Lenders to study charges of bias Bankers eye high rate of home loan denials for blacks.

November 07, 1991|By Kevin Thomas | Kevin Thomas,Evening Sun Staff

A group of Maryland mortgage lenders says it will investigate concerns raised by a federal report that shows blacks are rejected for conventional home loans more than twice as often as whites.

The Maryland Mortgage Bankers Association [MMBA] yesterday said it would establish a task force to review last month's Federal Reserve report, which states that black applicants for non-government loans nationally were rejected 33.9 percent of the time last year, while whites were rejected at a rate of 14.4 percent.

The ratio of rejections was similar in the Baltimore area, with blacks being rejected twice as often as whites. The actual figures are 15.6 percent vs. 7.5 percent.

The Baltimore figures, while lower than the national average, caused concern among the MMBA's board of directors, who were meeting the day the report became public.

Theodore E. Reichhart, a spokesman for the MMBA, said the association will look at the tentative figures to determine if recommendations are necessary.

However, Reichhart, who as executive vice president of Maryland National Mortgage Corp. will sit on the task force, said he did not think that bias is a factor.

"Determining race bias is going to be very difficult to do," he said.

"From what I know of my competitors, I don't think loans are approved or rejected based on race."

"I don't see where there is a need to police it," Reichhart added. "What the mortgage bankers are saying is, 'We will look at it, and if we determine that there's a problem, we'll take action.' "

Local community organizations yesterday were skeptical that the MMBA could effectively investigate itself.

"I'm going to pray on it," said George Buntin, executive director of the Baltimore chapter of the NAACP.

Buntin is also president of the Maryland Alliance for Responsible Investment, which polices banking institutions on their investment practices in minority and poor communities.

"The thrust of their task force seems to be to refute the federal report," Buntin said. "They should be saying, 'Look, there's a problem, let's come up with a way to address the problem.' "

Buntin said he fears that the MMBA will approach its investigation with a defensive posture, determined to prove that discrimination is not a factor in disproportionate loan rejections.

"I don't think anybody is saying that it's a case of specific discrimination," Buntin said. "But the results are still the same."

The NAACP head said bank officials need to look at policies they have that may discourage blacks from seeking loans in their institutions and that are insensitive to some blacks' credit problems.

"Most loan officers are white males and they don't have any sensitivities at all other than what they read about minority communities," he said.

But banking officials say lending practices are governed by strict federal regulations that may unintentionally exclude some minorities because of credit problems or the general condition of homes in some neighborhoods.

They say it appears unlikely that, given current conditions in banking, regulators are likely to loosen such restrictions.

"They're losing money now on claims [at foreclosure]," Reichhart said. Moreover, Reichhart said it is the regulators who are responsible for investigating individual complaints of discrimination.

"I just hope this doesn't create a witch hunt where everyone who is turned down for a loan is going to want to claim discrimination, because it's certainly not the case," he said.

The federal report has come at a time when banks are under increasing internal and external pressure.

Larger institutions in particular are looking at possible mergers to avoid financial collapse. Merging requires regulatory approval, however, and several consumer groups are throwing wrenches at those linkups, hoping banks will become more responsive to minority communities.

The strategy seems to have had impact. The Charlotte, N.C.-based NCNB Corp., which conceded last month that it rejected blacks for loans twice as often as whites, said it would pump $10 billion in loans over 10 years into low-income communities if its merger with Atlanta-based C&S/Sovran Corp. is approved.

Stockholders of the two banks voted in favor of the merger last week.

The linkup creates the nation's No. 4 bank, with $118 billion in assets and branches in Maryland, seven other states and the District of Columbia.

Buntin said banks overcome regulatory stumbling blocks when they perceive it to be in their best interest. Locally, he said, Maryland National Bank has been "very cooperative" in establishing an $80 million loan program that will provide for mortgages and development loans in low-income areas over 10 years.

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