THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, December 1, 1995 TAG: 9512010215
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MIKE KNEPLER, STAFF WRITER
DATELINE: HAMPTON LENGTH: Medium: 81 lines
Low-income home-buyers will fare better from creative and mutually beneficial partnerships between banks and nonprofit community groups than from increased government regulation and spending, Lawrence B. Lindsey, a Federal Reserve governor told a statewide housing conference here on Thursday.
``Success in the future is going to involve much more partnering between institutions and groups who have different talents and assets to bring to the table,'' Lindsey told the the gathering of housing activists, businessmen and government officials.
He also reported a rise in housing opportunities for minorities and low-income people. He attributed the trend to reduced inflation, lower mortgage rates and the spread of community-based partnerships.
``There has been a dramatic trend toward the democratization of credit and consequent access to homeownership opportunities,'' Lindsey said. ``Individuals with relatively modest incomes and individuals from minority ethnic and racial backgrounds have never had greater access.''
Blacks saw a 54.7 percent rise in their ability to get conventional home purchase loans between 1993 and 1994; there was a 42 percent increase among Hispanics and 15.7 percent boost for whites, he said.
But political posturing in Washington over the national budget and community banking laws could hurt interest rates and other ingredients necessary for continued increases in homeownership rates.
In an impromptu news conference before addressing the conference, Lindsey said: ``I've got my fingers crossed . . . If we don't get a budget deal with substantial reductions in spending, I'm a little bit worried about the market backing up'' to higher interest rates.
``That would give us a very unpleasant 1996,'' he added.
Economists and Wall Street analysts have speculated that the Federal Reserve open market committee could lower interest rates at a Dec. 19 meeting if the Clinton administration and Congress agree on a deficit-reduction package.
``I think that the sooner uncertainty is resolved, the better,'' he said. ``It depends on the patience and tolerance of the markets, and we'll have to wait and watch.''
Lindsey, concluding speaker at Virginia's eighth annual Governor's Conference on Housing, also voiced concern about political bickering over the federal Community Reinvestment Act, which was created to encourage banks to lend more money in low-income neighborhoods.
Reform efforts, he said, are snarled in a debate between advocates of more aggressive legislation and those pushing deregulation.
``The public does not benefit from periods of extreme policy activism followed by periods of neglect - hot, then cold regulation,'' he said. ``Public policy should be temperate, consistent and predictable . . . Inside the Beltway there aren't a lot of temperate people around.''
Instead, reform in community development, Lindsey said, should be guided by mutual recognition that banks and community groups can help each other.
Success in community reinvestment, he said, ``lies in the fact that many lending institutions have found the loans they have made to low- and moderate-income individuals quite profitable. Clearly the enormous increase in lending to these groups . . . during the 1990s would not have occurred . . . had financial institutions not considered it in their long-term interest.''
Meanwhile, community groups ``often have a keen insight into the types of investments which will prove profitable locally and the individuals who will be the best credit risks,'' he said, adding: The groups ``can become involved in the full cycle of lending,'' from working with potential buyers before they shop for a home, to guiding them through the lending process, to nipping problems that may cause them to lose their houses.
Lindsey also had advice for helping to rebuild blighted neighborhoods. He advocated a streamlining of municipal and state regulations that prevent reuse of abandoned property until old titles are cleared and all back taxes are paid.
``The exorbitant delays nationwide on the rapid transfer of title on abandoned properties, particularly in inner-city areas,'' Lindsey said, ``is a national disgrace.'' ILLUSTRATION: Color photo
Lawrence B. Lindsey said success is going to depend on partnerships
between institutions and groups.
by CNB