WASHINGTON -- The Mortgage Bankers Association of America announced a plan on Friday to improve blacks' and Hispanics' ability to get home loans.

The plan includes consumer-counseling programs and recommended changes in lenders' operations. They were unveiled along with findings of a study, reinforcing a similar report last year by the Federal Reserve, which found that minority groups' mortgage applications are turned down at far higher rates than whites'.

The mortgage Bankers, which has 2,300 members, based its findings on interviews with consumer groups, researchers, secondary market agencies, as well as the Fed's study of 1990 Home Mortgage Disclosure Act data and some association members' experiences.

|Significant' Gap

The association said there are "significant" discrepancies in the approval rates, despite offers of commissions and other incentives to extend credit.

Also, many minority neighborhoods are not adequately served by the industry, and members of minority groups may not get equal treatment at the earliest stages of the mortgage process, the group said.

One reason for the pattern of discrimination could be that many lenders interpret secondary-market and government-mortgage insurance guidelines conservatively because of concerns about having to repurchase loans or indemnify government agencies against loss, the Mortgage Bankers said.

Saying it is committed to get credit flowing to all qualified applicants, the association urged members to:

* Develop tests for discrimination at the pre-application and application stages.

* Counsel applicants to improve their chances of getting mortgages.

* Conduct second reviews of applicants who are turned down.

* Eliminate minimum loan amounts. Federal Reserve researchers concluded that blacks and Hispanics are generally more likely to be in the low-income borrower groups that apply for smaller loan amounts.

"Our industry must embrace, without compromise, the goal of fair lending to all and take every step necessary to reach that goal," said Angelo Mozilo, the association's president, and president and chief executive of Countrywide Funding Corp., Pasadena, Calif.

Counseling Standards

To combat the problem, the Mortgage Bankers will develop uniform standards for counseling consumers at four critical stages: when they apply for a loan; are rejected for a loan; at the closing; and if the borrower has trouble making payments.

The association is also urging lenders to review denied applications more thoroughly to ensure that all relevant factors and options have been considered, and that bias played no role in the decision.

The group will sponsor five seminars on fair housing laws and secondary-market underwriting guidelines. They have been tentatively scheduled in Los Angeles, Denver, Atlanta, Boston and Chicago.

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.