WASHINGTON -- Ban trade group executives are bracing themselves for Wednesday's signing of a fair lending agreement between the Mortgage Bankers Association and the Department of Housing and Urban Development.
Association chiefs have already been urged to sign a mortgage lending "best practices" accord, but they know the government's real offensive will begin after MBA becomes the first group to commit to selling the deal to its members.
However, the other groups will prove a much harder sell.
"I don't think anyone in any of the trade associations will sign something that gives HUD regulatory authority over the commercial banking industry," said Edward L. Yingling, executive director of government relations at the American Bankers Association.
Kenneth A. Guenther, executive vice president at the Independent Bankers Association of America, said: "This is a divide-and-conquer strategy. You lop off the weak link -- the MBA -- and then go after the rest of the industry.
"I find it inconceivable that we would sign one," he added.
Officials at the Bankers Roundtable, the Consumer Bankers Association, and the Savings and Community Bankers of America also said they had no plans to ink a deal with HUD.
Most trade group officials noted that mortgage bankers are not covered by the Community Reinvestment Act, thus making them the more susceptible to pressure from HUD.
In fact, in a letter to members Sept. 9, MBA president Stephen B. Ashley said he hoped the accord would fend off efforts in Congress to extend CRA to mortgage bankers.
The best practices deal provides the industry "with a credible alternative to the strong possibility of congressional action imposing Community Reinvestment Act requirements on mortgage bankers," according to Mr. Ashley.
Rep. Joseph P. Kennedy 2d, D-Mass., plans to hold a hearing Sept. 29 on extending CRA to mortgage bankers.
The deal, which has been in the works for months, was initialed Friday by MBA officials and HUD Assistant Secretary Roberta Achtenberg. A formal signing ceremony with HUD Secretary Henry Cisneros is set for Sept. 14.Under the best practices accord, MBA will take a series of steps to encourage its members to make more loans to minorities and lower-income people. The agreement also lays out a menu" of best practices do Mr. Ashley said "HUD and individual lenders may choose in negotiating individual agreements." That menu contains a number of CRA-like elements such as delineating a market area and promoting community outreach.
Banking trade group officials object to signing similar deals because their members already adhere to CRA. They. also are wary of allowing another agency to oversee the industry.
HUD reportedly wants a hard dollar figure in its agreements with individual lenders, which trade executives said amounts to credit allocation. They said a deal with HUD could lead to safety and soundness problems if banks were forced to make poorly underwritten loans to satisfy a fair-lending target.
"These documents present social goals which could be in conflict with safety and soundness" Mr. Guenther said.