Mayor Seeks Law to Boost Home Loans for Minorities : Housing: Ordinance would force banks and thrifts to disclose lending practices. Survey finds wide disparities.

Saying minorities are not getting a fair share of home loans, Mayor Tom Bradley on Thursday unveiled a proposed ordinance requiring that banks and thrifts disclose their lending practices--and directing Los Angeles agencies to rank banks that compete for city deposits.

The announcement coincided with the release of a city-commissioned survey that revealed disparities in the number of home purchase and improvement loans in minority and non-minority neighborhoods.

“We found compelling evidence of widespread racially disparate lending in the city of Los Angeles,” said the survey conducted by USC and the Western Center on Law and Poverty. “. . . Banks and savings and loan associations make fewer and smaller residential loans in lower income and minority neighborhoods than in the city at large.”

According to the survey, the higher the proportion of white residents in a neighborhood, the more home loans the area receives. “Nearly $6 is loaned per building in predominantly white neighborhoods for every $1 per building in minority neighborhoods,” said the survey.

The 200-page report concluded that relatively low median incomes in minority neighborhoods did not influence the loan patterns. Even in neighborhoods with comparable income levels, more than twice as many loans are made per building in mostly white areas than in minority areas, the report said.

“There is no reason why one section of this city should not have the same access and opportunities for loans as some other part of the city,” Bradley said at a City Hall news conference. “This (ordinance) will help identify where the problems are and how we can adjust them.”

The proposal is to be introduced to the City Council today by Councilman Mark Ridley-Thomas, and Bradley has given the city attorney’s office 60 days to draft an ordinance.

The proposal would require that banks publicly disclose detailed information on their lending practices, including residential, consumer and commercial loans for each census tract. Federal law already requires banks to provide information on loans in poor neighborhoods, but Bradley said the proposed ordinance would require more detailed reporting.

The proposal also calls for creation of a system of ranking banks according to their lending performance whenever they seek a portion of the city’s estimated $11 billion in deposits.

“There will be no more business-as-usual in practices that essentially amount to redlining in the banking industry,” Ridley-Thomas said. “Those who wish to do business with the city will be able to do that with nondiscriminatory practices.”

The Bank of America, California’s largest bank, made 41 home purchase loans and Security Pacific made 19 such loans in all of South-Central Los Angeles in 1990, according to federal Home Mortgage Disclosure Act data. By comparison, Bank of America made 191 loans in the 11th Council District on the Westside of Los Angeles, and Security Pacific approved 70.

John Keane, a spokesman for the Bank of America, acknowledged that “we are not happy with our numbers generally and we are taking steps to improve them.”

He added, however, that “if we have turned down loans, they were turned down for good reasons, credit history or other reasons.”

Comment from Security Pacific was not immediately available.

To increase the availability of credit to low-income and minority customers, Bank of America recently developed new criteria for reviewing loan applications and stepped up recruitment of minority loan officers, Keane said.

The bank also established a special program to review property appraisals in South-Central Los Angeles, including an “appraisal ombudsmen” to review loans turned down based on the appraisal of a property. The ombudsman may overrule a field appraiser, bank officials said.

The survey conducted by Gary Dymski and John Veitch, both assistant professors of economics at USC’s College of Letters, Arts and Sciences, was based on data collected from more than 200 Los Angeles banks, thrifts and credit unions between 1981 and 1989, including more than 300,000 loans involving 743 census tracts.

The economists said consequences of making fewer loans to low-income and high-minority neighborhoods range from “ghettoization” to denying entire populations access to home ownership.

These racial disparities, however, do not occur in Asian-American neighborhoods, the researchers found.

“This may be because loans are coming from Asian-owned banks,” the report said, “or because Asian-Americans are perceived to be better credit risks than African-Americans or Latinos.”

For many black and Latino residents of Los Angeles, however, the situation means “that the traditional avenue by which lower income Americans accumulate wealth--through the equity in their homes--is closed,” according to the report.

The report said the findings are especially troubling in light of the city’s housing crisis because they imply that “neighborhoods with many African-American and Latino residents, regardless of those residents’ average incomes, are being shut out of the financial market for home purchase and home improvement loans.”

This year, only 13.7% of all the families in the city could afford to purchase a home in Los Angeles, where the average home costs $224,000. That figure compares with a national average of $90,000.

Minority organizations praised the proposal, which is designed to force banks to open their windows to minorities and improve financial services in neighborhoods where loan institutions are scarce but check cashing businesses proliferate.

In South-Central Los Angeles, for example, there are 18 bank branches and 133 check cashing centers.

City Councilman Mike Hernandez, whose 1st Council District is among the poorest in the city with an average annual family income of $13,000, said, “Public disclosure of lending practices will allow us to know whether these institutions are treating everyone equally, and which areas they have to balance.”