The president of the Mortgage Bankers Association said the group is committing itself this year to increasing lending to low- and moderate-income home buyers.
Stephen B. Ashley, president of the Mortgage Bankers Association, said association members had improved lending efforts among minorities and low-income groups in 1993, with loans to Hispanics increasing by 60,000 over 1992 and mortgages to African-Americans showing about the same increase.
“Our group is committing itself to a major fair-lending effort this year,” Ashley told a meeting of regional mortgage bankers at the Taj Mahal Resort-Casino here.
The fair-lending proposal urges members to hire more minority staff members, increase outreach to low- and moderate-income neighborhoods and provide sensitivity training to employees.
Ashley said that “change is an opportunity to be welcomed” in an industry that expects business to decline from a record $1.3 trillion in 1993 to just under $800 billion this year.
A decline in business is expected primarily because interest rates have begun rising from 20-year-lows, reducing the numbers of people who want to refinance their mortgage.
Last year, refinancings accounted for 50 percent of all mortgages issued, said Leland Brendsel, chairman and chief executive officer of the Federal Home Loan Mortgage Corp., also known as Freddie Mac.
He said refinacings were expected to make up 25 percent to 30 percent of all mortgages issued in 1994. He attributed that decline to a one percentage point jump in the average rate for 30-year fixed rate mortgages, which, according to Freddie Mac, rose from a 25-year-low of 6.74 percent in October to 8.5 percent recently.
Mortgage bankers are hoping to capitalize on the growing effort to bring more low- and moderate-income first-time buyers into the market.
Ashley said the mortgage bankers association was recommending that each of its members consider acting on a number of proposals to increase lending levels among minorities and low- and moderate-income buyers. Among them:
– Developing second-consideration criteria for loans that have been denied.
– Providing mortgage counseling to those whose loans have been denied so they can later try again.
– Developing a self-evaluation system.
Ashley said that mortgage bankers should ensure that they are serving all areas of the market and every neighborhood.
“Bias seems to be occurring because of the flexibility of the underwriting guidelines,” said Paul Hancock, chief of the civil rights division of the U.S. Department of Justice.
“On the other hand, a Federal Reserve Bank of Boston study in 1992 found that 80 percent of those who seek mortgages are marginally qualified for them,” he said.
“So the guidelines can’t be rigid. To make the loans, the loan officers have to be flexible.”
