Magazine article Mortgage Banking

The Big Picture

Magazine article Mortgage Banking

The Big Picture

Article excerpt

The February 7 Mortgage Bankers Association of America (MBA) forum held in Washington, D.C. at Howard University was beamed to more than 300 colleges and universities throughout the United States via satellite closed-circuit television. The forum relied on a complex web of high-tech communications facilities to explore an arguably even more complex topic--fair lending.

But in the course of that forum's heavy focus on mortgage discrimination it occurred to me that racial bias is only one aspect of the many issues involved in fair lending. So why does it get all the attention? To focus on it alone, to the exclusion of the other interrelated issues, misses a chance to capture the full extent of the problem in a genuine attempt to get at real solutions.

Howard Carey, president and CEO of Neighborhood House Association of San Diego and a panelist involved in a smaller discussion group at the University of San Diego immediately after the viewing of the Howard forum, stated, "The first step to solving a problem is to admit it exists." However, the real problem is in defining "it" when you are talking about fair lending practices.

The subject of fair lending covers a very broad spectrum of issues. "Low income" as defined by HUD includes a major segment of our population of every race and color. Many single-parent families, teachers, social workers, nurses, police, to mention just a few, aren't earning enough to get above the low-income designation and can't qualify to buy a home. Many young married couples (of all races) just getting started also are in the "low-income" category.

When it comes to housing in America, less than 50 percent of the population can qualify to purchase a new home under the traditionally accepted lending guidelines that apply today. This is the issue. This is the "it" when we define the problem of fair lending.

Our industry is now in the midst of what appears to be a full-scale government crackdown aimed at eradicating mortgage discrimination or even what appears to be bias in home lending. This powerful campaign waged by the federal government involves new rules being written and pressures being brought to bear to change the underwriting of mortgage loans without significant regard for the longer term consequences, or, for that matter, without really understanding what the true nature of the problems are.

What might seem obvious to those of us who understand the intricacies of the mortgage process, and the need, as well as the knowledge of how to establish a good credit history, is, to many of the coming generation of borrowers a complete mystery.

A minority housing consultant and a former minority employee with a mortgage servicing company who attended the Howard forum had this to say: "Given |the~ discriminatory practices pervasive throughout an industry that soon will have mostly minorities as its customers, it is either ignorance or indifference that seeks to sustain "business as usual" in mortgage lending.

"Reluctance on behalf of the fair lending forum panelists even to speculate whether race discrimination in lending will be eliminated by the year 2000 is evidence of this. The industry and |this~ emerging market requires more than the hiring of minority field representatives and the offer of new buyer counseling and loan programs."

Her prescription for what the industry needs to do to correct these problems includes the following: minorities must become part of management and policy making; current decision-makers need the same sensitivity training they now require of their loan officers; minority Realtors and grass-roots community-based leaders must be consulted for product and program development to have successful market penetration; and proactive strategies must be developed to prevent common obstacles to minority homeownership, such as credit glitches and other evidence of less-than-sound personal financial management.

Clearly there are different perceptions of the problems that have kept the mortgage industry from better serving every creditworthy borrower regardless of race or income. …

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