THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: THURSDAY, June 16, 1994 TAG: 9406160484
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: By TOM SHEAN, STAFF WRITER
DATELINE: 940616 LENGTH: Long
In a report of its lending activity in minority and low-income communities, NationsBank said the disparity in rejection rates between black and white applicants seeking home loans in the region continued to widen in 1993.
{REST} For black applicants, the rejection rate rose to 30.9 percent last year from 29.9 percent in 1992, according to figures compiled by the Richmond-based unit of NationsBank Corp. In 1991, NationsBank turned down only 16 percent of the African-American applicants seeking home loans in South Hampton Roads.
For black applicants, the 1993 rejection rate was almost twice the 15.8 percent denial rate for NationsBank's white applicants.
The NationsBank figures and rejection rates include applications for home equity lines of credit when the applicant said the funds would be used for home improvements. However, the figures do not include refinancing of existing-home loans.
NationsBank, the region's largest bank, also disclosed this week that its lending in low- and moderate-income neighborhoods of South Hampton Roads plunged 42 percent last year.
William L. Rueger, NationsBank senior banking executive in South Hampton Roads, said he was surprised by the growing disparity in rejection rates for home-loan applicants because the bank had stepped up its efforts to reach prospective borrowers in the African-American community.
NationsBank officers, he said, have met more frequently with local community leaders and have conducted more consumer-education programs in minority communities in recent years.
The higher rejection rate for blacks seeking home loans from NationsBank last year was accompanied by an 18 percent falloff in loan applications from African-Americans in the region.
Letitia Batey, NationsBank community investment coordinator in South Hampton Roads, attributed the decline in applications partly to wariness among some black consumers about taking on greater debt in an uncertain economic climate.
Greater competition among mortgage lenders in the region also contributed to the reduced number of black applicants at NationsBank, she said.
Willard E. Pretlow, fiscal officer of the Urban League of Hampton Roads in Norfolk, said the higher rejection rate for blacks seeking home loans from NationsBank probably was due to the weak credit histories of some applicants and to job losses in the local black community.
``Many persons (with personal bankruptcies or creditors' judgments) apply for a loan and expect to get it, not knowing that the numbers just don't work,'' Pretlow said.
Also, he added, ``Many applicants need some financial education prior to the loan process.''
During the past year, the Urban League in Hampton Roads and 17 other metropolitan areas have formed loan review boards to examine home-loan applications that NationsBank has turned down. Since April, the local Urban League review board has scrutinized two loan applications, and in each case the board agreed with NationsBank's decision, Pretlow said.
Disparities between the rejection rates for white home-loan applicants and black applicants have generated accusations of racial bias by banks and other mortgage lenders.
In response to heightened concern in Congress about the availability of credit for minority borrowers, the Clinton administration has been revising community-reinvestment rules for banks, thrifts and other mortgage lenders.
In addition to reporting a wider disparity between the rejection rates for white applicants and black applicants, NationsBank said its overall lending to low- and moderate-income neighborhoods in South Hampton Roads plunged 42 percent last year to $16.62 million from $28.64 million in 1992.
Many creditworthy consumers and small businesses in the region have postponed borrowing and apparently are waiting to determine the impact that cutbacks in defense spending might have, said Rueger, the NationsBank senior banking executive.
NationsBank's annual lending report evolved from the company's promise to lend $10 billion over 10 years to members of minority groups and to neighborhoods that had not been adequately served by banks.
When their merger application was attacked by community organizations and housing advocacy groups in 1991, the predecessor companies of NationsBank said the new institution would make $10 billion available to consumers, small businesses, non-profit groups and public-private partnerships in low-income areas.
Throughout its nine-state market, NationsBank made $2.9 billion of these loans last year, a 32 percent increase from $2.2 billion of loans in 1992, Rueger said.
``The $10 billion is not a ceiling,'' he said. ``If we can lend $20 billion by the end of the decade, we will.''
NationsBank's latest breakdown of its home lending in Hampton Roads by racial groups included a few positive developments, including reduced rejection rates for Hispanic applicants and for members of other minority groups.
The bank's denial rate for Hispanic applicants in the region dropped last year to 14 percent from 20 percent in 1992, while the rejection rate for members of other minority groups fell to 19 percent from 43 percent in 1992.
However, the 14 loan applications from Hispanics and the 47 applications from members of other minority groups accounted for only a fraction of the 1,429 home-loan applications that NationsBank received in South Hampton Roads last year.
{KEYWORDS} MINORITY DISCRIMINATION
by CNB