WASHINGTON The Mortgage Bankers Association is ready to sign a fair lending pact with the Department of Housing and Urban Affairs.
Under the three-year agreement, the trade group would promise to-encourage its 2,900 members to sign individual deals with HUD pledging to adopt. "best practices" on a wide range of fair lending issues.
Those deals are expected to contain specific dollar goals for lending in minority neighborhoods according to a draft copy of the agreement.
"Performance targets will form a standard part of all individual agreements," the document states. "These will be tailored to the lender and its community, taking into account such factors as economic conditions, mode of business. size, location, and financial capacity of the individual firm."
While the agreement has not been made public, HUD Secretary Henry Cisneros said privately last week that it will be unveiled soon. The date on the document obtained by American Banker is stated as "September XX."
Mr. Cisneros made his comments Aug. 18 at a closed-door meeting here of government and private-sector officials working to increase home ownership. A Mortgage Bankers Association spokesman refused Monday to comment on the document, but, insisted that "this is not the final agreement. It could drastically change before September."
HUD was close to signing an agreement with-the association back in May, but the deal stalled. The association's spokesman refused to explain what happened- and a call to HUD Assistant Secretary Roberta Achtenberg's office was not returned.
HUD has been reawakened to its responsibilities to enforce the Fair Housing Act under Mr. Cisneros and Ms. Achtenberg.
Mr. Cisneros and Ms. Achtenberg are trying to recruit trade associations to persuade their members to sign the individual minority lending pacts.
To date, banking trade groups are not biting.
Paul Schosberg, president of the Savings and Community Bankers of America, said his group is unlikely to sign any such deal with HUD.
"Trade associations are not the policemen of their members," he said.
Kenneth Guenther, executive vice president of the Independent Bankers Association of America, also rejected the idea.
"Roberta Achtenberg of HUD has made it very clear that she expects banking trade associations to enforce lending targets and hiring standards on banks," he said. "This is disturbing."
Edward Yingling, chief lobbyist for the American Bankers Association, said: "We already are federally regulated and examined on these issues and the mortgage bankers are not."
Institutions that choose not to sign 'a lending pact with HUD will not be penalized, the document states.
Failure to sign "can have no bearing on the secretary's independent obligation to enforce the Fair Housing Act," according to the agreement.
However, by signing one of these deals, a lender can buy itself some good will and avert punitive damages if the government discovers any discriminatory activity.
Inking a deal with HUD, the document states, "will be viewed in a positive light in making a determination as to additional penalties or other relief which HUD will seek in cases where is has alleged a violation of the Fair Housing Act."
"It is HUD policy to consider as a substantial mitigating factor an institution's self-identification and self-correction of a fair lending violation," the model agreement states.
The documents include a five-page deal with the association as well as a seven-page model
agreement to be signed by individual members of the association.
In addition to the performance targets to measure minority lending, the model agreement for individual -members forbids lenders' to set a minimum loan size.
These lenders also must establish a second review program for applications that are rejected as well as for loan applications that are withdrawn.
The agreement states that the lender will use mystery shoppers, internal statistical analysis, or other means to verify compliance with fair lending rules.
These lenders also must designate an ombudsman to handle borrower complaints. Customers who are denied loans should be given the ombudsman's name and number and advice on how to proceed.
Finally; the agreement requires lenders to develop a work force that "reflects the cultural, racial, and ethnic diversity of the lenders' market areas."
Under the agreement, the Mortgage Bankers Association would agree to:
Help its members develop reliable self-testing programs.
Develop software to help members do market share analysis;
Create a curriculum for community colleges and technical schools to help minorities qualify as loan originators, processors, underwriters, and loan servicers;
Foster relationships- between members and minority brokers and community organizations;
Hold an annual forum where training materials on fair-lending marketing and compliance are presented;
Encourage development of flexible underwriting and appraisal standards.