The outgoing president of the Mortgage Bankers Association laid the groundwork for court fights against Justice Department attacks on mort-gage banks lending patterns while an attorney counseled clients against sign-ing the much blander lending agree-ment with HUD that the MBA does endorse.

We must be prepared to adjudicate overzealous enforcement that goes beyond the law, Stephen B. Ashley said Oct. 10 in his final address to the MBA

Ashley told reporters later that his concern grows out of the five DOJ attacks on banks alleged discriminatory lending and the fact that all five cases ended in settlements rather than in court.

At some point there needs to be some lines drawn, some clear defini-tions of what does and doesnt constitute discriminatory practice, and it may be that those lines have to be drawn in court, he said. Despite that view, Ash-ley said the MBA hasnt voted to follow the American Bankers Associations reported decision to raise a war chest to fight DOJ, and he wouldnt speculate on whether his group would.

That war chest was inspired earlier this fall by DOJs agreement with Chevy Chase Federal Savings Bank in which the Maryland thrift agreed to spend $11 million to correct what Justice claims was a pattern of discriminatory market-ing practices. DOJ now is believed to be training its sights on Floridas Barnett Bank and about nine other institutions.

Ashley said mortgage bankers know well that all of them must strive to eradicate discrimination in lending. But instead of DOJ, the MBA would much rather deal with the Department of Housing and Urban Development, with which it signed a Best Practices Agreement at about the same time DOJs hammer fell on Chevy Chase.

Ashley defended the agreement during his speech to members by argu-ing that it establishes the principle that mortgage bankers can set their own fair lending standards, rather than have those standards determined for us by someone else. Indeed, shortly after signing the pact, Ashley argued to a congressional committee that the agreement is one reason why the Com-munity Reinvestment Act doesnt need to be extended to mortgage banks.

For its part, HUD is pushing hard to sign mortgage banks to the Best Prac-tices agreement. An MBA official said HUD wants to get about 75 signees in all parts of the banking industry. Coun-trywide Funding Corp. already has done so, and HUD Assistant Secretary Roberta Achtenberg said about three dozen institutions are talking about becoming the next participants.

Not so fast, some argue.

I dont believe theres any reason to run to HUD, said Mitch Kider, an attorney with Weiner, Brodsky, Sidman & Kider in Washington and an expert on mortgage banking regula-tion. Kider told Mortgage Marketplace that mortgage banks should spend more time getting HUD comments on the consequencesfrom HUD and from third partiesof failing to meet the goals listed in the agreement.

Achtenberg, told Kiders assertion, said that a mortgage lenders failure to meet the target growth for minority loans cited in a HUD agreement has no affect. ... There is no mechanism for legally enforcing the agreement. She said HUD is searching for violators of its fair lending policy, and it wouldnt make sense to penalize an institution whose only fault was that its minority lending portfolio didnt grow as much as it, and HUD, had hoped.

This is an effort at voluntary compliance, to work with HUD to stretch [lending targets], she said. Its important that no consequences flow from a high commitment.

Achtenberg said HUD hasnt decided whether it would issue a state-ment at the end of a Best Practices A-greement period. She said HUD attor-neys have determined that the infor-mation cannot be kept secret, but added that the department might choose instead to make people who want to see the year-later results of a Best Practices Agreement get the data via a Freedom of Information Act request.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.