News of bias accord stuns Columbia mortgage firm

Clinton misinformed, chief executive says of King Day report

January 19, 1999|By Bill Atkinson and Edward Lee | Bill Atkinson and Edward Lee,SUN STAFF

At a ceremony honoring the Rev. Martin Luther King Jr. yesterday, President Clinton stunned executives of a Columbia-based mortgage company by announcing that the federal government had reached a record $6.5 billion discrimination settlement with the company.

But David J. Gallitano, chairman and chief executive of Columbia National Mortgage Co., said he was shocked by any suggestion that his company had discriminated and was taking dramatic steps to reform its ways.

"I'm sure he was very poorly informed," he said of the president.

The company said it had admitted no wrongdoing and had committed no more money than it would have otherwise to help minority and low-to-moderate income borrowers. "We are mortified," Gallitano said. "The statements being made are flat inaccurate."

Gallitano said his company, which was founded by James W. Rouse, has done nothing wrong, and has lent $6 billion over the past five years to members of minority groups and low-to-moderate-income families.

The Department of Housing and Urban Development said it began investigating allegations of discriminatory lending practices at Columbia National 18 months ago. The firm violated the Fair Housing Act, approved by Congress in 1968, by making too few loans to minority or low-to-moderate income families, according to HUD.

In 1997, its loans to such borrowers totaled $51.6 million, less than 5 percent of its volume, the agency alleged.

Gallitano said Columbia National signed an agreement with HUD late last year that "does not accuse us of any discriminatory practices. The agreement does nothing more than to reaffirm that we are going to continue our past lending practices."

A member of the board of directors for the Howard County Economic Development Authority and of County Executive James N. Robey's spending affordability committee, Gallitano said he was "scrambling" to make sense of the news. He didn't know what the firm's next step would be.

"As recently as this morning we had one of the HUD investigators tell us that we did nothing wrong and did not participate in any form of discriminatory lending," Gallitano said. "We were caught about as off base as we can be. I have never been more upset in my career than [at] what HUD has done to us today."

The settlement was announced by Clinton after he and Vice President Al Gore joined Americorps volunteers in tearing down a wall in a room being renovated at a Washington retirement home. Their work was part of a national focus on volunteerism in the spirit of King, the nation's most celebrated human rights activist, who was born Jan. 15, 1929, and was assassinated April 4, 1968.

The reported settlement calls for the mortgage company to make $6 billion in home mortgage loans available over five years to members of minority groups and low-to-moderate-income families in 28 states, according to HUD. The company also must spend $529 million on programs designed to increase homeownership among minority and poor families, the agency said.

"If companies know we're going to enforce the law, you'll see more compliance. And $6.5 billion says we're going to enforce the law," said Housing Secretary Andrew M. Cuomo, who attended King Day services in Atlanta.

Columbia National was founded in 1939 by Rouse, who pioneered Columbia's development as a community that would accommodate people of all races, religions and economic backgrounds.

Rouse's "reputation and approach to business has always been legal and nondiscriminatory," Gallitano said. "We have not changed that one iota."

The mortgage company has about 900 employees, and 75 offices in 23 states. It ranked as the country's 65th-largest residential loan servicing company in the first quarter of 1998, according to National Mortgage News, an industry trade publication.

Former Howard County Executive Charles I. Ecker, who appointed Gallitano to the Economic Development Authority's board of directors two years ago, said he has known Gallitano for about seven years.

"I've always thought that he's a fine individual," Ecker said. "I think he treats everyone fairly and equally."

Wire services contributed to this article.

Pub Date: 1/19/99

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