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Mortgage rejections for blacks still high

Despite a crackdown by the Clinton administration, mortgage lenders continue to reject black applicants more than twice as often as whites with similar incomes, a regulatory report said Wednesday.

Banks, savings institutions and credit unions turned down 34 percent of mortgage applications received from blacks, 27.8 percent from American Indians, 25.1 percent from Hispanics, 15.3 percent from whites, and 14.6 percent from Asians, according to the survey for 1993.

As in past years, the disparity in rejection rates for whites and blacks remained wide even when the data was adjusted for income.

This is the fourth year the survey has been released by the Federal Financial Institutions Examination Council, a coordinating body for five federal regulatory agencies.

The rejection pattern in the latest report was little different from the first year, when 33.9 percent of blacks were turned down, 22.4 percent of American Indians, 21.4 percent of Hispanics, 14.4 percent of whites, and 12.9 percent of Asians.

For low-income applicants _ those with less than 80 percent of the median income in their areas _ the rates were: blacks, 32.3 percent; Hispanics, 28.6 percent; American Indians, 27 percent; whites, 19.3 percent; and Asians, 16 percent.

Rejection rates for applicants earning more than 120 percent of the median income were: blacks, 18.2 percent; Hispanics, 17.1 percent; Asians, 13.7 percent; American Indians, 13.6 percent; and whites, 7.9 percent.

Donald G. Ogilvie, executive vice president of the American Bankers Association, said the figures were "at best a flawed measure" of his industry's commitment to fair lending. Although the report groups applicants by income, it does not take into account such factors as applicants' previous indebtedness and credit record. A bad credit history or no credit history is the most frequently cited reasons for loan denials, according to the report.

However, he pointed out that despite the still divergent rejection rates, the actual number of applications and approved loans increased more quickly for blacks and Hispanics than for whites. He attributed that both to efforts by bankers and to low interest rates in 1993, which made home purchases more affordable for first-time buyers.

The association is getting ready to send each of its members a "Fair Lending Toolbox," with information on how to improve their lending records.

Allen Fishbein, general counsel of the Washington-based Center for Community Change, which provides advice and assistance to non-profit community groups, said lending institutions as a whole appear to be making some progress but many still had very poor records.

"Just like politics, all lending is local," he said. "Too many (lenders) still view this as a public relations problem rather than a need for a substantive fundamental change in the way they do business."

He praised the Justice Department, which in August secured an agreement from Chevy Chase Federal Savings Bank to invest $11-million in black neighborhoods in the District of Columbia, and which is investigating Florida's largest bank holding company, Jacksonville-based Barnett Banks Inc.

However, he said the bank regulatory agencies appear to be retreating from the Clinton administration's earlier promise to toughen enforcement of the Community Reinvestment Act of 1977, which requires financial institutions to lend in poor and minority neighborhoods.