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HUD Archives: News Releases

HUD No. 98-107
Further Information:For Release
In the Washington, DC area: 202/708-0685Tuesday
Or contact your local HUD officeMarch 10, 1998


ASHINGTON - Housing and Urban Development Secretary Andrew Cuomo today announced that HUD will investigate the problem of mortgage lending discrimination in America's cities, in a move to increase urban and minority homeownership.

The announcement follows last week's highest settlement on record of mortgage discrimination allegations under the Fair Housing Act. HUD helped negotiate the settlement with three lenders, who agreed to make nearly $1.4 billion in home mortgage loans and spend $6 million on a broad range of programs to increase homeownership by low- and moderate-income families and minorities over the next three years.

HUD's investigation of lending discrimination is a response to calls by the U.S. Conference of Mayors, The National Conference of Black Mayors, the National Association of Real Estate Brokers, the Congress of National Black Churches, and 100 Black Men of America, Inc. for such a probe, as part of an effort to close the "homeownership gap" that divides suburbs from cities and whites from minorities.

"The homeownership gap remains far too wide," Cuomo said. "It's time to move beyond talking about this serious problem and move forward more aggressively to solve it. All Americans - no matter where they live, no matter what their race or ethnicity - have a legal right under the Fair Housing Act to be treated equally when they apply for a home mortgage. We will ensure that this legal right is enforced."

Cuomo said HUD will closely monitor complaints of lending discrimination and use testing to ferret out unlawful practices that treat white applicants and minority applicants differently. The Secretary said HUD will issue a report later this year on the extent of mortgage lending discrimination, after completing its study of the problem around the nation.

According to the most recent data from the U.S. Census Bureau, in 1997 the nation's homeownership rate hit a record high of 65.7 percent. However, while the homeownership rate was 72.5 percent in suburbs last year, it was only 49.9 percent in cities, where low- and moderate-income residents and minorities are disproportionately concentrated. The data show that the homeownership rate last year was 72 percent among whites, but only 45.4 percent among African Americans and just 43.3 percent among Hispanics.

A U.S. Conference of Mayors report issued Feb. 23 , titled "America's Homeownership Gap," said statistics collected by the Federal Reserve Board show that "minority households applying for mortgage credit were much more likely to be rejected than white households with similar income." For example, the data showed that only 10 percent of white applicants with incomes between 100 and 120 percent of the area median are denied conventional mortgages. The denial rate for Hispanics with the same income range jumps to 19.6 percent, and more than doubles to 22.8 percent for African Americans.

The Fair Housing Act bars housing discrimination on account of race, color, religion, sex, disability, family status and national origin. The Act covers the sale, rental, financing and advertising of almost all housing in the nation.

"Our goal is simple justice for minority and other urban families, as well as bringing our diverse nation together as part of President Clinton's One America Initiative," Cuomo said. "We must end all forms of illegal housing discrimination - including mortgage lending discrimination - if we expect to become One America not just in rhetoric but in reality."

The need for a comprehensive study of mortgage lending discrimination was discussed at a HUD-funded conference held Friday at the Urban Institute in Washington. The conference looked at the issue of testing for racial and ethnic discrimination in housing, employment, business development and consumer goods and services.

One of the participants in Friday's conference was Christopher Edley, a Professor of Law at Harvard Law School and the Kennedy School of Government who is also an adviser to President Clinton on the President's Race Initiative. Edley said: "A comprehensive study in this area (mortgage lending discrimination) is long overdue. It would be part of the picture of where America is on the challenges of color."

Another participant in the Friday conference was John Yinger, Professor of Economics and Public Administration at Syracuse University and an expert on housing discrimination. He said: "The evidence we have suggests continuing and extensive discrimination in mortgage lending. This and other forms of housing discrimination have a profound impact not only on housing and homeownership opportunity, but on access to jobs, good schools, and safe neighborhoods."

