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Minority mortgages are rarer in some cities: community group

September 10, 1997

NEW YORK (AP) _ Mortgage loans to whites in Los Angeles, New Orleans and Bridgeport, Conn., greatly increased last year while mortgages to black or Hispanic applicants declined, a community group said Tuesday.

The group, Association of Community Organizations for Reform Now, or Acorn, said it also found mortgage lending disparities in Chicago, Philadelphia and Oakland, Calif., and blamed banking’s reliance on computers for prompting fewer minority mortgages.

However, banking officials said the study looked at too short a period of time to be reliable.

Acorn looked at wide-ranging federal data released by the Federal Financial Institutions Examination Council in August and analyzed only conventional, home-purchase loans in 15 cities.

The group found success stories in St. Louis, Minneapolis-St. Paul and Denver _ cities where mortgage loans to minorities increased in 1996 _ but said most other cities went the other way.

Patrick Woodall, spokesman at Acorn’s Washington office, said the decline was due in part to banks’ increasing reliance on computer software, or credit scoring, to analyze an applicant.

``One of the things we’re concerned about is, the standards that they’re using are narrowly tailored and rigid,″ Woodall said.

He also blamed those banks that are requiring four credit references, which usually include a credit-card company. Many low-income applicants have only three references: the gas, electric and phone companies.

Banking industry representatives acknowledged that 1996 was a bad year for equal lending. But they criticized Acorn’s study, saying one year was too short a time to analyze.

``Changes in credit flows are things that take a long time,″ said Mike terMaat, senior economist at the American Banking Association in Washington.

Fritz Elmendorf, spokesman for the Consumer Bankers Association in Arlington, Va., said banks have made strides in minority lending.

``Most of the larger banks have had affordable mortgages for several years that are designed to get more mortgage approvals to lower-income groups, and they’ve been pretty successful,″ he said.

TerMaat and Elmendorf defended the use of credit scoring, saying that computers are colorblind.

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