways.

"The numbers came out so late in 1991, there really was no opportunity for the industry to analyze and correct anything" for 1991, said David Fynn, vice president of National City Corp., Cleveland.

Outreach Efforts Cited

Some bankers also said their improved outreach to minorities has increased applications. Many of those are returned down, inflating the denial rates even though the banks may be making more loans to minorities.

The overall denial rate increased to 18.9% in 1991 from 16.1%.

The Fed found that the number of loan applications from low-income people increased significantly in 1991, possibly reflecting lenders' efforts to reach and educate poorer communities.

The 1991 report is likely to spur renewed interest in the bias problem, as well as calls for stronger government action.

"The report really casts doubt on the integrity of the agencies," said Deepak Bhargava of the Association of Community Organizations for Reform Now, known as Acorn. "I think they're trying to spin the numbers and deflect attention from what has been a abominable record of enforcement over the past decade.

"They are tyring to forestall any serious enforcement efforts by Congress and prevent both [the Department of Housing and Urban Development] and the Justice Department from intervening in fair lending enforcement."

Programs Said to Be in Place

"All around the country I have seen a strong reaction on the part of bankers," said Federal Reserve Governor Lawrence B. Lindsey. "The overwhelming majority of banks have programs and policies in place to try to produce a nondiscriminatory result."

Added Mr. Fynn, "Banks are tremendously concerned. My bank is working diligently both to understand the numbers and to more effectively market our products to specific segments of the community."

In a speech earlier this month, Fed Governor LaWare recounted a variety of successful programs that banks have undertaken to encourage minority lending, including expanded marketing, credit counseling, mortgage review boards, neighborhood loan offices, and community partnerships.

"The important point is that financial institutions have at their disposal the tools and models to ensure that all segments of our society have access to credit on equitable basis," he said. "These tools and models exist, many are being used extensively, and most can be replicated by both large and small institutions."

Task Force Formed

Trade groups have developed new programs as well. The American Bankers Association formed a mortgage lending task force and a community development center to serve as a clearing house for lenders developing minority-lending programs.

"The clear conclusion is that the best way to get more mortgage credit to minorities is to help more minorities become creditworthy, to make the entire system more flexible and easier to understand, and to help banks ensure that their procedures promote fair and equal treatment," said ABA spokeswoman Virginia Stafford.

Since last year's Home Mortgage Disclosure Act report, the federal government has stepped up its criminal investigations into lending discrimination. Last November, Attorney General William Barr announced a Justice Department crackdown, and this year the department levied its first civil money penalty for lending discrimination, against Decatur Federal Savings in Atlanta.

The 1991 HMDA update follows a more comprehensive Fed study of mortgage lending in the Boston area, which dug deeper into 1990 data. The Boston study showed that even after accounting for important financial characteristics not included in the HMDA data, blacks and Hispanics were still 60% more likely to be denied a mortgages than whites.

Because the Boston study presented a more thorough picture of the factors influencing mortgage denials, it has largely put to rest questions of the HMDA survey's validity.

"The alert that has now been sounded within the industry will result in behavioral change," Mr. LaWare said. "We now are in a position to go after it more intelligently and in a more targeted way. And we will."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.