While HUD remains noncommittal about its plans to put more fair-lending teeth in the Ginnie Mae program, industry analysts warn that the details will likely contain requirements patterned after the Community Reinvestment Act.
But some glimpses into the department's thinking emerged when Secretary Henry Cisneros, who will soon make decisions on lending discrimination policy, addressed the issue during a hearing before the House Subcommittee on Consumer Credit and Insurance Oct. 21.
He said that HUD plans to "identify and remedy discriminatory practices in fair housing and fair lending," and issue new regulations that will "affect mortgage lenders who are not subject to the oversight of federal regulatory agencies, such as mortgage bankers and property insurers."
In its Policy and Program Management Plan released Oct. 15, HUD said it would review its policies on discrimination in mortgage lending and publish proposed regulations by Sept. 30, 1994, as well as fair housing requirements for Fannie Mae and Freddie Mac's programs.
It also calls for a review of Ginnie Mae requirements to ensure that guidelines for purchasing mortgages do not lead to discrimination by FHA-approved lenders.
Some banking industry lobbyists believe that requiring Community Reinvestment Act inspections is well out of Cisneros' jurisdiction.
Nonetheless, they say, he may create similar requirements for FHA lenders, drawing some details from the Community Reinvestment Act Reform Act, introduced by Rep. Maxine Waters, D-Cal., in April.
Mortgage bankers believe the bill mixes apples with oranges by applying to their industry CRA requirements designed for depository institutions.
"The underlying nature of CRA doesn't apply to mortgage banking," said Mike Ferrell, legislative counsel for the Mortgage Bankers Association of America. "That's not to say that we're not sensitive to the needs of minorities, but we address those issues in a different way [than do depository institutions].
"We address [minority lending] through things like the secondary [mortgage] market and mortgage insurance agencies that help us tell how we can meet the needs of a wider group of potential homeowners."
Consumer groups, however, see matters differently.
"There are scores of mortgage banks that use FHA to do high volumes of business in minority neighborhoods," said Deepak Bhargava, legislative director of the Association of Community Organization for Reform Now.
"Many of these banks have monstrous default rates, and there are few safeguards to prevent these abusive lenders from creating abandonment in those neighborhoods.
One year [the neighborhoods are] stable, then the next year there are 40 or 50 abandonments because [the borrowers] can't make their mortgage payments."
Bhargava said other problems include underwriting standards that are less attractive to minority lenders than those offered under CRA programs, and industry standards, like tiered pricing and minimum loans amounts, that deter minority home buyers. Waters' bill, he said, would go a long way toward eliminating those practices.
Coupled with initiatives he is confident HUD will take in 1994, H.R. 1700 could help make the market attractive to members of racial or ethnic minorities.
Recent studies have prompted action on Capitol Hill, in the halls of HUD and offices of consumer lobbyists to provoke change in fair lending practices.
In a report issued Oct. 12, data based on Home Mortgage Disclosure Act statistics compiled by ACORN showed that disparities in lending between whites and minorities have not improved substantially over 1990 and 1991 data. And while the ACORN report has drawn sharp mortgage industry criticism, the critics may be more distressed over what the CRA Reform Act may do.