BANKING : B of A Policy on Minority Loans to Be Changed : * Finance: Data shows that applications from Latinos and African-Americans were rejected at a far higher rate than Anglos.
Bank of America on Friday disclosed data showing that it rejected home loan applications from minorities at a far higher rate than Anglos last year, and it announced a series of steps to improve lending practices to low-income and minority customers.
The data, gathered under the Home Mortgage Disclosure Act, shows that Anglos were rejected 26% of the time, while African-American and Latino loan applications were rejected 39% of the time.
Among the steps the San Francisco bank said it would take are offering easier terms to those applying for loans in low-income areas, providing incentives to loan officers to make low-income loans and providing special appeals procedures for those whose applications are denied.
At least one major community group, while praising some of the specific steps B of A will take, denounced the bank’s lending record and criticized it for announcing its program publicly before all of the data on its lending patterns has been properly compiled and analyzed.
Robert Gnaizda, a lawyer for the San Francisco-based Greenlining Coalition, said the bank’s statistics on loans made in low-income areas is faulty because it uses 1980 census tracts. In addition, he argued that the rejection rate would be higher if it included people who are too discouraged to apply.
But B of A Executive Vice President Donald T. Mullane, the bank’s point man on its minority and low-income lending programs, said the bank by law was required to release the data Friday, and that the 1980 census tracts are all that is available. He said that the bank denied 1.6 minority loan applications for every application from a Anglo that it denied, a better record than most banks.
“That is substantially better than any I have seen directly or that have been shown to me as a courtesy,” Mullane said. But, Mullane added, the bank still has to improve its programs “and we readily admit that.”
B of A’s announcement comes against the backdrop of the $4.7-billion pending acquisition by its parent firm, BankAmerica Corp., of Security Pacific Corp. in Los Angeles.
Community groups are using the BankAmerica/Security Pacific merger--as well as other major bank mergers such as Manufacturers Hanover/Chemical Banking and NCNB/C&S; Sovran--to turn up the heat on banks to force them to commit more funds for loans to low-income and minority groups.
The groups are threatening to oppose the mergers, which must be approved by federal bank regulators, if the banks do not make specific commitments.
In addition, banks across the country are nervously expecting an embarrassing federal report to be released later this month showing that minorities are rejected for loans from two to four times more frequently than Anglos. Security Pacific’s data has not been released.
Bank of America, California’s largest bank, said its specific programs will include waiving until mid-December the closing costs on adjustable-rate mortgages in designated low-income areas, which would save an estimated $3,700 on a $150,000 loan.
It also will allow down payments of less than 5% on some loans in low-income areas.
Loans that are turned down will undergo a special, high-level review. In South-Central Los Angeles, the bank will establish a special review program for property appraisals, including an “appraisal ombudsman” to review loans turned down based on the appraisal of a property.
That ombudsman may overrule a field appraiser, the bank said.
In addition, the bank said loan officers will be offered financial incentives to make credit-worthy loans in low-income areas. The bank also said it will step-up the recruitment of minority loan officers.
B of A said it increased first-mortgage home loan volumes in lower-income census tracts in California by 51%, or $482 million, last year compared to 1989.
It said the percentage of first mortgages made to minority customers was 25.7% of all its first-mortgage business in 1990.
Who’s Turned Down
Ethnic breakdown of those denied home mortgage loans by Bank of America in 1990. Percent of Loans Denied
American Indian / Native Alaskan: 35%
Asian / Pacific Islander: 28%
African American: 39%
Latino: 39%
Anglo: 26%
Interracial: 39% Source: Bank of America
