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A Case Study in Mortgage Lending
Discrimination in Hartford, Connecticut

U.S. Commission on
Civil Rights
Clearinghouse Publication 48
June 1974


The United States Commission on Civil Rights
is a temporary, independent, bipartisan agency
established by the Congress in 1957 to:
• Investigate complaints alleging denial of
the right to vote by reason of race, color,
religion, sex, or national origin, or by
reason of fraudulent practices;
• Study and collect information concerning
legal developments constituting a denial of
equal protection of the laws under the
Constitution because of race, colors-religion,
sex, or national origin, or in the administration of justice;
• Appraise Federal laws and policies with
respect to the denial of equal protection of
the laws because of race, color, religion,
sex, or national origin, or in the administration of justice;
• Serve as a national clearinghouse for
information concerning denials of equal
protection of the laws because of race,
color, religion, sex, or national origin; and
• Submit reports,findings,and recommendations to the President and the Congress.

Arthur S. Flemming, Chairman
Stephen Horn, Vice Chairman
Frankie M. Freeman
Robert S. Rankin
Manuel Ruiz, Jr.
John A. Buggs, Staff Director

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402

1. Why Study Mortgage Lending?
2. Population and Housing in Hartford _
3. Minority Rejection in Mortgage Lending
The Role of Brokers
The Role of Loan Officers
Objective Criteria
4. Sex Discrimination in Mortgage Lending
The Working Wife
The Single Woman
5. Employment in Lending Institutions _
6. Summary and Conclusions




1. Racial and Ethnic Population of Hartford SMSA, 1960-1970
2. Owner-occupied Housing Units, by
Number and Value, Hartford SMSA,
3. Lender Policies on Broker Screening
of Applicants
4. Lender Policies on Ratio of Income to
Housing Payment
5. Women's Earnings as Percentage of.
Men's Earnings
6. Median Income of Families with Both
Husband and Wife Present, by Work
Experience and Race
7. Employment of Wives, by Race
8. Lender Policies on Wife's Income
9. Officials, Managers, and Professionals,
By Race and Sex, Four Hartford Mortgage Lenders
10. Office, Clerical, and Service Workers,
By Race and Sex, Four Hartford Mortgage Lenders



Homeownership is a goal most American
families aspire to, but which some find difficult
or even impossible to achieve. In 1970, 65
percent of all white families owned their homes
but only 42 percent of all black families and 44
percent of all Spanish speaking families. In that
year 68 percent of all families headed by men
owned their homes contrasted to 48 percent of
all families headed by women.1 Discrimination
by real estate brokers and mortgage lenders is
largely responsible for this disparity.
In 1968, passage of the Federal Fair Housing
Law2 prohibited discrimination against minorities in obtaining mortgage financing. Yet real
estate brokers and mortgage lenders still treat
minority home buyers differently from white
purchasers. White, male-dominated lending
institutions use imprecise, subjective criteria in
granting mortgages; and these criteria, such as
motivation and eligibility, are applied differentially.
Although most families have some difficulty
in obtaining the financing necessary to purchase
a home, minority families and women often
encounter insurmountable obstacles when they
approach the mortgage lending community.
A white family headed by a male whose income
is sufficient by itself to carry the cost of home
U.S., Department of Commerce, Bureau of the
Census, 1970 Census of Housing: Metropolitan Housing
Characteristics—Final Report, no. HC(2)-1 (September 1972), pp. 9, 18. U.S., Department of Commerce,
Bureau of the Census, 1970 Census of Housing: Housing Characteristics by Household Composition—Final
Report, no. HC(7)-1 (February 1973), pp. 105, 114.
See also, U.S., Department of Commerce, Bureau of
the Census, 1970 Census of Housing: Structural Characteristics of the Housing Inventory—Subject Report,
no. HC(7)-4 (June 1973), p. 2.
* 42 U.S.C. § 3601 et seq.

purchase conforms easily to the traditional
criteria of the lending community and is readily
approved. But minority families, families
headed by women, families in which both the
wife's and the husband's incomes are necessary,
and single persons do not fit as well into the
traditional perception of homeowners held by
lending institutions. Their applications frequently are handled arbitrarily.
During a period of tight money, as at present,
restrictive conditions worsen. As the pool of
money available for mortgages decreases, fewer
families are able to obtain financing. The access
of marginal families to money in this situation,
including families headed by minorities or
women, is even more restricted.
The purpose of this investigation has not
been to uncover individual instances of discrimination by mortgage lenders, but to examine the system of mortgage finance and its effect
on homeownership opportunities for minorities
and women. The Commission has examined a
number of the purportedly neutral criteria that
govern mortgage loan decisions to determine
the extent to which they afford equal opportunity to minorities and women and assure that
decisions will be made on the basis of objective
factors, not personal or institutional bias.
Measuring the extent to which the mortgage
finance system results in discriminatory treatment of minorities and women is a difficult task
because data are unavailable, inadequate, or
difficult to obtain. The responsibility for requiring data collection of the Nation's lenders rests
squarely with the Federal financial regulatory
agencies which have long resisted promulgating
such a regulation. Many statements and actions
of real estate brokers and mortgage lenders
that discourage minorities and women from

lower among blacks and the Spanish speaking
than among whites, and the suburbs remain
inhabited almost entirely by whites. The central
city is declining in population, mainly because
of the exodus of white residents to rapidly
growing suburbs. In short, the population shifts
occurring in Hartford and many of the factors
contributing to these changes in choice of
residence are characteristic of those found elsewhere. The practices and attitudes of Hartford
mortgage lenders also reflect those found in
cities throughout the Nation.
The Commission believes that the facts
uncovered by this report are sufficiently alarming to alert the community of mortgage lenders
—and their regulatory agencies—to the need
for a reexamination of the policies and practices under which they operate.

seeking to finance the purchase of a home never
become part of a written record. The fact that
loan inquiries and application procedures are
informal serves to emphasize that ample
opportunity exists for discrimination against
minorities and women. Although the practices
of mortgage lenders are more often covert than
overt, they nevertheless have the effect of
denying many qualified families the opportunity
of homeownership.
This report reflects the Commission's investigation of mortgage lending policies and practices in a demonstrably typical American city—
Hartford, Connecticut. A sizable minority
population is clustered in the central city.
Although there are both city and suburban
homes priced within the income range of
minorities, the incidence of homeownership is


Chapter 2
Population and Housing in Hartford

Hartford, the capital of Connecticut, is a
conveniently located commercial center for the
State. It is served by Bradley International
Airport and three major interstate highways.
The insurance industry started in Hartford in
the early 19th century, and 39 companies have
headquarters there. Like many other metropolitan areas in the country, the city of Hartford is very different from the surrounding
towns which make up the rest of the Hartford
Standard Metropolitan Statistical Area
During the decade of the 1960's, the population of the Hartford metropolitan area grew
substantially, from less than 550,000 to more
than 660,000. All of this growth occurred outside of the central city, which declined from
more than 162,000 people in 1960 to about
158,000 in 1970.4
The racial composition of the central city
changed significantly from 1960 to 1970: The
black population nearly doubled, from close to
25,000 to a little over 44,000, while the Puerto
Rican population almost quadrupled, from

An SMSA is a county or group of contiguous
counties containing at least one city of 50,000 or more
inhabitants, or "twin cities" with a combined population of at least 500,000. Contiguous counties are
included in an SMSA if they meet criteria for socioeconomic integration with the central city. In the New
England States, SMSA's consist of towns and cities
instead of counties.
Unless specificially noted, population, housing, and
income figures are taken from the following U.S.
Department of Commerce, Bureau of the Census, publications: 1970 Census of Housing: Metropolitan
Housing Characteristics—Final Report, no. HC(2)-1

about 2,300 to more than 8,500.5 In 1970, the
black and Puerto Rican population combined
represented about a third of the inner-city
population.6 Over the same 10 years, more than
31,000 whites left the inner city, representing
almost 25 percent of the white population.
Although the black population in the suburbs
of Hartford increased from nearly 4,000 to
6,400 in the 1960's, blacks still represented
barely 1 percent of the suburban population in
1970. Of the more than 9,000 Puerto Ricans
residing in the Hartford metropolitan area in
1970, fewer than 700 lived in the suburbs, an
(September 1972). 1970 Census of Housing: Housing
Characteristics by Household Composition—Final
Report, no. HC(7)-1 (February 1973). 1970 Census of
Housing: Structural Characteristics of the Housing
Inventory—Subject Reports, no. HC(7)-4 (June 1973).
1970 Census of Population and Housing: Census
Tracts—Final Report, no. PHC(l)-87, Hartford,
Conn., SMSA (May 1972). 1970 Census of Population:
General Social and Economic Characteristics—Final
Report, no. PC(1)-C8, Connecticut (April 1972).
1970 Census of Housing: Metropolitan Housing Characteristics—Final Report, no. HC(2)-89, Hartford,
Conn., SMSA (May 1972). 1970 Census of Population:
Puerto Ricans in the United States—Subject Reports,
no. PC(2)-1E (June 1973). 1970 Census of Housing:
Detailed Housing Characteristics—Final Report, no.
HC(1)-B1, U.S. Summary (July 1972). 1970 Census of
Population: Earnings by Occupation and Education—
Final Report, no. PC(2)-8B (January 1973).
Data on Puerto Ricans are limited in the 1970
census because in some instances this ethnic group is
classified together with Cubans and Mexican Americans
as persons of "Spanish language" origin. Where
possible, data pertaining exclusively to Puerto Ricans
have been used.
The 1970 census may have substantially undercounted Spanish speaking persons in Hartford and
blacks. Nevertheless, while the undercounting of
minority members distorts the actual numbers, the
figures at least give indications of trends.

increase of just 5 persons over the 1960 figure.
(See table 1.)
The growth of the black and Puerto Rican
population in the city of Hartford has not
occurred uniformly. Blacks and Puerto Ricans
are concentrated largely in the northern section
of the city, while the southern and western
sections have remained predominantly white.
Housing in the suburbs of Hartford differs
markedly from housing in the central city. It is
newer, less likely to be overcrowded, and much
more likely to be owned by the occupant. Three
of every five suburban housing units have been
constructed since 1950, while 80 percent of the
housing in the central city was built before
1950. Fewer than 5 percent of the suburban
households are overcrowded, compared to more
than 10 percent of the city's households.

