Mortgage bankers said they hoped their recent pact with HUD might help relieve some of the increasing pressure to subject them to the Community Rein-vestment Act, but with Congress set to readdress the issue Sept. 29, the pact is likely to serve as a remedial fair lending lesson rather than the industrys saving grace.
The Mortgage Bankers Association and the Department of Housing and Urban Development signed the Fair Lending Best Practices Master Agree-ment Sept. 14 that will span the next three years. Under the terms of the ac-cord, HUD and MBA agreed to under-take, continue, or facilitate during the next three years ... to provide support and technical assistance to each other.
The agreement, which has already been signed by Pasadena, Calif.-based Countrywide Funding, also provides a model of a Best Practices Agreement that reflects activities intended to in-crease homeownership opportunities while reinforcing and supporting the principles of sound lending. MBA also said it would support and facilitate HUDs efforts to reach agreements with MBA members.
The MBAs decision to ratify the agreement hasnt been met with much support from other banking industry trade groups, however. In fact, mostparticularly the Savings & Community Bankers of America and the Indepe-ndent Bankers Association of Americaconsider the MBA a splin-tering faction, and have been adamant about not entering into similar accords themselves.
Most of these groups believe the MBA, which is not subject to CRAbut has seen increasingly intense scrutiny of their lending practices from Congress, the Clinton administration and consumer groupscracked un-der pressure from HUD.
In a letter sent to members, MBA President Stephen Ashley speculated that endorsing the agreement might relieve some of the pressure mounting around the CRA issue. Those hopes, however, may prove unrealized as Congress bears down on the issue. Rep. Joseph Kennedy, D-Mass., plans to hold a hearing before the House Subcommittee on Consumer Credit and Insurance to consider extending CRA to mortgage bankers Sept. 21.
Kennedys interest in CRA for mort-gage bankers isnt new. Rep. Maxine Waters, D-Calif., introduced similar legislation in 1992. That legislation received only lukewarm support, but with the Clinton administrations fair lending fervor now reaching a fever pitch, the likelihood of such a bill being passed has improved greatly.
Some mortgage industry analysts have speculated that the MBA fully believes the extension of CRA laws to mortgage bankersor at least CRA-type regulationsis inevitable, and that signing the accord is more geared toward acclimating its members toward new ways of doing business rather than deflecting exposure. The best practices agreement seems to pave the way for that re-education.
According to the terms of the agree-ment, MBA members choosing not to join in the best practices guidelines will not be targeted for closer scrutiny or enforcement actions. Both HUD and the MBA recognize that a lenders signing, or failure to sign, a best practices agreement can have no bearing on [HUDs] independent obligation to enforce the Fair Housing Act, the agreement said.
However, a mortgage lenders wil-lingness to enter into an agreement and its good-faith efforts to comply with the terms ... will be viewed in a positive light in making a determination as to addi-tional penalties or other relief which HUD will seek in cases where it has alleged a violation of the Fair Housing Act.
Mortgage bankers agreed to under-take initiatives that include self-testing; outreach to brokers; community organ-izations; education, training and re-cruitment; job opportunities; consumer education and outreach; training for mortgage lending staff; underwriting standards; marketing analysis and sup-port of best practices agreement.
More specifically, the MBA agreed to:
* Provide guidance and support to members interested in developing re-liable self-testing programs, as well as developing a standardized set of test protocols to facilitate them;
* Foster relationships between mem-bers and mortgage brokers, real estate agents, developers, builders and other agents active in minority neighborhoods and census tracts;
* Develop a curriculum for commu-nity colleges and technical schools through its state affiliates that teach skills necessary to qualify for loan origination, processing, underwriting, loan servicing and loan counseling positions, partic-ularly at schools with significant mi-nority student enrollment;
* Encourage member participation in job information programs at schools and training centers, provide recruiers and materials at job fairs, and to develop internship programs for minorities;
* Develop a resource guide for its state affiliates and other organizations to sponsor credit and home buyer com-munity education efforts for low-income and minority buyers. The agreement also requires the MBA to serve as a resource for lenders seeking to provide consumer information directed toward non-English speaking people and people with disabilities;
* Develop and distribute a basic guide to the home buying process and the management of credit for use in high schools;
* Provide opportunities for training employees of its mortgage banking members on fair lending issues, as well as legal requirements of the Fair Hous-ing Act, Equal Credit Opportunity Act and applicable state consumer pro-tection and civil rights laws;
* Work with third-party organiza-tions, such as mortgage insurers and appraisers, to encourage the develop-ment of practical, flexible underwriting and appraisal standards; and
* Develop and make available ap-propriate software and data bases that will help members undertake market share analyses of minority and low-income households.