HUD began a stepped-up campaign against all forms of housing discrimination in September, at President Clinton's direction. Cuomo pledged to double the number of enforcement actions HUD takes against violations of the Fair Housing Act.

The President's proposed 1999 federal budget seeks $22 million in increased funding for HUD to intensify the fight against housing discrimination through increased testing and other actions. The 73 percent increase for HUD's Office of Fair Housing and Equal Opportunity would boost spending by the office to $52 million.

Cuomo said another budget proposal that can have a dramatic effect on the number of homeowners in America's cities is the President's request to increase the limit on mortgages insured by the Federal Housing Administration from just $86,317 in most areas of the nation to a new nationwide maximum of $227,150. The initiative will help an estimated 3 million more families qualify for FHA mortgages in the next five years.

The higher loan limits will particularly benefit Americans traditionally underserved by mortgage lenders. For example, over 70 percent of FHA home loans go to first-time homebuyers - the group of homeowners that has the most difficulty coming up with mortgage downpayments. In addition, FHA disproportionately serves minorities, inner city residents, single heads of households and others who have the most difficulty qualifying for mortgages and have the lowest homeownership rates.

The U.S. Conference of Mayors said in its report on the homeownership gap: "Despite a dramatic surge in the nation's homeownership rates, academics and housing experts continue to document discriminatory lending practices in inner cities today. The long and infamous history of housing and lending discrimination in this country scarred the lives of millions of families seeking to realize the dreams and aspirations of all Americans - to own a home. Unfortunately, such practices remain with us, in the form of urban redlining, mortgage steering, and other discriminatory actions.... The denial of mortgage credit does more than limit the homebuying aspirations of families, it limits efforts to revitalize urban areas."

In responses to the U.S. Conference of Mayors report:

  • Mayor Emanual Cleaver of Kansas City, MO, President of the National Conference of Black Mayors, said: "The denial of mortgages to inner city residents - more specifically minorities - is not only illegal, but it cripples efforts to revitalize communities where our people live in the inner cities. NCBM calls on the Justice Department and the Department of Housing and Urban Development to launch a thorough investigation into banks and other institutions that evaluate and provide mortgages."

  • The National Association of Real Estate Brokers, Inc., a predominantly African American group, said in a statement: "The recent report by U.S. Conference of Mayors documenting a homeownership gap between cities and suburbs is another sign that discrimination is alive and well, and that we need to do more to defeat the ugly forces that are perpetuating racial inequality in this country."

  • Dr. Wallace S. Hartsfield, Chairman of the Congress of National Black Churches, said: "Banks and institutions that evaluate and provide mortgages must be investigated and where violations are found, we want prosecutions."

  • Thomas W. Dortch, Jr., President of 100 Black Men of America, Inc, said: "It is shameful that in 1998 a family living in America still cannot pursue the American Dream - not because of finances, but because of the color of their skin. This is an outrage."

Cuomo announced Thursday that three lenders have agreed to make $1.37 billion in home mortgage loans and spend $6 million on a broad range of programs to increase homeownership by low-and moderate-income families and minorities over the next three years. More than 20,000 low- and moderate-income and minority families are expected to receive home mortgages as a result of the agreement.

The lenders and the amounts of mortgage loans and spending on homeownership programs they will make to benefit low- and moderate-income and minority homebuyers are:

Temple-Inland Mortgage Corp. $1.35 billion $3.3 million
Banc One Mortgage Corporation $10 million $493,000
Overton Bank and Trust $9 million $2.3 million

The total commitment reflected in the Temple-Inland agreement is largest of any such settlement reached under the Fair Housing Act.

The three lenders committed to the agreements after the Fort Worth Human Relations Commission filed fair lending complaints with HUD under the Fair Housing Act, based on testing results alleging unlawful discrimination. The Texas Human Rights Commission joined HUD and the Fort Worth Human Relations Commission in reaching the agreements with the lenders. The agencies made no finding that any of the three lenders who reached the agreements violated any law. All three lenders denied discriminating.

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