Of the more than 100,000 owner-occupied
units in the Hartford metropolitan area, fewer
than 10 percent are in the central city. Eightyfive percent of all black families living in the
city of Hartford do not own their own homes;
97 percent of all Puerto Rican families in the
city are renters. Of the city's female-headed
families, 85 percent do not own their own
homes.7 By contrast, more than 70 percent of
the housing in the suburbs is owned by the
occupants, including the few blacks and Puerto
Ricans who live there.
Earnings are one reason why so few black
and Puerto Rican families live in the Hartford
suburbs or can be counted among the area's
homeowners. Median income for all families in
the city as of 1970 was $9,100 a year. But for
blacks it was $7,000 and for Spanish speaking
? Ownership figures are for two or more person
female-headed households only.





Puerto Rican**
Puerto Rican
Puerto Rican
















U.S., Department of Commerce, Bureau of the Census, 1970 Census of Population and Housing:
Census Tracts—Final Report, no. PHC(l)-87, Hartford, Conn. SMSA (May 1972). pp. 1, 14. See also
City of Hartford, Conn., Commission on the City Plan, Analysis of 1970 Census Data (December
1972), pp. 2-3, table I.
* Data for American Indians and Asian minorities are included in each total but are not shown separately. Therefore, combined figures do not equal 100 percent in any category.
** Persons of Puerto Rican birth or parentage made up 59 percent of the Spanish speeking population in
the Hartford SMSA in 1970 and 72 percent of the Spanish speaking population in the city of Hartford.
*** Figures for the balance of the Hartford SMSA excluding the city of Hartford.

families, $5,250. Thirty percent of the minority
families in the city of Hartford had incomes
below poverty level. By contrast, in the suburbs
median income for all families was $13,300 a
year. For blacks it was $12,600 and for Spanish
speaking families, $12,400.
Economics, however, by no means fully explains the gross underrepresentation of blacks
and Puerto Ricans in the suburbs of Hartford
or among the area's homeowners. Despite the
disparity between the annual income of minority and majority group families, a substantial
proportion of Hartford minority families earn
enough to enable them to buy housing at market
prices. Some 20 percent of the Spanish speaking
families in the city and over 30 percent of the

black families in the city earn more than
$10,000 a year and generally can afford housing
costing as much as $25,000. Nearly half of the
owner-occupied housing in Hartford's suburbs
and fully 75 percent of the owner-occupied units
in the city are valued at less than $25,000.
(See table 2.) Nonetheless, few black or
Spanish speaking families are homeowners.
The more than 18,000 female^headed families,
which are almost evenly distributed between
the central city and the suburbs, constitute 11
percent of all families in the area. Nineteen
percent of these female-headed families are
black and 4 percent are Spanish speaking.
In both the city and the suburbs, femaleheaded families earned substantially less than

Value of OwnerOccupied Units

Number of
Units in

Percentage of
Total Units in


less than $10,000
35,000 or more


100.0 ?o


less than $10,000
35,000 or more


100.0 %


less than $10,000
35,000 or more



Source: U.S., Department of Commerce, 1970 Census of Population and Housing: Census Tracts—Final
Report, no. PHC(l)-87, Hartford, Conn., SMSA (May 1972), table H-l.
* Total may not add to 100 percent due to rounding.

all families. Within the city of Hartford these
families had a mean income of $6,206 compared
with $10,011 for all families. Their mean
income in the suburbs was $9,562 compared to
$14,595 for all families. In addition, the disparity between male and female median earnings in the metropolitan area was equally severe
for all races and ethnicities.8
Approximately 5 percent of all male- and
female-headed families were living in poverty
in 1970 in Hartford. Yet, of the female-headed
families alone, 14 percent of the white families,
71 percent of the black families, and nearly
57 percent of the Spanish speaking families
were living in poverty. These women are not
potential homeowners. Still, a substantial
number—about 15 percent—of those women
currently renting their homes earn incomes
over $10,000 and can afford to purchase innercity or suburban housing.
Undoubtedly a variety of factors contributes
to the gross underrepresentation of minority
and female-headed families among Hartford
homeowners. What role does mortgage finance
play in denying these people homeownership

Data are not available on median family income by
race and sex in Hartford. Median earnings of persons
by race and sex in the Hartford metropolitan area are:
all males, $8,918; all females, $4,225; black males,
$6,237; black females $3,548; Spanish speaking males,
$6,131; Spanish speaking females, $3,861. U.S., Department of Commerce, Bureau of the Census, 1970 Census
of Population: General Social and Economic Characteristics, no. PC(1) C-8, Connecticut (April 1972), tables
89, 93, and 99.

Chapter 3
Minority Rejection in Mortgage Lending

In Hartford, as in other communities, the
process by which mortgage loans are made is
complex.9 At each stage opportunities exist for
denying mortgage loans to qualified minority
families on the basis of nothing more than the
personal prejudice of individuals in positions to
decide. Few complaints are made by minority
families who have been rejected for mortgage
loans because there is little objective basis
on which they can complain. Usually the
rejection is informal, and the minority families
rarely know the precise reasons why they are
rejected. Indeed, lending institution officials
themselves frequently cannot explain these
reasons by reference to objective credit factors.
Typically, most American families must successfully run a three-stage screening gauntlet
before obtaining their first mortgage loan.
They are screened initially by a real estate
broker, next by a loan officer, and finally by the
institution's loan committee. Minority families,
however, are much more closely scrutinized
than majority families, and each stage is
fraught with the possibility of discriminatory
rejection. The criteria considered in determining approval or rejection include several factors
which are so subjective as to permit decisions
on the basis of personal prejudice. Even those
criteria which appear to be objective and
susceptible to precise measure turn out, on close
examination, to be inconsistent and open to
differential application.

This report is based on data obtained through interviews of real estate brokers, lenders, home buyers,
public interest groups, and Federal and city housing
specialists. Interviews were conducted from July 1972
through September 1973. The original written materials
are on file and available for review at the U.S. Commission on Civil Rights in Washington, B.C.

The real estate broker serves several functions in a real estate transaction. Generally,
brokers represent sellers and their principal
obligation is to arrange for a sale on the most
advantageous terms to their clients. Brokers
also have a direct relationship with buyers in
that buyers usually deal with them when
looking for a house.
Studies have documented discriminatory
rejection by brokers of minority families who
are ready, willing, and able to meet the terms
of sale offered by sellers.10 White brokers have
attempted to dissuade minority homeseekers
from making an offer on a house they desire;
they have gone to great lengths to avoid having
to deal at all with minority homeseekers; and
they have flatly refused to tender good-faith
offers by minority families. These actions—
subtle and covert—usually have been consciously discriminatory.
Often, brokers also have a direct relationship
with lenders. Through continuing contacts
with one or more lenders, they can help arrange
for expeditious financing on favorable terms.
It behooves brokers to remain in the good
graces of lending institutions to assure a
friendly reception for those whom they refer
for financing.
Although brokers may handle sales everywhere in the Hartford metropolitan area,11 the
See Rose Helper, Racial Policies and Practices of
Real Estate Brokers (Minneapolis: University of
Minnesota Press, 1969). Bibliography included.
Commission staff interviewed members of 16 real
estate firms from July 1972 through September 1973.
Seven of the firms were black owned; one of the persons
interviewed was a black woman. This sample is approximately 10 percent of the total number of real estate

minority brokers are located and work primarily in the minority area of the city—Blue
Hills and the suburb of Bloomfield. There are
many more white firms and they are generally
larger, some having branch offices dispersed
throughout the city.
The broker's treatment of the home buyer
differs somewhat according to the home buyer's
race. Both black and white brokers are concerned that the homeseeker is financially able
to buy a home. But several acknowledged that
they expend more energy ascertaining the
purchasing ability of the potential black home
buyer, making the assumption that the white
family will be credit-worthy and the black
family unqualified in the eyes of the lender.
A black homeseeker reported that he had
contacted a white broker to purchase a house in
a white suburb. The broker carefully reviewed
his credit report, which reflected current
stability but showed a pattern of late payments
3 years previous owing to illness. In apparent
response to the report, the broker discouraged
the homeseeker from pursuing further his
desire to buy in the suburbs and steered him
toward a "more suitable" section of town
(a minority neighborhood),12 which the broker
felt would be more acceptable to the lender.
The black homeseeker subsequently changed
brokers, found a suburban house, and obtained
a mortgage.
Another crucial variable in the broker-buyer
relationship is the race of the broker. Minority
brokers serving minority families who are
lower middle-income buyers view their role as
one of counselor, confidant, and benefactor.
They emphasize the importance of developing
rapport with homeseekers and offering advice,
based on their knowledge of lending institution
policies and practices on mortgage qualifications. This advice constitutes a screening of
would-be mortgage applicants before the lender
firms in Hartford and 80 percent of the black-owned
12 The U.S. Department of Justice charged seven
Hartford real estate companies in May 1974 with
promoting resegregation by steering black home buyers
into integrated areas and white home buyers away
from them. The areas are Blue Hills and the suburb of
Bloomfield. All of the firms are white owned and


