Unfair Housing Acts

By Bovard, James | The American Spectator, April 1999 | Go to article overview
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Unfair Housing Acts

Bovard, James, The American Spectator

HUD is shaking down lenders for billions of dollars in settlements on specious grounds of racial discrimination, all to ustify government as the last line of defense against moral barbarism.

It was the kind of triumphal photo-op that the embattled president needed. On January 18, Martin Luther King Day, President Clinton was "pleased to announce" the largest-ever settlement for a home-lending discrimination suit. "The Columbia National Mortgage Company will offer-listen to this-$6.5 billion in home mortgages and extra effort to help 78,000 minority and low- and moderate-income families unlock the door to home ownership," the president boasted. The same day, at King's old church in Atlanta, Housing Secretary Andrew Cuomo also touted the settlement: "If companies know we're going to enforce the law, you'll see more compliance. And $6.5 billion says we're going to enforce the law."

There was just one problem. The entire settlement was a sham.

It wasn't the first time-and it likely won't be the last-but Columbia National's ordeal illustrates this administration's idea of fairness when it comes to faceless, private corporations: wild accusations and record settlements, all to convince voters that the federal government is the sole force preventing America from slipping into moral barbarism. And all in the name of correcting "racist" practices that never existed in the first place.


The Columbia National case began in 1996, when the Fort Worth Human Relations Commission received a $100,000 grant from the Department of Housing and Urban Development to send pairs of testers-each pair comprising a white and minority loan "applicant"-to investigate possible fair-housing violations by mortgage companies. Three pairs went to a Columbia National office.

The first two pairs found no problems, but the third uncovered sufficient discrimination to alert HUD: The white male tester spent an hour with a female loan officer, while the Hispanic male tester spent only 20 minutes with a male loan officer. According to the commission's report, the loan officer who saw the Hispanic male, after shaking his hand, "excused himself to use the restroom. About two minutes later, he retumed from the restroom and the interview began." The report concluded that there were no "extenuating circumstances" to justify the interruption, and the subsequent $6.5 billion "settlement" could make this the most expensive bathroom break in history. (Never mind that the white male tester waited five minutes to see his loan officer.)

The official settlement from HUD stated the department's grave concern about an alleged difference "in the level of encouragement given to apply for a loan" between the Hispanic and white applicant. The Columbia National officer did seek to prequalify the Hispanic for a mortgage, providing him with a loan application and his business card. But HUD judged that the difference in the time the loan officers spent with the two applicants was conclusive proof of wrongdoing.

The department later admitted that the two testers gave different information. The Hispanic, for instance, claimed to have less personal savings than did the white tester. Neither would provide his Social Security number or an address, nor did either allow the loan officer to pull his credit reports. Columbia National CEO Dave Gallitano noted that such conduct "is very unusual. It would result in a good sales person spending time with them-being courteous-but they will not spend a huge amount of time because it is not an application yet."

Nevertheless, White House and HUD press releases on the case implied that the company was being fined $6.5 billionlargely for a 4o-minute differential in interviews for a single pair of people. That's over $150 million per minute.

A HUD official involved in the case, speaking on condition of anonymity, says that "no formal investigation was ever completed; therefore, there was no formal finding one way or the other.

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