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F ederal R eserve Bank OF DALLAS ROBERT D. M c T E E R , J R . PRESIDENT AND CHIEF EX ECUTIVE O F FIC E R DALLAS. TEXAS 7 5 2 2 2 June 11, 1993 Notice 93-63 TO: The Chief Executive O f fic e r of each member bank and o th er s concerned in the Eleventh Federal Reserve D i s t r i c t SUBJECT Joint Agency Letter Regarding Discrimination in Lending DETAILS To address the concern t h a t some minority consumers and small business owners are experiencing d isc rim in a tio n by len d er s, federal bank and t h r i f t supe rv is ors are r e i t e r a t i n g t h e i r commitment to e f f e c t i v e enforcement of f a i r lending laws and are urging banks and t h r i f t i n s t i t u t i o n s to incr ease t h e i r f a i r lending a c t i v i t i e s . In a l e t t e r to a l l banks and t h r i f t s , the heads of th e four agencies said t h a t d is c ri m i n a t io n s t r i k e s a t a basic t e n e t of a f r e e market system: equal opportun ity f o r a l l to gain access to bank s e r v i c e s . The l e t t e r s t a te d t h a t the r e g u l a t o r s expect a ll f in a n c ia l i n s t i t u t i o n s to do t h e i r p a r t to design programs to ensure access to c r e d i t on a non- discriminatory b a s i s . The l e t t e r urged special a t t e n t i o n to 11 s p e c i f i c f a i r lending a c t i v i t i e s , including enhanced employee t r a i n i n g , in t e r n a l second review programs f o r loan a p p lic a tio n s t h a t might otherwise be denied, p a r t i c i p a t i o n on m u l t i - l e n d e r mortgage review boards, and a f f ir m a tiv e marketing and c a ll programs. ATTACHMENTS A copy of the a gencies’ l e t t e r and a copy of the suggested f a i r lending a c t i v i t i e s are attach ed . MORE INFORMATION For more information, pleas e co ntact Dean Pankonien a t (214) 922-6154. For a dditional copies of t h i s Bank’ s n o t i c e , please co ntact the Public A f f a i r s Department a t (214) 922-5254. Sin cerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) May 27, 1993 TO THE CHIEF EXECUTIVE OFFICER: The federal financial institutions supervisory agencies are deeply concerned that some minority consumers and small business owners may be experiencing discriminatory treatment in their efforts to obtain credit from financial institutions. Discrimination in lending, on any prohibited basis, strikes at the fabric o f both our political commitment to equal opportunity and our economic commitment to free and competitive markets. Our agencies are committed to making sure that financial institutions understand their fair lending obligations and respond appropriately. We will continue to strengthen and refine our fair lending enforcement activities. Examiners will routinely use HMD A data, as well as other information, to identify cases which require closer examination. Examiners will then conduct detailed reviews and comparisons of loan and application files to examine for compliance with fair lending laws and regulations. The agencies will continue to develop and refine computer-based programs to facilitate and improve this process. This is part of an ongoing effort to develop tools that will further help examiners and institutions analyze HMDA data, review examination procedures and determine how they can be strengthened to detect and deter discrimination in lending. In cases where examination results or other information suggest probable fair lending violations, we will cooperate with the U.S. Department of Justice and the Department of Housing and Urban Development. We further believe that a sustained national effort to expand and intensify educational programs for both lenders and consumers is necessary, with an emphasis on greater sensitivity to fair lending issues. We urge financial institutions to use their maximum creativity to design appropriate programs. We especially urge consideration of the ideas listed on the appended sheet. It is clear to the agencies that more needs to be done to assure equal access to credit by everyone in our country. We expect all financial institutions to participate in this effort. Federal Reserve System Acting Chairman Federal Deposit Insurance Corporation of the Currency SUGGESTED FAIR LENDING ACTIVITIES Use o f an internal second review system for consumer, mortgage and small business loan applications that would otherwise be denied. Enhanced employee training that engenders greater sensitivity by financial institution management, and employees, to racial and cultural differences in our society. Training of loan application processors to assure that any assistance provided to applicants in how to best qualify for credit is provided consistently to all loan applicants. Efforts to ensure that all persons inquiring about credit are provided equivalent information and encouragement. Use o f flexible underwriting and appraisal standards that preserve safety and soundness criteria while responding to special factors in low- and moderate-income and minority communities. Efforts to encourage equal employment opportunity at all levels throughout the institution, including lending, credit review, platform and other key positions related to credit applications and decisions. Affirmative marketing and call programs designed to assure minority consumers, realtors, and business owners that credit is available on an equitable basis; marketing may involve sustained advertising programs covering publications and electronic media that are targeted to minority audiences. Ongoing outreach programs that provide the institution with useful information about the minority community, its resources, credit needs and business opportunities. Participation on multi-lender Mortgage Review Boards which provide second reviews of applications rejected by participating lenders. Participation in public or private subsidy or guarantee programs that would provide financing on an affordable basis in targeted neighborhoods and communities. Use o f commissions or other monetary or nonmonetary incentives for loan officers to seek and make safe and sound consumer and small business loans in minority communities.