is in any way involved.13 The brokers encourage
complete disclosure of social and financial data;
then, if they judge the homeseekers "responsible," they make an appointment with a lender,
coach the buyers in preparation for the interview, and accompany them to the lender's
White brokers, who generally serve more
affluent and knowledgeable homeseekers,
develop a much different relationship. They
may advise the buyer to some degree, but it is
the applicants' responsibility to canvas the
mortgage market and arrange financing. The
most realtors will do is provide buyers with
the names of several institutions in the area
and give some indication as to the kinds of
terms they can expect to be offered.
By contrast, less affluent purchasers, a disproportionate number of whom are minorities,
frequently need help in obtaining the necessary
financing. This is especially true for first-time
purchasers, who tend to be unfamiliar with the
complexities of mortgage finance. In seeking
this help, they turn to real estate brokers.
If it appears that a minority family is
financially able to buy a home, then the broker
helps them to obtain a mortgage. A number
of the brokers interviewed in Hartford reported
that they arrange mortgages for up to 90
percent of their sales. While this practice has
been construed as a service to the families, the
prequalifying process may be detrimental to
homeseekers. The brokers admitted, for
example, that they automatically run credit
checks on minority families, but not on white
families unless special circumstances appear
to require it.
If brokers inaccurately assess the financial
status of homeseekers, they may use any one of
a number of ways to dismiss and discourage
them. Homeseekers may be led to believe that
they are ineligible when, in fact, they have been
victims of deception, discrimination, or both.
A case in point is that of a black couple who
contacted a white broker in response to an
advertisement for a house. The broker asked
!3 Although not all were asked, 11 of the Hartford
brokers interviewed by Commission staff asserted
that mortgage lenders expect them to screen would-be

about the husband's income and employment
and then informed them that they did not meet
the "income standards of the community."
He did not state the asking price of the house
or ask how much money the couple had for a
downpayment. (They had $5,000.) He simply
looked through his listings and told them that
he had nothing he "felt was suitable" for them.
Only later did the couple think that they might
have been discriminated against, but in the
process they were prevented from buying the
house they wanted.
Families deemed unqualified by a broker for
the mortgage they seek are so advised informally and the matter usually ends there. No
written record is kept, nor is a lender involved
and put in the position of having to reject the
applicant. Consequently, acquiring documentation on the extent of discriminatory rejection
of minorities by brokers is nearly impossible.
Just as minority home buyers are dependent
upon brokers to obtain a mortgage, minority
brokers in Hartford have provisional relationships with white lenders. Compared with white
firms, minority firms are smaller, with lower
sales volume and fewer mortgages to arrange.
Thus, they deal with lenders on fewer occasions ; and, when they do, they feel they must
present only well-qualified families because
they do not have the sales volume to use as
leverage in favor of marginal applicants.
Black brokers are forced to be more cautious

than white brokers in dealing with lenders.
If they feel that a lender is discriminating,
they are reluctant to make an issue of it for
fear of offending the lender. One black broker
reported that she applied for a mortgage for
herself to a lender with whom she dealt
regularly. Her income was $13,000 and she
was ready to put $2,000 down on a $20,500
house. Her credit report was favorable. The
lender, however, was unusually slow in processing the application and excessively demanding
in the documentation required. For example,
he stipulated that cash for the closing in
addition to the downpayment had to be in the
bank prior to approval of the loan. She then
applied to another lender and swiftly obtained
a mortgage. Although this is not an overt case
of discrimination, the broker believes that she
was discriminated against because of her race
and/or her sex. But she would not press the
issue because it might threaten her working
relationship with the lender.
Hartford brokers contend that they judge
the ability of a potential mortgage applicant on
the same basis as the lending institution. They
argue that because they arrange mortgages so
frequently and are in continuing contact with
loan officers, they are thoroughly familiar with
the criteria used by the institutions. In fact,
it is virtually impossible for brokers to know
precisely the policies of lending institutions
because lending criteria vary widely among

1 (S&L)




President &
vice president
Branch manager
Vice president
Branch manager
Branch manager
Loan officer
Vice president
Branch manager
Branch manager

Do you expect the
brokers to have
screened the applicant?

Location of
Main office
Nonminority area
Main office
Minority area
Nonminority area
Main office
Main office
Minority area
Minority area

Source: Commission staff interviews.


lending institutions in Hartford and also vary
to a large degree among different offices of the
same institution.
Lending institutions also differ on whether
or not brokers are expected to screen potential
applicants. As table 3 shows, only one of three
institutions surveyed by Commission staff has
a consistent policy on broker screening. Screening requirements in the other two are determined by individual loan officers. Nonetheless,
a number of Hartford brokers act on the
assumption that they are expected to conduct
The absence of consistent objective lending
criteria, coupled with the brokers' desire to
remain in the good graces of lending institutions, tends to make brokers overcautious.
They, thus, screen out families whom lenders
might well approve. Several brokers conceded
that, unless a family fits the traditional characteristics of acceptable mortgage loan applicants,
they will discourage the family because they
feel that the loan officer will not approve a
In short, if brokers are to err in their
evaluation of an applicant's qualifications, they
would rather err on the side of conservatism.
One lending official reported that, on several
occasions when applicants referred by brokers
have been rejected, the brokers have felt compelled to apologize for having inadequately
screened the applicant. The same official also
expressed the view that brokers could be
considerably more liberal in their approval.
The process of broker screening also opens
up broad possibilities for rejection on discriminatory grounds. Brokers may screen out
qualified minority applicants on the basis of
their personal bias or their perception, right
or wrong, of the lender's discriminatory policies. Rejection at this stage is informal. No
specific reason need be given; discrimination
is, therefore, difficult to detect.
If minority applicants successfully clear the
hurdle of broker screening, they still must pass
another test before reaching the stage at
which their formal application for a mortgage
loan is considered and decided upon by the

lending institution's loan committee. This is a
second screening process, this time by a loan
officer. As in the case of broker screening, this
stage is informal and based, at least in part, on
subjective criteria. The loan officer can reject
applicants for any reason, including personal
bias, without having to explain why.
The basic concern of lenders in determining
whether to approve a mortgage loan is security
against loss. One consideration is the value of
the property on which the mortgage is held.
Another is the credit-worthiness of the borrower. For the latter purpose, lenders inquire
into such seemingly objective factors as income,
occupation, length of employment, age, and
credit rating. They also inquire into less tangible factors that clearly call for subjective
judgments. For example, one standard text on
mortgage credit risks states:
In judging a borrower's reasons for requesting a loan, the lender should consider the
strength of his [her] attachment to the
property and his [her]
probable future
attitudes toward it.14
The text goes on to assert:
A borrower's relationship to his [her]
family and friends is a significant element of
risk although it is difficult to rate. Evaluators
usually consider whether a borrower has an
established reputation, a harmonious home
life, associates with good reputations, and if
he [she] is active in civic affairs or whether
he [she] has been dishonest and untruthful in
the past, has a troubled family15 life, and associates of doubtful reputation.
Compounding the problem caused by the
subjective nature of the factors considered by
the loan officer is the fact that, at this stage of
the mortgage application process, decisions
are made informally. The same text advises:
14 U.S., Department of Housing and Urban Development, Mortgage Credit Risk Analysis and Servicing
of Delinquent Mortgages, by Anthony D. Grezzo
(Washington, D.C.: Government Printing Office, 1972),
p. 14.
Ibid. See also Robert H. Pease, ed., Mortgage
Banking (New York: McGraw-Hill, 1965), p. 216, who
states that some lenders visit the applicant's home to
determine personal habits that indicate "those
important intangibles . .. such as pride of ownership,
general housekeeping standard, and reputation within
the immediate community."

An analysis of the credit risk should include
an informal interview between a representative of the lending agency and the borrower
and his wife [her husband].... The results
[including a verification of employment,
bank account, and a check against public
records] should enable the lending agency to
decide if the borrower should submit a formal
application for a loan, or if he [she] should
be told that
his [her] application would be
Commission staff investigations in Hartford
indicate that lending institutions in that city
adhere closely to the above standards and
procedures. Savings and loan officers make
decisions on the suitability of filing an application on a purely impressionistic basis. In fact,
one savings and loan association president
reported that only "eligible" persons are
allowed to apply for a mortgage. When asked
to elaborate concerning what he meant by the
term eligible, he said that it was based on
his "feeling about the applicant."
A vice president of another Hartford mortgage loan institution told Commission staff
that he placed great stock in whether the
applicants were "highly motivated" in deciding
whether to accept their application. These
criteria obviously open up broad possibilities
for decisions on the basis of prejudice or other
irrational factors. Nonetheless, they are
widely used.
The subjective latitude exercised by a loan
officer in judging the merits of individual
applications is reflected in the case of a black
couple who were rejected because they had
"a lot of debts." The couple's combined income
was $18,700, which normally would have
qualified them to purchase the $32,000 house of
their choice. They had on hand the 20 percent
downpayment required. Yet because of a long
term debt of $3,000, their application was
refused by a white loan officer who argued that
the debt was too much for them to handle in
addition to the mortgage payments. The same
loan officer counsels all minority families to
save $15,000 before attempting to purchase a
house. The couple subsequently obtained a
mortgage at another institution.
Officials at five lending institutions reported

Mortgage Credit Analysis, p. 9.

that, following informal interviews at which
various subjective factors are considered, they
are expected to discourage applications from
people they consider "ineligible." No reasons
need be offered to the rejected applicants,
nor is any written record kept to provide a
basis for complaint. Applicants are merely
informed that they should not make formal
application because it will be rejected, revealing another opportunity for discriminatory
rejection of minority applicants.
Beyond this, loan officers tend to be overcautious in accepting loan applications and
forwarding them to the loan committee.
Several loan officials explained that their
future careers are determined in part by the
default rate on applications they recommend
for approval to the loan committee. Thus, they
try to avoid accepting applications which they
feel might be rejected by the loan committee,
since this would reflect adversely on their
judgment and might hinder their career
These policies inevitably result in informal
rejection of applicants who might well qualify
for a mortgage and never default on it. At one
savings and loan institution, two branch
managers reported that 80 to 85 percent of the
applications they forward to the loan committee are approved. Two branch managers at
a savings bank similarly indicated that nearly
all of the applications they accept are approved
by the loan committee. At both institutions,
submission of an application is tantamount
to approval. One can only speculate, however,
how many applications would have been
approved by the loan committee had they not
been informally rejected at an earlier stage
of the process.
Although lending institution officials make
substantial use of subjective criteria such as
motivation and character in determining an
applicant's qualifications for a mortgage loan,
they still place heavy reliance on criteria which
appear to be objective and susceptible to fairly
precise measure. These criteria seemingly
would not permit the latitude for decisions
based on personal bias.

