Attorney General Janet Reno came out swinging at mortgage bankers Nov. 4 during the Senate Banking Committee hearing on the long-awaited 1992 Home Mortgage Disclosure Act figures.
The Justice Department and HUD will conduct joint investigations of financial institutions in a dragnet that will focus particularly on independent mortgage companies which are not regulated directly by any of the federal financial regulatory agencies," said Reno.
The figures suggest blacks and Hispanics continue to be denied loans twice as often as whites, a finding that the administration did not welcome.
Reno hinted that the war on lending discrimination is about to get bloody.
Justice, the Department of Housing and Urban Development and each of the four banking regulators are preparing to unleash reinforced exam and enforcement forces. First on the hit list will be those lenders whose denial rates have not improved over past years or that have gone up. Also targeted are lenders for whom the new 1992 HMDA figures show relatively high minority denial rates.
Reno described the Justice Department's increasing investigations of mortgage lenders for bigotry as a long-overdue wakeup call. She said her office will emphasize "bold, vigorous law enforcement."
Reno was backed by HUD Secretary Henry Cisneros who, on behalf of the Clinton administration, said "the message on fair lending ... is simple and clear: We are changing the way we do business, and we mean business."
The Clinton administration also has indicated to bankers that it's no longer going to listen to excuses that HMDA figures are misleading.
Reno criticized bankers for contending that the data's higher rejection rates for minority applicants can be explained by differences in credit worthiness or that lower loan origination rates in minority neighborhoods are due to reduced demand for mortgage loans in such communities.
"Our law suit against Decatur [Federal Savings & Loan, Decatur, Ga.] has sharply called into question this response to these charges," Reno said.
Such charges continue to be challenged in light of the 1992 HMDA data. and it's clear that the Clinton administration and many lawmakers are no longer giving the industry the benefit of the doubt.
The newly released data shows that the number of housing loans applied for rose significantly over previous years, with a dramatic rise in home refinancing and only a modest increase in home improvement loans. The number of applications approved rose across the board as well.
However, "the basic message of the 1992 HMDA data is a disappointing one." Cisneros said. "It tells us that discrimination is still alive and well in America. To cite just one statistic: denial rates for conventional home purchase loans are much higher for African-Americans and Hispanic-Americans than for whites - 36%, 27% and 16% respectively. We cannot allow these wide disparities to continue for any group of people."
The disparities between black and white approval and denial rates persist," said Fed Governor Lawrence Lindsey, adding, There is no question that the differential denial rates and approval rates for different income groups are troubling."