USE THIS VERSION : 27 Banks, Thrifts to Consider Increasing Inner-City Loans

Twenty-seven banks and thrifts on Sunday agreed to consider boosting their lending for housing and small businesses in inner-city neighborhoods.

The lenders included 15 that already had a lending program in place with the Assn. of Community Organizations for Reform Now, or ACORN, a group of community activists that met with the lenders amid renewed attention on urban blight following the Los Angeles riots in May.

In California, some banks have pledged to assist neighborhoods hurt by the riots. Bank of America, which sent representatives to ACORN’s meeting in New York, has earmarked $25 million for businesses affected by the rioting. After distributing $200,000 in immediate aid, First Interstate Bank committed $30 million to businesses through the U.S. Small Business Administration and is developing several advantageous home loan programs.

Of 150 lenders from across the country invited to the two-day meeting in Manhattan, only 41 showed. But the gathering, timed to overlap with the nearby Democratic Convention, drew Jesse Jackson, other politicians and 1,000 ACORN members as the group pushed for more investment in affordable housing, small-business development, job creation and infrastructure and economic development.

The group said it was the first meeting of its kind.

“There are too many people without housing and too many houses without people,” said Maude Hurd, ACORN’s president. “Without a dramatic intervention, the spiral of disinvestment will collapse upon itself.”

Specifically, lenders agreed to sit on task forces with ACORN members and negotiate ways to beef up loans to people and businesses in low-income urban neighborhoods where they are based.

In addition, the task forces would push for such congressional reforms as rule changes for federal lending agencies and the private mortgage insurance industry.

April Young, community lending officer at First American Bank in Washington, said Sunday’s agreement was evidence that banks were serious about the federal Community Reinvestment Act, which bars lending discrimination on the basis of income, race or neighborhood.

“There isn’t a bank in the country that isn’t worried about their CRA rating,” Young said. CRA regulators rate banks according to their lending practices to minorities and low-income neighborhoods.

Under CRA law, ACORN said it has challenged a number of U.S. banking mergers and as a result got $1 billion committed to urban housing loans.

However, Citibank and some other large New York banks declined to specifically commit to working with ACORN, saying that they were already working with a New York City coalition to consider stepping up their lending.

“We didn’t agree to anything,” said Janet Thompson, Citibank’s vice president for community development. However, Thompson, noting her bank’s work with the other coalition, said it was “good business” to lend in low- and moderate-income neighborhoods. “There’s some cost to it, but that’s mostly in marketing and outreach,” she said.

In a stirring keynote address that took on the tenor of a religious revival, Jackson called for the investment of public and private pension funds in housing and small-business projects.

He also said that the federal government should establish an economic development program for U.S. cities similar to agreements for Eastern Europe. Such a program would include low-interest, long-term loans backed by the federal government.

In addition to public monies, he said banks themselves should make more loans in the inner city and argued that they were a good investment. “Urban America is an undeveloped market for jobs and growth,” Jackson said.

The meeting follows renewed focus on the subject of discrimination in lending. Last fall the Federal Reserve Board released a series of detailed studies called the Home Mortgage Disclosure Act reports.

The reports showed that banks, thrifts and other lenders rejected 34% of black borrowers and 21% of Latinos; the rejection rate for whites of comparable income was just 14.4%.

The banking industry initially denounced the reports, saying that they lacked explanations for rejection of individual loans. But recently, the industry has taken another approach.

The American Bankers Assn. has set up a special committee to bring together information on successful community lending programs in one place, so bankers can build on the success of existing programs.