One such criterion is the income of the
applicants in relation to the monthly payments
they will be required to pay under the mortgage. The lending institution is legitimately
concerned that the applicant's income be sufficient to afford the monthly payments, so as to
assure against default and possible financial
loss to the lender.
The credit-worthiness of the applicant is
another legitimate concern of the lending
institution. An applicant with an unstable
financial past or a history of failing to satisfy
debts is a questionable risk and the lender is
obliged to be as sure as possible that the applicant, if approved, can be expected to meet the
long term substantial payments that the
mortgage involves.
Another legitimate concern of the lending
institution is the value of the house being
mortgaged. It is the lender's obligation to set
the amount of the mortgage loan -in reasonable
proportion to the value of the property, after
conducting an appraisal of the property to
determine its fair market value, which may
differ from the sales price.
Although these three criteria are traditional

mortgage credit standards, in Hartford they
are applied inconsistently and offer ample
opportunities for decisions based on subjective
judgments, including personal bias.

A common formula lenders use is that one
week's income should be equal to or greater
than the monthly mortgage payment. Hartford
lenders, however, use a variety of other
formulas as well. (See table 4.)
Two institutions surveyed by Commission
staff have no official policy on the ratio of
monthly payment to income and leave the
decision on an acceptable ratio to the individual
loan officer. Although most loan officers are in
a position to judge an acceptable ratio based on
experience and training, without official policies
or guidelines it is difficult to hold them accountable. At these institutions the apparently
objective criterion of the ratio of monthly
payment to income can easilyfoeapplied
subjectively and discriminatorily.
Seven institutions were surveyed that do have
official policies on the maximum ratio of

Official Interviewed
PITI* = 25% of groas or net income
President and vice
PITI = 25 % of gross income
Branch manager
PITI = 25% of net income
Vice president
PITI = 25% of net income
Branch manager
Housing expenses** = 30% of gross income
Branch manager
Housing expenses = 35 % of net income
Vice president
PITI plus fixed debts = 38 to 40% of net
Branch manager
Housing price = twice the gross annual
PITI = 25% of gross or net income
Vice president
Housing expenses = 35 % of gross income
Vice president
No policy
Vice president
Housing expenses = 25 % of gross income
Vice president
Vice president
No policy
Source: Commission staff interviews
* PITI is the sum of the Principal and Interest payments on the mortgage, Taxes and property
Insurance costs.
** Housing- expenses are the sum of PITI, utilities, heat, and maintenance costs.


monthly payment to income. The two institutions with the most liberal ratios (a bank and
a savings and loan association) require that one
week's gross income equal the principal,
interest, taxes, and insurance (PITI). Three
institutions use differing ratios which are
based not only on PITI cost but on total housing expenses, including heat, utilities, and
maintenance, in relation to gross income. Two
other institutions use ratios .of net income to
housing payments in assessing applicants.
Thus, there is little consistency among the
nine lending institutions on the permissible
ratio of monthly payment to monthly income.
Moreover, there is also little consistency in this
regard among the different offices of the same
institution. At one savings and loan association,
for example, while the vice president in charge
of residential mortgage lending and one branch
manager were in accord that the ratio should be
25 percent of net income to equal the PITI cost,
another branch manager operated under the
formula that 30 percent of gross income should
equal total housing expenses.
Even on a day-to-day basis a bank may alter
its preferred ratio of housing payment to
income, permitting ample opportunity for
discrimination. For example, a black couple
sought a loan to purchase a condominium in a
new development. They went to the lender that
had financed a number of the new condominiums and were able to satisfy the institution's standard ratio requirement. The lender
turned them down, however, on the grounds
that they could not meet a newly imposed
higher ratio. Subsequently, they obtained a loan
from a different institution and were the first
blacks to move into the development.
In addition to inconsistent application of the
monthly payment to income ratio among
Hartford lenders, there also is inconsistency in
the definition of the basic term, income. Generally, income can include salary earned 'by the
primary borrower and secondary borrower,
along with commissions, overtime pay, and
bonuses. All Hartford lenders agree that the
income of the primary borrower should be

Issues relating to the secondary borrower, who is
often the wife of the primary borrower, are discussed
in ch. 4.

stable, reliable, and have reasonable prospects
for continuation. These same criteria apply to
the income of the secondary borrower.17 The
conditions under which overtime pay and
income from second jobs are counted, however,
are not uniform among the institutions.
Three institutions allow overtime and second
job income as effective income, provided that
the same criteria as applied to the primary job
are met. Two institutions do not necessarily
allow such income to be counted even if the
criteria are met. Each case is treated individually, and the basic criterion of income becomes
less susceptible to objective definition.
The failure of Hartford lenders to accept
income from overtime pay and second jobs on
a consistent basis necessarily has a discriminatory effect on minority homeseekers, who
often rely on these sources of income.18 The
Federal Housing Administration, however,
accepts overtime pay as part of income when
such pay is characteristic of the job. FHA also
accepts income from a second job if the applicant has held it over a substantial period of
time and is expected to continue in it during
the early period of the mortgage.

Reports on the credit history of mortgage
applicants are necessary information for the
lender to have in deciding .whether to approve
an application. Again, Hartford lenders are not
consistent in their use of these reports. Some
lenders limit their examination of an applicant's credit history to the previous 2 years,
reasoning that this is sufficient to determine the
financial responsibility of the applicant. Others,
however, extend their examination to the
previous 5 or even 7 years. By the same token,
while some lenders do not accept at face value

This argument is supported by guidelines released
by the Federal Home Loan Bank Board in December
1973. "Automatically discounting . . . income from
bonuses, overtime, or part time employment will cause
some applicants to be denied financing. ... Since
statistics show that minority group members and low
and moderate-income families rely more often on such
supplemental income, the practice may be racially
discriminatory in effect, as well as artificially restrictive
of opportunities for home financing." 38 Fed. Reg.
34653 § 531.8(c).


adverse reports on a family's credit but look
for possible mitigating circumstances or other
clarifying information, other lenders assert
that any adverse information in the report
automatically disqualifies the applicant. No
investigation is conducted to determine the
circumstances surrounding the adverse report
or even to determine whether the adverse information is accurate. The discriminatory effect
of this policy of automatic disqualification on
minority applicants is apparent, owing to the
discriminatory judgments made by credit
bureaus in assigning credit ratings.19
A 1971 survey of savings and loan associations by the Federal Home Loan Bank Board
(FHLBB) revealed that 57 percent of the
associations looked at credit reports for the
previous 2 years or less; 34 percent considered
the previous 3 to 5 years and 9 percent looked
at the previous 6 to 7 years.20 The survey also
revealed that 26 percent of the associations
sought information on arrestjcecords, and 12
percent automatically disqualified applicants
who had ever been arrested, whereas 14 percent disqualified applicants if they had been
convicted. Because minority persons are
arrested in disproportionate percentages, the
disqualification on arrest records alone has a
discriminatory effect.21
Similarly, 73 percent of the associations require information on previous homeownership,
and 23 percent (automatically disqualify applicants with "unsatisfactory answer (s)."
Because minority persons are overwhelmingly
not homeowners in metropolitan areas, this
See S.N. Sesser, "Big Brother Keeps Tabs on
Insurance Buyers," New Republic, April 27, 1968,
pp. 11-12.
20 Federal Home Loan Bank Board Survey (released
March 1972). The FHLBB considered the results of
the survey inconclusive, since it included only 74 of
the 5,000 federally-supervised savings and loan
Figures taken from the Uniform Crime Report
published by the Federal Bureau of Investigation in
1973 and interpolated with national population
statistics show that the arrest record of blacks was
more than three times that of whites in 1972 in
proportion to their percentage in the population;
Spanish speaking persons are included in the category


