NEW YORK - Sen. Charles E. Schumer, D.-N.Y., Fannie Mae, the New York Bankers Association, and nine banks announced a partnership on Wednesday that will offer loans in lower-income New York City neighborhoods that have poor access to mortgage credit.
The partners say the House Equity Lending Project, or Help, will begin in the coming weeks as a pilot program and was inspired by a report issued by Sen. Schumer last fall. The report charged that in New York and its surrounding boroughs, blacks were far more likely than whites to be rejected for a conventional loan.
Drawing from 1998 data, the report said that "expensive and often predatory lending has flourished in predominantly black neighborhoods to the point where it is more common for a subprime lender to issue a loan in a predominantly black neighborhood than a conventional bank."
Help's pilot phase will begin in Laurelton, in southeast Queens, and Bedford Stuyvesant/ Brownsville, in central Brooklyn. The banker trade group will notify neighborhood residents that they can obtain loans from one of the nine participating bank companies: Bank of New York, Citigroup, J.P. Morgan Chase, European American Bank, FleetBoston, Greenpoint Financial, Hong Kong Shanghai Bancorp, M&T Bank, and NorthFork Bancorp.
Consumers will be able to call a toll-free line handled by the New York Bankers Association, which will forward borrower information to the participating banks through a private Web site.
Fannie Mae has contributed $20,000 toward the telephone operation and will offer "flexible" products through the banks participating in Help. The government-sponsored enterprise has also agreed to buy the loans once they close, and its Fannie Mae Foundation charitable arm will chip in $50,000 for a "financial literacy" handbook to be distributed by faith-based institutions.
In spreading word about the program, the New York Bankers Association will get help from churches. That effort will be led by the Rev. Floyd Flake, a former member of Congress, of the Allen African Methodist Church in Queens, and the Rev. David Cousins of the Bridge Street African Methodist Episcopal Church.
The Help initiative, which was announced at Sen. Schumer's office here, is intended to bridge the communication gap between consumers and banks, said Michael Smith, president of the New York Bankers Association. Sen. Schumer's report cast many lenders in a bad light, and the New York program "highlights what we have been doing" to address the problem of predatory lending, Mr. Smith said.
If the program succeeds it will expand to other New York neighborhoods, Mr. Smith said. Naomi Bayer, director of Fannie Mae's New York Partnership Office, said it could be used nationwide.
Sen. Schumer said that, with Democrats poised to take control of the Senate after Sen. James Jeffords of Vermont officially leaves the Republican party, the Senate Banking Committee will hold a hearing on predatory lending soon. He said outgoing Chairman Phil Gramm had held up action on the issue.
The Rev. Jesse Jackson, who was on hand for the Help program's unveiling, said it will force predators "to find a real job."