WASHINGTON -- Consumer advocate Ralph Nader unveiled a study Thursday accusing 49 major mortgage lenders of redlining in 16 cities across the country.

Mr. Nader said he has sent the study to Attorney General Janet Reno and to bank and thrift regulators, asking them to investigate these lenders for illegal lending bias.

"There are federal laws on the books that are supposed to prevent racial redlining," he said. "These laws have not been enforced."

The study, based on 1990 and 1991 Home Mortgage Disclosure Act data, reported finding 62 instances of institutions avoiding mortgage loan business in minority neighborhoods. It focused on the relative number of loans an institution made in a given neighborhood, not on the application and denial rates highlighted in some other reports.

Sears Unit Fare Worst

Sears Mortgage Corp., based in Vernon Hills, Ill., was identified as the lender with the worst record, with six separate instances of redlining. Prudential Home Mortgage Co. followed, with three cases cited in the study.

Mortgage companies, including bank subsidiaries, were the subject in 40 of the 62 redlining instances cited, or 65% of the cases. These included Chase Home Mortgage Corp., Nations-Bank 1 Mortgage Corp., Republic Bancorp Mortgage Inc. in Michigan, Norwest Mortgage Inc., GE Capital Mortgage Services, GMAC Mortgage Corp., and Source One Mortgage Services.

The Nader study cited commercial banks in the remaining 20 instances, including Chemical Bank, Republic Bank, Wells Fargo Bank, Citibank Federal Savings Bank and Bank of America.

Mapping Techniques Used

Researchers Jonathan Brown and Charles Bennington used computerized mapping techniques to translate HMDA data into color-coded maps for the 20 largest mortgage lenders in 16 metropolitan areas.

When lenders had a low market share in minority neighborhoods, originated mortgages throughout most of the metropolitan area, and excluded or substantially underserved minority areas, the authors judged redlining to have occurred.

While the researchers did not accuse the lenders of purposefully discriminating against minorities, they charged that because policies and practices -- like prescreening, exclusive marketing, and rigid underwriting standards -- led to fewer loans in these areas, illegal discrimination occurred.

Many bankers say the study's maps do not prove lending bias.

"We think we are in full compliance with the current interpretation of the lending laws," said Larry Costello of Sears Mortgage. "Our focus has been on ensuring nondiscrimination in the application process rather than outreach in particular neighborhoods."

And regulators say that while studies like this are an important start, HMDA analysis without further investigation is not proof of discrimination.

"The mere fact that HMDA data show a particular institution has relatively few applications from minorities, or from particular neighborhoods, does not in and of itself tell you there is illegal discrimination," said Steve Cross, deputy comptroller for compliance management at the Office of the Comptroller of the Currency. "It's enough to raise some serious red flags but its not enough in my mind to draw a conclusion."

The Comptroller's office will follow-up on the study for the banks it regulates, Mr. Cross said.

Warren Lasko, executive vice president of the Mortgage Bankers Association of America, attacked the report, saying it was full of "distorted and undocumented accusations."

"This supposed study makes in impossible leap in logic from looking at raw HMDA data to concluding that banks are willfully discriminating in their lending decisions," he said.

Added C. Howie Hodges, director of the America Bankers Association's center for community development, "We're concerned with this. We vigorously oppose discrimination of any kind in the banking industry, or even the perception of discrimination."

But the colorful, computer-generated maps produced by the researchers illustrate the power of the HMDA data in studying lending in specific neighborhoods.

New Uses for Data

"They've really revolutionized the utility of the HMDA data to pinpoint bias in the market," said Chris Lewis of the Consumer Federation of America. "You can almost recognize the very blocks that have been redlined. They do speak for themselves."

The study's authors have asked the Justice Department to review the cases detailed in the study. Mr. Brown said he hoped to see several Justice investigations similar to that of Decatur Federal Savings and Loan, which resulted in a $1 million settlement.

The authors called also called on the Department of Housing and Urban Development to establish strong enforcement standards, using its authority under the Fair Housing Act. And the department appears ready to take on this burden.

"This report underscores the importance of the necessity for a concerted federal response to redlining, a response that includes HUD, the Justice Department, and the federal banking regulators," said Roberta Achtenberg, HUD's assistant secretary for Fair Housing and Equal Opportunity.

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