imposes an additional, undue burden on them.22

If a mortgage is needed by most families to
buy a house, it also is true that the mortgage
must be large enough. If not, families must
either obtain a second mortgage, which can be
expensive, or abandon their efforts to purchase
the house they desire. The amount of the
mortgage a lender will offer to an applicant is
based largely on the appraisal, which determines the worth and marketability of the
house. One traditional way of discriminating
against minority homeseekers is through underappraisal of the houses they wish to purchase.23
Commission staff did not attempt to conducf
an in-depth investigation of the extent to which
discriminatory underappraisal was prevalent in
Hartford. Instead, knowledgeable local lenders
and borrowers were asked for their expert
opinion. As expected, most stated that discriminatory underappraisal was not a common
practice, that most homes were appraised at
the sales price.
Officials of one lending institution and three
brokers, however, reported that appraisal
value was lower than the sales price in a
substantial number of cases. In their view, this
happened most often when the purchaser was a
minority group member or when the house was
located in an area of minority concentration.24
Transitional neighborhoods—those in the
22 Only 34 percent of black families living in central
cities and just 14 percent of the Nation's urban
Puerto Rican families were homeowners in 1970. U.S.,
Department of Commerce, Bureau of the Census, 1970
Census of Housing: Detailed Housing Characteristics—
Final Report, no. HC(1)-B1, U.S. Summary (July
1972), p. 292. Also, U.S., Department of Commerce,
Bureau of the Census, 1970 Census of Population:
Puerto Ricans in the United States—Subject Reports,
no. PC(2)-1E (June 1973), p. 94.
Underappraisal may be discriminatory in effect
when it results in a lowered loan amount and a higher
downpayment, thus forcing the homeseeker out of the
According to the FHLBB survey, only 4 percent
of the savings and loans use minority appraisers. Thus,
the appraisers are overwhelmingly white and undoubtedly reflect the views of the associations: 30 percent
of the associations "disqualify some neighborhoods

process of integrating—very likely fall into this
category. They added that often the underappraisal was made without discriminatory
intent, but rather on the basis of the traditional
appraiser view that property values decline in
minority and transitional neighborhoods.25
They conceded, however, that sometimes the
appraisals were the result of nothing more than
the personal bias of the appraisers.

from lending because they are low-income or minoritygroup areas" and 78 percent feel loans in such neighborhoods are "more risky than other loans." Additionally, 11 percent of the associations' appraisers use
"different methods or factors" for such neighborhoods.
For purchases in such areas, over a quarter of the
associations require higher downpayments; 11 percent
levy interest rates one-half of one percent higher, and

almost a third give terms 7% years shorter than loans
for homes in other areas.
In May 1972 the Department of Housing and Urban
Development (HUD), Office of Equal Opportunity,
issued an initial report on a private lending institutions
questionnaire. It showed that 18 percent of the associations surveyed refuse to make loans in areas with high
minority concentrations.
The new FHLBB guidelines prohibit "redlining," the
refusal to lend in a neighborhood solely because of
minority concentration. "The racial composition of the
neighborhood where the loan is to be made is always
an improper underwriting consideration." 88 Fed. Reg.
34653 § 531.8(c).
This traditional appraiser perception is prohibited
by the new FHLBB guidelines: "Refusal to lend in a
particular area solely because of the age of the homes
or the income level in a neighborhood may be discriminatory in effect since minority group persons are more
likely to purchase used housing and to live in lowincome neighborhoods. 38 Fed. Reg. 34653 § 531.8 (c).


Chapter 4
Sex Discrimination in Mortgage Lending

Unequal access to mortgage money for Hartford's minorities occurs largely by virtue of
mortgage procedures and criteria which permit
and even facilitate decisions based on personal
bias and other factors not related to objective
lending criteria. Whether because discrimination in mortgage lending is prohibited by both
Connecticut and Federal law or for other
reasons, lenders in Hartford do not generally
admit that they reject applicants on the basis
of their race or national origin. In fact, the
criteria which govern whether mortgage applicants will be approved or disapproved are,
at least on the surface, nondiscrimiriatory. To
the extent discrimination does occur, it is
subtle, often unconsciously practiced, and
difficult to detect.
Discrimination on the basis of sex is a
different matter.26 Here, the major problem is
not that mortgage procedures or criteria permit
opportunities for decisions on the basis of
discrimination. Rather, traditional mortgage
lending criteria followed by Hartford mortgage
lenders virtually require sex discrimination.27
Under these criteria, women are automatically
considered suspect risks.
Sex discrimination in mortgage lending currently
is not prohibited under Federal law. The Federal Home
Loan Bank Board, which regulates Federal savings and
loan associations, issued guidelines in December 1973
on nondiscriminatory lending practices with respect
to age, sex, and marital status. 38 Fed. Reg. 34653.
The Federal Deposit Insurance Corporation, which
supervises most of the Nation's commercial banks, has
had under consideration for well over a year, but has
not acted on, the issuance of a regulation prohibiting
sex discrimination in lending.
27 In Connecticut, in June 1973, a State law was
passed which prohibits discrimination on the basis of
sex or marital status in credit transactions including


If married and working, women's incomes
are discounted for purposes of determining the
family's eligibility for a mortgage. No matter
how important their income is to the family
budget, it is considered "secondary" for mortgage lending purposes, and the family's chances
for a mortgage loan are decided largely on the
basis of the husband's financial status.
If unmarried, women are viewed with great
skepticism under traditional mortgage lending
criteria. Regardless of their professional background or work experience, their status as
unmarried women renders them suspect credit
risks. Female heads of household who are
separated or divorced also face unfavorable
treatment by lenders. Separated women are in
an ambiguous legal status in terms of debt
liability, while both separation and divorce
bear a traditional social stigma.
This chapter examines the barriers to homeownership only of those women who are
economically capable of owning a home. The
ability to purchase a house depends directly on
household income, and on this point, women
who are black, Spanish speaking, and white are
at a severe disadvantage compared to men.28
(See table 5.) Moreover, the impact of discrimination is felt doubly by black and Spanish
speaking women who are penalized 'because of
race and ethnicity as well as sex.
Sex discrimination in mortgage lending is
not nearly as difficult to detect as discrimination
mortgage lending transactions. Conn. Public Act
73-573. Evidence for this chapter was gathered prior
to passage of this law; its impact has not been analyzed
Median earnings of women in the Hartford SMSA
in 1970 were only 47 percent of men's earnings.


Spanish speaking



Women's Earnings as Percentage
of Men's Earnings
47 ?&



U.S., Department of Commerce, Bureau of the Census, 1970 Census of Population: Earnings by
Occupation and Education—Final Report, no. PC(2)-8B (January 1973), tables 1, 2, 7, 8.
*Ages 25-64

Black as
Black as
of White
of White
Black, total
Only husband worked
Husband and wife worked
White, total
Only husband worked
Husband and wife worked
Source: U.S., Department of Commerce, Bureau of the Census, The Social and Economic Status of the
Black Population in the United States, 1971, P-23, no. 42 (July 1972), p. 34.
* Heads of household under 35 years of age only.

on the basis of race or national origin. Much of
it is based on what lenders consider prudent
and objective criteria. In Hartford, as elsewhere, sex discrimination is part and parcel of
official bank policy.
This chapter will detail the various forms
that sex discrimination in mortgage lending
takes in Hartford. Women of different marital
status—married, unmarried, widowed, separated, and divorced—are all viewed somewhat
differently by the mortgage lending community.
No group of women, however, has equal access
to mortgage money.
Married women are a substantial part of the
Nation's labor force. The stereotyped pattern
of women giving up their jobs once married to
spend full time caring for the house and
children clearly is no longer true. As of 1970,
in two of every five families with husband and

wife both present, both the wife and the
husband worked. Increasingly, the working
wife's income is being relied upon as a substantial and continuing part of a family's assets.
Important as a working wife's income is to
families generally, it often is essential to
minority families. As of 1970, in more than
two-thirds of the Nation's black families with
husband and wife both present, both worked.
Table 6 demonstrates the importance of the
wife's income to the economic well-being of
black families.29 Among families in which only
the husband worked, iblack family income was
less than two-thirds of that for white families.
By contrast, among families in which both
husband and wife worked, black family income
was nearly 90 percent of the income for whites.
29 Work experience and income data on two-earner
Spanish speaking families are not available. However,
median household income variation among the three
groups would suggest that a similar pattern occurs in
two-earner Spanish speaking households.


Total wives employed

Number Percentage

Commission staff interviews with home purchasers, Hartford, Conn., September 1972.

This nationwide pattern is reflected in Hartford. In 45 percent of white husband-wife
households in the Hartford metropolitan area,
and 60 percent of black husband-wife households, the wife works.
The importance of the working wife's income
in achieving the goal of homeownership is
shown by data from a sample of mortgage
transactions in Hartford, for the years 197172.30 As table 7 shows, in half of the 72 families
in the siample, the wife worked. This was true
for 41 percent of the white families and 58
percent of the black families.
These statistics strongly indicate that, to the
extent mortgage lenders discount some or all
of the working wife's income in determining
whether to approve a mortgage loan application, all families necessarily are penalized. For
minority families the penalty may be doubly
severe because this form of sex discrimination,
coupled with discrimination on the basis of race
or national origin, effectively places minority
women and their families in double jeopardy.
Traditionally, lenders have ignored the
working wife's income in assessing a family's
financial status. Recently, however, because of
their growing recognition of the fact that
married women are a (substantial part of the
labor force and because of pressure from various public interest groups,31 they have come to

Number Percentage Number Percentage

Data gathered through interviews in 1972 with
home purchasers. In only one instance was the female
the head of the household. She was a nurse whose
income was fully considered by the lenders.
si For example, a statement in opposition to the
Federal National Mortgage Association's proposed
guidelines restricting mortgage credit was issued in

count some portion of it. Nonetheless, the policies and practices of mortgage lenders still fall
far short of fully accepting the income of
working wives.
The 1971 survey by the Federal Home Loan
Bank Board on practices of savings and loan
associations showed that 25 percent of the
respondents would not count any of the income
of a wife, age 25, with two school children,
who held a f ull-time secretarial position. More
than half of the mortgage lending institutions
would limit credit to 50 percent or less of her
salary. Only 22 percent would count all of it.
The results of the survey not only show the
overly conservative view of mortgage lenders
toward a wife's income, but also demonstrate
the lack of any uniform policy. This is reflected
in Hartford. As table 8 illustrates, not only are
there inconsistencies in policy among the nine
Hartford lending institutions surveyed by Commission staff; but, even within the same institution, officers differ markedly in their view
of a wife's income.
The refusal to credit the working wife's income is based on the unsupported assumption
that to do so would increase the risk of default
and subsequent foreclosure. In fact, to date no
studies have controlled for this crucial variable. One study found, however, that as the
percentage of family income earned by the
husband decreased, the chance of a loan's
being delinquent actually decreased
1971 by 30 public interest groups including the National
Organization for Women, National Association for the
Advancement of Colored People, Center for National
Policy Review, and Nonprofit Housing Center.


