RIGHTS WATCH : Cookie Cutting

It would be in everyone’s interest if banks did a better job of getting home loans out to a broader segment of Americans. Unfortunately, most banks’ record of lending to Latino and African-American home buyers has not improved despite the industry’s self-proclaimed efforts to make mortgages more available.

Fresh data collected by the Federal Reserve Board revealed that Latino and African-American applicants face rejections significantly more often than whites and Asians. This sorry pattern in mortgage lending was documented for the first time last year when banks and thrifts were required to report publicly on mortgage lending among ethnic groups.

Community groups have long claimed that banks are engaging in unfair and biased lending practices. In 1991, rejection rates for those seeking conventional mortgages were 15% for Asians, 17.3% for whites, 26.6% for Latinos and 37.6% for blacks.

With interest rates down to 20-year lows, many consumers see a once-in-a-lifetime opportunity to afford a home. But the conventional cookie-cutter standards used by banks to qualify applicants too often work to the disadvantage of minorities, who may not fit a creditor’s economic profile of an ideal homeowner. And even when Latino and black borrowers do meet standard criteria, they are more frequently rejected for loans.

Banks must change their practices to widen the availability of mortgage credit. Otherwise they could face tough sanctions--and growing public criticism.