Lending Study Finds Minority Neighborhoods Underserved
Consumer activist Ralph Nader accused mortgage lenders in 16 cities Thursday of failing to adequately serve minority neighborhoods.
A Nader-founded group, Essential Information Inc., studied Federal Reserve Board data on 1.25 million mortgage loan applications from 1990 and 1991. The information was reported to the board by each mortgage lender.
The study found 62 lending patterns that it described as “worst case,” meaning minority neighborhoods were excluded or inadequately served.
The problem is that minorities don’t apply for loans, not that lenders don’t approve those applications, the study found. But Jonathan Brown, the study’s author, said some lenders have marketing strategies that exclude minority applicants or “pre-screening tactics,” such as high application fees, that discourage them from applying.
A spokesman for one lender, Chase Manhattan in Buffalo, N.Y., said the bank has been trying to encourage more minorities to apply for loans, has hired a black mortgage loan officer and has advertised in minority community newspapers. Despite that, spokesman James Sykes said the bank’s loans to minorities did not increase last year.
“We’re not necessarily pleased with the success we’ve had so far, but we’re going to keep after it,” he said. The bank branches were known as Chase Lincoln First Bank during the period of the study.
One lender, Sears Mortgage Corp., had a pattern of inadequate service in six cities, Nader said. Those six are Los Angeles, Pittsburgh, Atlanta, Chicago, St. Louis and Oakland.
“We feel we are in full compliance with the current interpretation of lending laws,” said Sears spokeswoman Sandra Byrnes. “We welcome a chance to participate in a discussion of the issue.”
The 16 cities in the Nader study are Los Angeles; Boston; Miami; New York; Buffalo, N.Y.; Chicago; Detroit; Philadelphia; Pittsburgh; St. Louis; Dallas; Baltimore; Houston; Washington; Oakland, and Atlanta.
“One of things that may be throwing the numbers off is we do not do FHA and VA loans,” said Ronald L. Hanson, president and chief executive of Mortgage Capital Corp. of St. Paul, Minn. “We work strictly with wholesalers or brokers. We don’t do any retail loans.”
“We, of course, do not look at any race or ethnic background or any of those type of things” in considering whether to buy a loan, Hanson said.
Nader asked the Department of Housing and Urban Development to tighten its enforcement of fair lending laws, and urged Atty. Gen. Janet Reno in a letter to have the Justice Department review his group’s study.
