With the stroke of a pen, the Department of Housing and Urban Development says it has eliminated a conflict of interest in its $1 million program to test mortgage lenders and banks for bias.

That's some powerful ink.

HUD, as I have reported in two earlier columns, is paying a civil-rights group called the National Fair Housing Alliance $1 million to root out Archie Bunkerism at financial firms that make home loans. The testing is taking place in at least three undisclosed cities.

The alliance sends in undercover agents posing as prospective homebuyers. Some are black couples, some are white, some are mixed. If they decide that one test group has been spurned unfairly by the lender, they can take legal action.

Sham Program

Fighting bias is a noble cause, but what stood my hair on end was the revelation that at the same time the alliance was testing lenders, it was hawking its educational and consulting services to them, to show them how to avoid being sued for discrimination.

In fact, the alliance was negotiating with Sears Mortgage at the very time undercover testers from an affiliated group were checking out its pre-application treatment of minorities.

I said this arrangement made a sham of the entire program because it was an outrageous conflict of interest. It gave the appearance that the alliance was selling banks a from of immunity from the HUD program.

Under the original contract, the alliance was supposed to determine on its own if there were any conflicts of interest when it targeted a lender for testing and let HUD know about it.

Taking Action

Following my complaints, Roberta Achtenberg, assistant secretary for Fair Housing and Equal Opportunity at HUD, decided to tighten the contract language.

From now on, the alliance must give HUD the names of lenders it's doing business with, about to do business with, or negotiating with for possible services.

If one of those lenders is located in a targeted city, HUD can move the testing to another urban location. That's not always practical, however, because big lenders have offices everywhere. So HUD can also order the alliance to hire a subcontractor to do the testing.

Missing the Point

I'm not sure this approach addressed the real problem. First, the alliance is still playing on offense and defense. I think HUD should make them choose sides. Period.

And there are questions about the alliance itself. Without HUD, the group is a financial Not only that, it generously funnels taxpayer money to other civil-rights groups -- groups that should be surviving on private donations.

During the fiscal year ended last September, it raised $47,950 from membership dues and $11,743 from outside contributions, which isn't enough to cover the salaries of its two top employees. What kept its programs going? A $400,000 HUD grant.

The group comprising the directors of state fair-housing groups received another $1 million contract from HUD during the fiscal year ending September 1991 for education, outreach, and testing, according to tax returns. Dues that year were $35,000, and they had a little over $1,000 in revenues from other sources.

They reported that the lion's share of the grant money -- about $860,000 -- went to Professional Media Services Inc. of Boston for printing and media products used to make public service announcements that appeared on 400 TV stations, 1,350 radio stations, and in 2,500 magazines and newspapers.

As a taxpayer, I wonder why HUD needed the alliance to act as a middle man for commercials.

The agency also hired the National Association for the Advancement of Colored People of Baltimore for $65,000 to help with the project.

The Mental Health Law Project, which among other things looks out for the rights of the mentally ill, received about $54,000.

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