1 (S&L)
2 (S&L)

Official Interviewed
President and vice
Vice president
Branch manager
Branch manager



Vice president
Branch manager
Branch manager

4 (S&L)
5 (Bank)
6 (Bank)

Vice president
Vice president
Branch manager

7 (S&L)
8 (Bank)
9 (Bank)

Vice president
Vice president
Vice president


100% allowance
100% if over 35 and employed 2 or 3 years;
if under 35, would take a "hard look";
might require a "'baby letter."*
100% if 29 or older, with no children and in
a professional occupation.
Requires professional occupation; would take
a "hard look" at younger than 30.
100% allowance
50 % allowance unless in a professional occupation, with no children and a "baby
75% allowance fora professional occupation
if under age 30; less allowed for others.
50% allowance
Depends upon the case
100% allowance
Does not count income from nonprofessional
Depends upon the case
Depends upon the case
100% allowance

Commission staff interviews with banking and savings and loan o _cials in Hartford, JanuaryFebruary 1973.
* The "baby letter" is a physician's statement attesting to sterility of husband or wife, their use of
approved birth control methods, or their willingness to terminate pregnancy.

slightly.32 Another more recent study, which
related borrower characteristics to delinquency
and foreclosure rates, found that none of the
contributing factors related to the income of
the working wife.33 In short, there is no empirical evidence to support the widely practiced
lender policy of discounting the working wife's

Age and Children.—A primary consideration
in mortgage loan underwriting is the female

wage earner's age. This is directly related to
the probability of childjbearing. For example,
a married woman in her twenties generally
would not have more than 50 percent of her
income counted, owing ,to the likelihood that
she will bear children and, it is assumed, leave
the labor force.34 By contrast, 75 to 100 percent
of the income of a married woman in her late
thirties would qualify, 'according to Hartford
In addition to the wife's age, the number and


Leon Kendall, Anatomy of the Residential
Mortgage Market (Washington, B.C.: U.S. Savings
and Loan League, 1964).
John Herzog and James Barley, Home Mortgage
Delinquency and Foreclosure (New York: National
Bureau of Economic Research, 1970).


Nationally, 38 percent of all women in the labor
force have at least one child under 18 years of age.
Forty-three percent of all ever-married women with
children under 18 are in the labor force. U.S., Department of Labor, Bureau of Labor Statistics, Marital
and Family Characteristics of Workers: March 1972
(April 1973), p. A-18.

ages of children living at home are also considered. Lenders assume that families with
young children will have additional children
and discount the working wife's income accordingly. There are, however, exceptions. A
married woman, even in her twenties, with no
children may have all of her income counted,
with certain documentation. This documentation, known in the lending trade as a "baby
letter," consists of a physician's statement
which attests to her 'or her husband's sterility,
their use of approved birth control methods, or
their willingness to terminate pregnancy.
Because of the absence of uniform institutional policy, the requirement of a 'baby letter
depends entirely on the attitudes of individual
loan officers. Branch managers in two lending
institutions stated to Commission .staff that
they required the baby letter as a precondition
to crediting all the income of a young wife.
However, at the central offices .of these same
institutions opinion differed as to the need for
these letters.35 The lack of consistent policy and
resultant confusion is illustrated by the following cases.
A young Hartford couple applied for a 90
percent loan on a $16,000 home. The husband
earned approximately $10,000 a year; his wife,
$9,500. Their only major long term obligation
was a monthly $200 car payment. At first the
savings and loan the couple applied to for a
mortgage loan was reluctant to approve the
mortgage based on the husband's income alone.
In order to count the wife's income, the institution asked for a baby letter. The couple refused.
Ultimately, the loan was approved, but the
couple was never informed what part, if any, of
the wife's income was counted.
In another case a married woman was asked
by the broker-builder-seller of the property to
file a baby letter, which she did. Subsequently,
however, the lending institution assured her
that no letter was on file. The institution also
informed her that her income had not been
counted. In this case the broker assumed that
35 At one lending institution, one vice president
would require a baby letter while another would not.
In general, executives at the central level in the lending
establishments favored full inclusion of the wife's
income, unlike more conservative branch managers.

the wife's income was necessary and that a
baby letter had to be presented. Neither
assumption was correct.
Working wives with preschool age children
are the least likely of any female subgroup to
have their income fully counted towards
maximum mortgage allowance. Lenders raise
questions and make determinations relying on
their own assumptions about the likelihood of
more children, the costs of child care, and the
length of time spent away from the job after
childbirth. A branch manager at one savings
and loan told Commission staff that his decisions on crediting a working wife's income are
based, in part, on his observation that a woman
usually does not return to work until a year
after the birth of a child. During that time her
income will not be available for mortgage payments. This attitude is common among Hartford lenders. They are reluctant to count more
than 50 percent, if that, of a young mother's
income, predicting that she will again become
pregnant and drop out of the work force for at
least a year during the early mortgage period.
The case of one young Hartford couple
clearly illustrates the effect this policy has on
the ability to purchase a home. The husband,
23 years of age, was a fifth grade teacher who
earned an annual salary of $8,574. His wife, 22
years of age, was a secretary earning $5,600.
They had two children, a 5 year old and an
The couple first contacted a savings and loan
in October 1972 and applied for a $16,150, 8
percent, 30-year mortgage on a house priced at
$17,000. The wife was not then employed.
Although the application was approved by the
Mortgage Guaranty Insurance Corporation
(MGIC), 36 it was subsequently rejected by the
lender because the husband had cosigned an
automobile loan for his brother.37
Two months later after the husband had
removed his name as cosigner on the auto loan,
36 MGIC is one of a number of State-licensed private
mortgage insurance companies which insure lending
institutions against loss, generally on the top 20 percent
of mortgage loans.
The rejection and reason therefor were communicated orally to the applicants by their broker.


the couple reapplied to the savings and loan.
By this time the wife had assumed a position
as a full-time secretary with the University of
Hartford. Several weeks later they received a
second notice of rejection from the lending institution. This time the reason was that the
wife was young, in her child-bearing years,
and, therefore, likely to become pregnant and
drop out of the work force.
This case illustrates the perplexing, sometimes erratic, behavior of mortgage lenders in
processing applications from married couples.
The fact that the application initially was approved by MGIC, although subsequently rejected by the lender, suggests that the couple
was, at worst, a marginal risk for the mortgage
they sought, even though the husband was
subject to liability as cosigner on an auto loan
and the wife was not then working. Two
months later, the husband's liability as cosigner had been eliminated and the wife was
working. Given these two new sets of conditions, the couple had good reason for optimism
and resubmitted their application. Nonetheless,
it was rejected. The fact that the wife now held
a responsible, full-time position and earned a
substantial income apparently counted for
little in the lender's judgment.
Occupation.—Another consideration which
lenders take into account in crediting the working wife's income is the type of job she holds.
The income of women categorized as "professional" by lenders is counted more readily
than that of women whose jobs are considered
"nonprof essional." Although some central office
lending officials interviewed by Commission
staff insisted that type of occupation is not a
determining factor in income allowance, most
branch managers interviewed stated that they
consistently differentiate according to professional and nonprofessional categories. A woman
who is a store clerk or bank teller, for example,
would not have as high a percentage of her
income counted as a woman who is a business
executive, teacher, or nurse. The presumptions
are that professional jobs are stable, as are
the women who hold them, whereas nonprofessional jobs are short term and unstable.
Type of occupation does not represent an
independent factor considered by itself in

determining whether and how much to credit
the working wife's income. The wife's age and
the number and ages of the children also figure
in, and the various factors are weighed in an
imprecise way that defies objective analysis.
One lending institution official said that his
rule of thumb in crediting wife's income was
that, if the woman is in her child-bearing years,
she must hold a professional position and, even
then, not more than 50 percent of her income
would be credited. He would not under any
circumstances, however, count any income of a
woman in her child-bearing years who held a
blue-collar job.
A branch manager of another lending
institution stated that he allows 50 percent
credit toward the income of a working wife
under 35 and 100 percent credit of a working
wife over 35, regardless of the type of job she
holds, provided that she has been employed for
at least 1 year. Another branch manager of the
same institution, however, stated that he
would never allow 100 percent of the income
of a female blue-collar worker. Jobs in that
category, he said, are unstable.
The arbitrary character of the application
evaluation with regard to wife's income is
underscored in the following case. A Puerto
Rican couple applied for a mortgage with a
savings bank. They were both 29, childless, and
had been schoolteachers for the previous 5
years, earning a joint income of $20,000
annually. The couple applied for a $16,000
mortgage on a $20,000 home but were told that
their income was insufficient. They subsequently
obtained a mortgage at a savings and loan
where half the wife's income was counted,
giving them an adjusted income of $15,500.
This case demonstrates two operational rules
of conventional mortgage lending in Hartford.
First is the arbitrary nature of lender decisions
on counting a working wife's income. At the
first institution, rejection on grounds of
insufficient income clearly suggests that the
income of the wife, who held a well-paying
professional job, was totally discounted because,
at 29, she was within child-bearing age. At the
second institution half of the wife's income was
counted. Secondly, this case reflects the traditional view of lenders that the income of the

working wife, under the best of circumstances,
cannot really be relied upon. Even where
credit was given to the wife's income, she was
treated as half a wage earner rather than as a
full wage earner.

