CHICAGO -- Federal housing chief Henry G. Cisneros put mortgage bankers on notice that his agency plans to step up its scrutiny of lending discrimination.

"We mean business," the secretary of housing and urban development told the annual convention of the Mortgage Bankers of America on Monday.

Mr. Cisneros said reiterated that his department will increase the use of undercover loan applicants, or testers, to weed out loan bias. Also planned: heightened scrutiny of lenders that do business with the Federal Housing Administration.

Praises Group's Initiatives

Mr. Cisneros praised the fair-lending initiatives announced by the trade group Monday, and said: "I'm not asking you to do anything that violates business practices . . . [to] make any loans that you wouldn't make."

But he made clear his view that mortgage bankers should make more loans to low-income and minority borrowers.

At a press conference after his speech, Mr. Cisneros said discrimination by mortgage bankers is often subtle. "Persons of color are scrutinized more closely," he said. Some applicants will be given counseling when a judgment call is needed on a loan decision, he said, but "in other cases, predominantly distinguished by color, that benefit is not given."

Mr. Cisneros also said some lenders redline neighborhoods in which they think they cannot make money.

Reporting Violations Up

In his speech, Mr. Cisneros noted that HUD's mortgage review board received 89 complaints in fiscal year 1993 against mortgage bankers who had violated the Home Mortgage Disclosure Act's data reporting requirements. That was more than double the 43 complaints received the previous year.

So far this year, the agency has barred three mortgage lenders from conducting FHA business. Two others were put on probation. Five were fined a total of $79,000, Mr. Cisneros said.

He told reporters that Roberta Achtenberg, assistant secretary of fair housing and equal opportunity, will work closely with the review board to enforce the fair-housing laws.

"I hope the industry is getting the world that [discrimination] is unacceptable, counterproductive, and [that] we will be watching," Mr. Cisneros added. "We do have some sticks to work with if we can't get the elimination of this insidious practice."

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