WASHINGTON -- Lending bias is the top civil rights issue facing the country, a senior Justice Department official said Tuesday.

Paul F. Hancock, chief of the department's housing and civil enforcement office, vowed that the government will vigorously pursue banks that discriminate against minority groups.

"Mortgage lending discrimination is probably the most serious problem in race discrimination and civil rights enforcement we face today," he told those at the annual conference of the National Fair Housing Alliance, a network of housing activists.

"We are continuing our program to address mortgage discrimination," he said, adding, "We need to do a lot more. We need to bring a lot more lawsuits in this area."

A Shortage of Funding

The banking regulators recently backed off from formal cooperation with the Justice Department in investigating banks suspected of biased lending. But that does not appear to have slowed down the Justice Department's efforts in this area.

In fact, the most significant barrier to the agency's investigations of lenders appears to be money.

The Justice Department spent several million dollars over tthree years on the only lending discrimination settlement it has reached -- $1 million in a case involving Decatur Federal Savings and Loan in Atlanta. Decatur has since been acquired by First Union Corp.

Justice officials say they have refined their strategy and now can complete an investigation in six to nine months, spending $300,000 to $500,000.

But they still say they don't have enough funding to pursue more than a few lenders at a time.

"We just have a very limited amount of resources," Mr. Hancock said. "If we do two of these at the same time, we are really taxed."

Some say the limited funding is what motivated the Justice Department to ask bank regulators to participate in joint investigations. While the agencies have pledged informal cooperation -- sharing records and information about the banks each agency is investigating -- none has agreed to fund the department's efforts.

Industry |Wake-Up Call'

Mr. Hancock said the Decatur settlement was a "wake-up call for the industry," and additional investigations could shake up banks even more.

The Federal Reserve Bank of Boston's study of lending discrimination -- which refined earlier data showing black mortgage applicants were more likely to be denied loans than whites with similar credit histories also was effective at grabbing the industry's attention, Mr. Hancock said.

Shawmut National Corp., which participated in the Boston study, is under investigation by the Justice Department. Separately, the lending records of several New England institutions are being reviewed by the Massachusetts attorney general.

Public Advocates Want More

While talk of additional investigations may strike fear among bankers, public advocates cheer the departments' renewed commitment. And they want more.

"They've done one case and it's a good one," said Joe Shifalo, executive director of Metro Fair Housing Services Inc. in Atlanta. "But doing one case no one can duplicate is not enough.

"We look to the Justice Department for help," he added. "And certainly the Justice Department under the new administration will take a more aggressive stance and work more cooperatively with community groups."

Mr. Hancock did pledge to work more closely with housing and civil-rights groups in investigating lenders.

"I would like to work with private groups as closely as possible -- especially in the area of prescreening testing," Mr. Hancock said. "If there are other ways we can work cooperatively with private groups, let's explore that."

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