On the relationship between the income of the
working wife and pregnancy, FHA softens its

When the effective income is derived from
dual sources of occupational income, as in a
case when both husband and wife are
expected to be employed during the early
period of mortgage risk, risk due to possible
reductions in total occupational income
frequently will be increased because of the
greater probability that one or the other
mortgagor may suffer a loss of income. This
factor of risk is of particular importance
when the dual income is represented by the
salaries of young married couples.89

The principal element of mortgage risk in
allowing the income of working wives as
effective income is the possibility of its
interruption by maternity leave. Most
employers recognize this possibility and
provide for maternity leave, with job retention, as an inducement of employment. With
strong motives for returning to work any
failure to do so after maternity leave would
represent such a very small percentage of
volume that 40
it could be accepted as a calculated risk.
The "strong motive" standard, however, is
vague and open to individual interpretation.
FHA policy, while liberal at the national
level, is implemented at the local level according
to the facts of each case, thereby permitting
wide latitude in the exercise of judgment by
individual FHA officials. This local autonomy
causes some disquiet and misunderstanding
among the real estate community. For example,
despite the high national percentage of mortgages made in which the income of both
husband and wife is counted, two brokers in
Hartford believe that FHA will not count the
income of a married woman under age 36.
The brokers' belief is not groundless
because the mortgage table on which many
local brokers and lenders rely states, incorrectly, that FHA will not count the income of a
wife under 32 years of age.41
Veterans Administration (VA).—Until very
recently, the Veterans Administration treated
wives' income more restrictively than the FHA.
In February 1973, the Washington Post published an article which alleged that a lender
required a veteran and his wife, who were
applying for a GI loan, to disclose their method
of birth control through a physician's statement
and to take measures to prohibit conception
and/or terminate pregnancy in order to qualify
the wife's income.42 In response to this incident,

38 U.S., Department of Housing and Urban Development, Mortgage Credit Analysis Handbook for
Mortgage Insurance on One to Four-Family Properties
(1972), sec. 1-22. See also, U.S., Commission on Civil
Rights, Housing, Report for 1961, vol. 4, ch. 3.
39 Mortgage Credit Analysis Handbook, sec. 2-21.2.

40 Ibid., sec. l-22.b.
41 Mortgage Guides, Inc., The Mortgage Guide
(Portland, Oregon: 1962). The table summarizes FHA
guidelines in use in 1962.
42 Washington Post, Feb. 24, 1973, p. A-l. See also
letter from Carol K. Lewicke to the Federal Trade

Federal Housing Administration (FHA).—

The FHA's policy on giving credit to the wife's
income traditionally differs somewhat from
that of conventional lenders. FHA policy is to
count either all of the wife's income or none of
it. By the mid-1960's, according to FHA
records, all of the wife's income was counted in
75 percent of the FHA mortgages made where
both husband and wife worked. Today, this
figure approaches 90 percent. The significance
of these statistics must be qualified by the fact
that they apply only to mortgages that were
actually made. FHA does not maintain records
on unsuccessful mortgage applicants. Thus,
there is no way of knowing how many families
were unsuccessful in obtaining an FHA mortgage because the wife's income was discounted.
The standard used by FHA in crediting the
income of working wives is that "income and
motivating interest may normally be expected
to continue throughout the early period of
mortgage risk."38 The underwriting manual
still addresses somewhat conservatively the
risk involved in basing net effective income on
two wage earners.


the Veterans Administration issued a circular
to its field stations which attempted to establish
guidelines on treatment of wives' income.43
The circular denied the foregoing allegations:
. . . it is not now and never has been the policy
of the Veterans Administration to request or
demand veterans and their spouses to make
any such disclosures....
Further on, it qualified this assertion by saying:
If such a medical statement (supporting
evidence that a couple are unable to have
children) is voluntarily submitted by the
veteran to the lender, it cannot very well be
refused upon receipt in VA. However,...
VA would prefer that any such statements
received by builders and lenders be retained
by them.
The circular's counsel on the treatment of
wives' income was just as ambiguous:
A proper conclusion that the wife's income
may be considered toward the repayment of
the loan obligation requires a determination
as to whether her employment is a definite
characteristic of the family life; i.e., a
condition which normally may be expected to
continue. Her entire income may be included
if it is derived from steady employment and
her age, the nature and length of her employment, and the composition of the family
indicate it is reasonable to conclude that such
income is likely to be reliable in the future.
Unless that condition is met, only such portions of the wife's income as is determined
to be reasonable may be considered.44
On July 18, 1973, however, the Veterans
Administration approved a new circular
stating "in consideration of present-day social
and economic patterns, the Veterans Administration will hereafter recognize in full 'both the
income and expenses of the veteran and spouse
in determining the ability to repay a loan... ,"45
All of the VA's regional offices have been
instructed that they should no longer discount
income on account of sex or marital status in
making this determination.
Commission, Bureau of Consumer Protection, Dec. 20,
1972, available in Commission on Civil Rights files.
U.S., Veterans Administration, Department of
Veterans Benefits Information Bulletin no. 26-73-1,
Feb. 2, 1973.
44 Ibid.
45 U.S., Veterans Administration, Department of
Veterans Benefits Circular no. 26-73-24, July 18, 1973.


The Federal Home Loan Bank Board.—

Responding to a 3-year drive by 13 public
interest groups, the Federal Home Loan Bank
Board issued potentially far-reaching guidelines in December 1973 on nondiscriminatory
lending practices. The guidelines caution
against practices which may result in discrimination even without actual intent to
discriminate. They state that "each loan applicant's credit worthiness should be evaluated
on an individual basis without reference to
presumed characteristics of a group."46
The guidelines describe those underwriting
decisions as discriminatory which distinguish
credit-worthiness on the basis of age, sex,
and/or marital status. The discounting of a
working wife's income may result in discrimination against race as well as sex, they argue,
because of the greater reliance of the minority
family on the wife's income for housing and
other necessities.
The women with the greatest difficulty in
gaining access to mortgage finance are single
women—unmarried, widowed, separated, or
divorced women. Each is treated somewhat
differently by mortgage lending institutions,
but for all it is their status as women who are
not part of a male-headed household that is of
greatest significance to mortgage lenders.
Bias against the single individual is evident
in the FHA's underwriting manual:
The mortgagor who is married and has a
family generally evidences more stability
than a mortgagor who is single because,
among other things, he [s'he] has responsibilities holding him [her] to his [her]
Thus, unmarried persons—men or women—
are at a disadvantage in seeking to obtain a
mortgage. This disadvantage, however, is not
shared equally by men and women.
A widely held view in the mortgage lending
community is that single women must present a
stronger paper position than single men. Their
credit and income must be more secure than
46 38 Fed. Reg. 34653 § 531.8 (b).
47 Mortgage Credit Analysis Handbook, sec. 2-7a.

those of men of the same status, and their
credit histories must be more closely scrutinzed.
As a result, the filtering process is applied more
rigidly at each stage of the mortgage application procedure, from broker to branch manager
to formal application. The myth generating
this stringency holds that the female is
inherently unstable and incapable of conducting
her own affairs. She allegedly needs the protection of a male, usually a husband or father.
In the lending industry the myth translates into
a reluctance to grant a woman a mortgage
loan outright and often, a requirement of an
assumption48 or a male cosigner.
A peculiar consequence of the theory that
women need protection is the lenders' disinclination to grant a loan to a woman who wants
to purchase a multif amily dwelling, reasoning
that she would be unable to perform the necessary maintenance. Normally, "a man would do
the repairs himself whereas a woman has to
hire someone," one lending official argued.
According to this official, VA policy is even
stricter than his own. He cited the case of a
widow who worked part time and received
social security. She wanted to buy a multifamily property. He approved the loan, but VA
rejected the application on the ground of insufficient income. Based on his previous experience
with VA, the lender felt that this excuse was
used to camouflage the true reason for
rejection, which was the repair issue.

In the case of an unmarried younger woman,
the principal reason cited for denying
mortgages is the likelihood of marriage and
pregnancy, and consequent shift in economic
status, which serve as risk factors. One broker
told Commission staff that in his experience,
of all categories of single women, the young
unmarried woman has the most trouble
securing a mortgage.
Another broker said that the only way an
unmarried woman can get a mortgage is
through an assumption. He tried unsuccessfully
48 In an assumption, ultimate responsibility rests
with the original mortgagor. The second mortgagor
takes on, or assumes, payments of the original loan.

to secure financing on a home for a professional
woman who had worked for 23 years. Such
failures not only disappoint the individual;
they also influence the real estate community
to discourage similar clients. Assumptions,
however, are considered a safety device; should
the woman default, the institution can hold
the principal mortgagor liable.
Policies vary both among and within institutions with regard to unmarried women.
Officials of lending institutions at the central
level generally stress length of employment,
while branch managers and brokers emphasize
age of applicant and type of job. One branch
manager went so far as to assert that an
unmarried woman could obtain a loan only if
she had a professional career. The marginal
case, according to a loan officer, would be that
of the older, unmarried woman in a nonprof essional occupation, such as a waitress or
store clerk, and with only a modest downpayment. Even if she has a reasonably long record
of employment, it is unlikely that she would
be approved for a home mortgage, he said,
because her employment is considered unstable.

