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Minorities Say Lenders Prejudiced, Regulators Unresponsive

May 8, 1992

WASHINGTON (AP) _ A black Philadelphia woman with considerable income, good credit and a long-held job was denied a home mortgage on grounds - erroneous, it turned out - she had once missed a payment of four cents.

A black borrower in St. Louis applied for a mortgage to buy an abandoned house; the bank turned her down because of a high abandonment rate on the block. She paid cash for the house, applied for a home-equity loan to install central heating - and was told the bank would make no loans on property lacking central heating.

Those cases were cited by the ACORN advocacy group Thursday as evidence of how mortgage lenders routinely discriminate against non-whites with little fear of being punished by federal regulators. Witnesses at a House hearing said such discrimination breeds hopelessness and despair.

″As evidenced by recent events in Los Angeles, we are only beginning to reap what we have sowed in the past decade,″ said Donald Martin, vice president of ACORN, which works to improve opportunities for low- and moderate-income people. ″Reversing a cycle of urban decline, despair and violence requires a federal commitment to be the guarantor of equal opportunity for all Americans.″

The House Banking consumer and housing subcommittees called the hearing to discuss a Federal Reserve Board study of the lending practices of 9,300 financial institutions. It found blacks’ mortgage applications were denied more than twice as often as whites’ with comparable incomes.

Lenders say the study does not prove discrimination because it does not show why blacks are far less likely to get a loan - whether, for example, they have poorer credit ratings, less job seniority or higher debts.

The survey ″is not conclusive but does raise some concerns,″ said Rep. Alfred McCandless, R-Calif.

To dismiss the findings is to argue that ″blacks and Hispanics and Asians are irresponsible in the way they spend money,″ retorted Rep. Joseph Kennedy, D-Mass., whose legislation led to the study.

″It is clear that people are being discriminated against by most lenders based on color, ethnicity and where they live,″ said Rep. Kweisi Mfume, D- Md., who is black. ″It is real. I know it firsthand.″

William Brown, a St. Louis data-management technician, said he had to go to five lenders before he could obtain a mortgage, despite a perfect credit rating and having held the same the job for 20 years with a current salary of $30,000.

″If I were white, I believe it would have been easier,″ said Brown, who is black.

″Banks just don’t lend to blacks in South Central Los Angeles,″ said Mathabo Kunene, whose husband is a UCLA professor.

Joan Cadigan of Continental Bank in Norristown, Pa., which makes a special effort to reinvest in the community, said the bank’s own record in denying loans to non-whites is similar to the nationwide findings. ″While we do not consider this to be caused by racially discriminatory policies, we are concerned about this data,″ she said.

Warren Smith, president of black-owned Boston Bank of Commerce, said his bank turned down 46 percent of black mortgage applications and 36 percent of those filed by whites.

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