Magazine article Black Enterprise

Study Cites Loan Bias

Magazine article Black Enterprise

Study Cites Loan Bias

Article excerpt

A Federal Reserve Board report on mortgage lending shows that blacks are twice as likely as whites to have their mortgage applications rejected by banks and other lending institutions. The study, released last October, highlights the problem of discrimination in lending at a time when banks are seeking interstate banking powers. Community activists, who have alleged discrimination in lending for years, are using this new data to stop banks from expanding unless they agree to greater compliance with the Community Reinvestment Act (CRA).

The study reviewed 6.4 million loan-application records from 9,281 lending institutions nationwide. It revealed that in 1990, 33.9% of black applicants were denied conventional mortgage loans, as compared to 14.4% of white applicants; and 26.3% of blacks were denied government-backed mortgage loans, as compared to 12.1% of whites. In general, the lower the income, the lower the acceptance rate. About 25% of all black applicants fell into the low-income category.

"This [level of disparity] makes it much harder for the Fed to dismiss allegations of discrimination," says Steven Kest, executive director of the Association of Community Organizations for Reform Now (ACORN), an organization that encourages lending to low-income residents.

ACORN played a vital role in several bank mergers in 1991. It was instrumental in Atlanta-based C&S/Sovran Corp.'s 10-year, $10 billion community lending agreement that was reached last August after it announced its merger with NCNB Corp. …

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