Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own - efforts to impose regulations on banks to make loans even if applicants are not creditworthy

The Clintonites go out of their way to gloss over the real agenda at work in the mortgage crackdown; they insist they would prefer the voluntary cooperation of mortgage lenders and that enforcement is only a last resort. Inside the velvet glove, however, is an iron fist. Miss Reno testified that many banks and thrifts have told her they want to lend more to minorities but have been unable to do so. These benighted institutions must be "educated," she says, in how to recognize discrimination in their own lending practices. It's so subtle and insidious, she explains, that the lenders do not see it themselves.

'Subtle Discrimination'

MISS RENO, like other mortgage militants, believes banks discriminate by such means as telling white applicants how to correct their applications so as to get loan approval, but not telling black applicants. The authors of the controversial Boston Fed study concur. The truth is, however, that most banks now routinely review all rejected minority applications, sometimes passing the loan file to the president's office. The Consumer Bankers Association has found that 88 per cent of banks responding to its annual "affordable housing" survey now automatically review all mortgage rejections.

HUD is also enrolled in the battle to ferret out "subtle discrimination." For now it is concentrating on a group of lenders known as "mortgage bankers," who are not covered by the Community Reinvestment Act. Mortgage bankers do not take deposits and do not hold mortgages in their own portfolios, as banks and thrifts sometimes do. Instead, they sell all their mortgages to investors in the secondary market. These firms are not closely regulated like banks and thrifts; they are therefore not hampered in reaching less profitable markets by the high cost of regulation, and so can be far more aggressive in filling in the gaps in the mortgage market. Ironically, therefore---in view of HUD's targeting them--mortgage bankers originate 80 per cent of government-guaranteed Federal Housing Authority (FHA) loans, which disproportionately benefit minorities.

The HUD crackdown on mortgage bankers is being administered by Assistant Housing Secretary Roberta Achtenberg, who before being tapped for the Clinton Administration gained fame in San Francisco for pressuring big corporations to stop funding the Boy Scouts. She has hired an independent testing firm that has been for several months sending out phony black, white, Hispanic, and AsianAmerican mortgage applicants to see if minorities are treated differently from whites. If a single loan officer or other employee in any way treats a single black applicant less favorably than a white applicant, then it can be considered a case of discrimination. Discrimination can be something as simple as not smiling at the black tester, having smiled at the white one.

Miss Achtenberg has considerable leverage against mortgage bankers, since HUD oversees the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Home Association (Fannie Mae), two government-sponsored private enterprises which buy mortgages from mortgage lenders and sell them to investors in the secondary market. If HUD denied a mortgage banker the right to sell its mortgages to Freddie Mac or Fannie Mae, that would force the banker out of business.