Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, October 15, 1995 TAG: 9510130022
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
That's the law saying banks cannot discriminate on the basis of race or income in granting mortgages and loans. Further, the banks must spend money in low-income and minority neighborhoods.
The act means regulators have the power to deny mergers between banks, halt plans for opening branches and other moves if they find those banks have violated the law.
Needless to say, many bankers jump through hoops trying to please the regulators.
And although most banks in the Roanoke market have a "satisfactory" or "outstanding" designation from the federal government for their records of compliance, two banks with offices in Roanoke face problems from sources other than regulators.
Activist groups, which have long taken pot-shots at virtually every bank seeking some kind of expansion, are engaging in more serious attacks.
One of those banking companies is Charlotte, N.C.-based NationsBank Corp., which has an outstanding rating from regulators for its compliance with the Community Reinvestment Act.
Yet, a civil rights group last month filed a class action civil lawsuit in Washington, D.C., that charges NationsBank with intentional discrimination against mortgage applicants who are black.
The suit, brought in the name of about 600 black applicants, seeks compensatory and punitive damages that could cost NationsBank tens of millions of dollars if the bank should be found at fault.
The suit was filed by the Washington Lawyers Committee for Civil Rights and Urban Affairs, the same group that last year won a $45 million civil settlement from the Denny's restaurant chain on charges of racial discrimination. The group is actively seeking to enroll more plaintiffs in the effort against NationsBank.
Promising to file suits coast to coast, the committee accused NationsBank of treating black applicants different from white applicants with similar incomes, debt ratios and credit histories. The group contends NationsBank has the worst fair-lending record in the Washington area.
The second company facing such moves is First Union Corp., which has a proposed merger pending with First Fidelity Bancorp. of Newark, N.J. First Union, also based in Charlotte, has a "satisfactory" rating for its Virginia, Washington and Maryland banks, all administered from Roanoke.
Last month, the Neighborhood Assistance Corp. of America asked the Federal Reserve Board to reject the First Union-First Fidelity merger and hold hearings on First Union's compliance records. The Inner City Press/Community on the Move organization filed a similar protest.
Indeed, the latter group has attacked First Union's flank, opposing as well First Union's proposed merger with the Raleigh (N.C.) Federal Savings Bank and its 34 branches. First Union's operations in North Carolina received an "outstanding" rating for compliance with the federal anti-discrimination law.
Among the many allegations in its 11-page press release concerning the Raleigh bank, Inner City Press/Community on the Move said First Union received 16 more applications from whites than from blacks in the Roanoke metropolitan area. It alleged that First Union denied black applicants three times more frequently than it did whites.
Inner City Press/Community on the Move, which is based in the South Bronx area of New York City, recently sent shock waves through the banking industry by filing both state and federal civil suits aimed at stopping the purchase of Home Savings of America's New York branches by GreenPoint Financial Corp. The suits failed quickly only because they were brought just as the merger became effective.
Like all businesses, banks fear civil lawsuits, particularly in larger cities, because of the tremendous time and expense involved in the legal discovery process and of hearings.
NationsBank promised to "fight these baseless charges." Citing its ratings and its three-year record of $85 billion in Community Investment lending, Cathy Bessant, the bank's community investment executive, said such suits "only discourage progressive lenders from expanding outreach to minority and low- and moderate-income customers."
Bessant said the lawsuit relied on discredited figures for denial rates and a misleading indicator of activities in fair lending.
"Why should a bank cast a very wide net to attract borrowers - which will obviously result in a number of denials for sound business reasons - if the end result is to be the target of groundless accusations of discrimination?" Bessant asked. "This hurts underserved neighborhoods and the industry overall."
She said NationsBank ranks second in the nation in the amount of credit extended to minority borrowers, while its growth rate for applications from blacks was 3.5 times greater than for non-minorities from 1992 to 1994. Growth rates for actual loans to minorities was five times greater and reached the national level in nearly all its markets.
Jan Boylston, another spokeswoman for the bank, said the Public Broadcasting System featured NationsBank prominently in a report by Hedrick Smith on efforts to develop the Anacostia neighborhood in Washington. Called "Across the River," the report will be presented at 9 p.m. Nov. 24 on Roanoke station WBRA-TV.
Jane Henderson, community reinvestment officer for First Union's Virginia, Washington and Maryland banks, said that bank had pledged to spend $200 million in community development loans in Washington and has already devoted $113 million to the cause.
And First Union also opened a branch in Anacostia, a low-income, minority area, the first new office in such a neighborhood in Washington.
As to the figures on Roanoke mortgages from Inner City Press/Community on the Move, Henderson said the Roanoke metropolitan area is only 13 percent to 14 percent minority so it is natural that most mortgages will go to white applicants.
It's true, she said, that denial rates for blacks are higher, but First Union tries to reach all segments of the market. She said denial rates do "not tell the whole story," because denials are based on credit histories and debt ratios.
In the inner city areas of Roanoke City, she said, First Union had $141 million in outstanding loans, including about 1,200 mortgages, 11,600 consumer loans and some small business lending.
Henderson chronicles a long list of projects in which the bank has participated in housing and other community improvements. And Henderson and First Union won one of the governor's housing achievement awards last year on the basis of the bank's commitment of more than $6 million that helped to provide nearly 850 affordable apartments and houses in cities and towns in Virginia.
Another First Union program offers "micro-lending" programs to entrepreneurs who need loans of $1,000 to $25,000 to launch a small business.
Ben Jenkins, president of the three Roanoke-based FIrst Union banks, said the company incorporates fair lending practices into employee orientation sessions and regularly holds diversity workshops for its workers. The bank, he said, sends employees into all communities to look for potential borrowers.
"Reaching out into the community to meet and anticipate banking needs of all types is the best way to build good will - and good business," Jenkins said.
by CNB