WASHINGTON -- Mortgage companies are doing a much worse job than banks in extending home loans to minorities, according to a study released Tuesday.
The study, commissioned by the National Community Reinvestment Coalition, found that 70% of the 126 "worst" lenders in 1993 were mortgage banking companies. Just under 30% were commercial banks and less than 1% were credit unions.
"This study says very clearly that mortgage companies, which have to report data under the Home Mortgage Disclosure Act, should be covered by" the Community Reinvestment Act, NCRC chairman Irvin Henderson said.
Earlier this year, a House subcommittee held hearings on that issue, but no legislation resulted.
The NCRC graded financial institutions on five indicators, group president John Taylor said. It awarded grades from A+ to F- for: marketing to minorities; minority-to-white denial ratio; lending to minorities; marketing to low-income and moderate-income applicants; and lending to low-income and moderate-income applicants. The group then averaged the grades for a final score.
The group, which relied on HMDA data, compiled the list of 126 "worst" lenders after examining major lenders in the 20 largest U.S. markets.
The group rated Prudential Home Mortgage Co. as the single worst lender in 1993. It said Prudential received failing grades in 18 markets.
Rounding out the list of the group's worst lenders were: GE Capital Mortgage Services, with eight failing grades; Country-wide Funding Corp., with seven failing grades; Chase Home Mortgage Co., with six failing grades; and Chase-owned American Residential Mortgage, with five failing grades.
Prudential senior vice president Doug Rossbach said the company didn't originate loans on its own in 1993. Instead, it depended on mortgage brokers to write loan policies for the company to purchase. "We weren't even the person who made the decision," Mr. Rossbach said. "The process is color-blind. We have no way to know if the person is a minority. We don't know who we are dealing with."
That changed this year, he said. Prudential has opened its first loan offices and it is starting to market to low-income residents directly, he said.
Chase Manhattan Bank senior vice president James R. Ferriter said the study uses "incomplete and outdated" statistics. Also, he said, prior to 1993, Chase only served borrowers looking for large loans. But, since Chase entered the mass loan market last year by buying American Residential, it is making 12% of its loans to minorities, well above the national average.
"I think the results through October of 1994 are outstanding," he said.
Marshall Gates, managing director of production operations for Countrywide, said his company is making twice as many loans to blacks and minorities this year compared to 1993, while the denial rate for blacks and Hispanics has fallen by half.
"We think our record of lending to minority and low-income communities is going to be one of the best in 1994," he said.
GE Capital spokesman Mike Kachel said the company will not comment until it reviews the report.
The study also found that Office of Thrift Supervision-regulated institutions scored considerably worse than banks or credit unions. It said 22 of the 37 banks and thrifts that made the list are OTS regulated.