The widow applying for a home loan generally has a better chance of obtaining1 it than
other single women. She more often can rely
on life insurance proceeds, social security
payments, or settlement on an estate to provide
a healthy downpayment and assure-a regular
income. One lending official said that although
widows represent a variety of ages and economic
circumstances, if they have a sufficient downpayment and a guarantee of regular income,
their prospects for homeownership often are
relatively bright.

In Hartford, the separated woman, particularly if informally separated, is in an awkward
position in trying to purchase a home. Under
Connecticut law, a husband is liable for his
"wife's reasonable support while abandoned
[by him]."49 The husband's liability extends

22 Conn. Gen. Stat. Ann. Ch. 809, § 46-10


even to cases where the wife has an independent
One of the primary concerns of lenders in
making a mortgage loan is assurance of
unambiguous liability. For this reason, the
informally separated woman falls into a high
risk category. If she were approved for a
mortgage loan and then defaulted on payments,
lenders could not be certain that the husband
would be required to make the payments, even
assuming he were financially able to do so.
The reason for uncertainty is that the
husband's liability exists only if the separation
results from his abandoning the wife, not from
her abandoning him. Thus, under an informal
separation arrangement, the lender could not
be entirely sure that the husband was liable.
Under formal separation, the legal rights
and liabilities are much clearer. In Connecticut,
legal separation carries all the conditions of a
divorce except that the parties are not yet free
to marry again. Neither party is liable for the
debts incurred by the other, and a wife's right
to alimony, support of children, and financial
allowances are specified by the court. For this
reason, one mortgage company requires proof
of legal separation as a condition to considering
separated women for a mortgage loan.
Other mortgage lenders simply will not deal
with separated women at all, whether the
separation is formal or informal. The vice
president of one savings and loan association
flatly stated that, because of ambiguous liability, separated women are not eligible for
mortgage loans from his institution.
Despite the fact that FHA policy generally
weighs heavily against separated women, in a
recent case in Hartford, the local FHA office
did approve a separated woman for a loan
under the section 235 program.50 Initially, her
application was not processed because she was
only separated, not divorced, from her husband.
FHA counsel, however, reversed the decision
because in his view there was no question of
ambiguous liability, arguing that State law
so Title I, Section 235, of the Housing and Urban
Development Act of 1968 provides subsidies in the
form of interest reduction payments to mortgage
lenders on behalf of lower-income families to enable
them to purchase their own homes

permits a wife to own property with clear title
in her name even when informally separated
from her husband.
Aside from the problems associated with
their legal status, another reason why separated women have difficulty obtaining mortgages is that their status allegedly reflects
domestic strife. For example, the Federal
Housing Administration, traditionally skeptical
of discordant marital relationships, states in
its underwriting manual:
It has been demonstrated that inharmonious
domestic relationships are an important
cause for foreclosure. The determination as
to this risk will be dependent upon recognition of items in the credit report and personal
history of the mortgagor which give evidence
of family discord, pending divorce suits,
reconciliation after initiation of divorce
suits, and other items
which point to unstable
family conditions.51
This policy underscores the stigma imposed on
"domestic strife" and is especially unfair to
women who continue a long and stable informal
separation. It is contradicted by a recent study
that found no statistically significant relationship between marital status and loan delinquency or foreclosure.52

The divorced woman also has considerable
difficulty in obtaining a mortgage, both because
of the alleged probability of an unstable
economic situation and because of her social
position. Her financial circumstances are often
complex: she may rely on alimony, child
support, or an independent income alone, or
any combination of these sources.
The divorced woman who has a substantial
work history and a separate source of income
will be treated as any other single woman.
Differential treatment occurs when alimony or
child support payments are listed as contributing and fundamental sources of income.
Lenders generally will not rely on support
payments which are not court ordered even if

Mortgage Credit Analysis Handbook, sec. 2-7.
John P. Herzog and James S. Earley, Home
Mortgage Delinquency and Foreclosure (New York:
National Bureau of Economic Research, 1970).

there is a long history of reliable payments.63
One lender stated, however, that the pattern
of payments would determine their inclusion
in total income. The divorcee whose support is
court ordered, and her sole source of income,
has a fair chance of negotiating a loan if she
can make a reasonable downpayment or obtain
private mortgage insurance, and if her total
support can sustain the monthly payments.
Credit ratings are a significant factor in
mortgage applications, and a divorced woman
finds establishing credit particularly difficult
if she does not have her own credit rating
already. A divorcee shares the taint of any
adverse information in her former husband's
rating, even if she paid their bills promptly.
Thus, any negligence on his part would impair
her effort to secure independent credit.
Even when income and credit ratings are
sound, divorced women still may be turned
down arbitrarily for mortgages as in the following case. A 51-year-old divorcee with no
dependents, working as a supervisor at an
insurance company in Hartford, sought to purchase a three^bedroom, two-bath house in
November 1971. The asking price was $21,500;
the sales price was $20,000. At the time, her
annual income was $8,600, and she had worked
at the insurance company for 15 years. Her
credit standing was excellent and she maintained two department store charge accounts.
She was willing to put $5,000 down, thus
applying for a $15,000 mortgage.
She tried to apply for a mortgage at the
main offices of four lending institutions. At
one savings and loan she was told not to fill
out an application because she was "not
qualified" and the loan committee would not
approve it. No explanation was offered as to
why she was not qualified. At two others she
was told that she did not "fit their formula,"
i.e., 30 percent of income for housing expenses.
Having been turned down by three institutions,
63 This criterion has no basis in fact because support,
whether or not court ordered, is infrequently paid. For
instance, the Citizens Advisory Council on the Status
of Women has reported that in Wisconsin in 1972 only
13 percent of ex-spouses were in full compliance 10
years after the settlement; 70 percent had discontinued
support altogether.

she went to a fourth, a savings and loan, and
obtained a 25-year, T1/^ percent mortgage.

Chapter 5
Employment in Hartford Lending Institutions

The policies and practices of Hartford lending institutions discussed earlier operate with
a discriminatory effect on minorities and
women seeking mortgage loans. Many of these
policies and practices are not overtly or consciously discriminatory but are viewed by the
lending community as necessary elements of
prudent banking. In fact, they can be traced to
long-standing bank tradition and are based on
certain assumptions concerning the subordinate
role of racial minorities and women in society.
Banking traditionally has been a profession
dominated by white males. Those in positions to
make bank policy have been white males, and
the policies they have established have been
geared to facilitate credit for white males.
Racial minorities and women rarely have been
in positions to change or even influence these
Title VII of the Civil Rights Act of 196454
prohibits discrimination in employment, and
all lenders in Hartford are covered by this
statutory prohibition. The Commission examined the employment records of four Hartford
mortgage lending institutions to determine
minority and female representation generally
and their representation in decisionmaking
positions.55 (See tables 9 and 10.) The basic
findings of this examination are:
• Women are abundantly represented as
employees of these institutions but almost
entirely in low-level positions which carry no
54 42 U.S.C. 2000 e-2.
Data for one institution cover only the main
branch for 1971 because there were no comparable data
for 1969. The inclusion of this institution does not
distort the interpretation because it shows the same
patterns as the other institutions. For convenience, the
1971 data are treated as though they were for 1969.

authority to influence the policies of the
• Applying the discriminatory occupational
criteria which these lenders use in weighing
a woman's mortgage application, these women
would not qualify for a loan from the very
institutions which employ them.
o Minorities—men and women—are grossly
underrepresented in any positions with these
lending institutions but especially in decisionmaking positions.56
• Of equal importance, the situation has not
appreciably improved over the 3-year period
between 1969 and 1972.
During this period the number of women
employed at these institutions increased by 198,
all in office, clerical, and service jobs. The
number of female officials, managers, and
professionals declined by one, although the
total number of such positions increased by 29.
The number of minority women working as
officials, managers, and professionals increased
from one to five. The number of minority men
in such positions declined, from five to four.
The number of office, clerical, and service
employees increased by more than 260 positions
from 1969 to 1972, but the great majority of
new employees (75 percent) were white women.
The institutions employed an additional 64
white men in this category but added only 3
minority females and 8 minority males.
In 1969, women constituted 58.4 percent of
56 The May 1972 HUD Private Lending Institutions
Questionnaire showed that 10 percent of the employees
in 50 cities were minority employee?, with 4 percent of
the decisionmaking positions being filled by minorities
and 12 percent of the cashiers and tellers being
minority members.


the employees and by 1972 this figure had
increased to 59.7 percent.57 But, whereas in
1969, 6 percent of the female employees were
officials, managers, or professionals, by 1972
this figure had declined to less than 5 percent.68
The comparative statistics between 1969 and

The percentage of female employees who were
minority women remained constant at 2 percent both
S Minority women increased their percentage in this

1972 of minority and female employment by
Hartford lenders do not suggest that substantial
progress is being made. Until minorities and
women are more adequately represented in
positions to determine or influence lending
policy, it is unlikely that the policies and practices that serve to discriminate against these
two groups of homeseekers will be changed.
group from just under 2 percent in 1969 to 9 percent
in 1972.


Total number
Minority women
Spanish speaking
Asian American _
Minority men
Spanish speaking
Asian American _




Commission staff review of employment records of four Hartford mortgage institutions, April 1973.


Total number
Minority women
Spanish speaking
Asian American _
Minority men
Spanish speaking
Asian American _




Commission staff review of employment records of four Hartford mortgage institutions, April

Chapter 6
Summary and Conclusions

This report has examined mortgage lending
policies and practices in Hartford, Connecticut,
that bear on homeownership opportunities for
minorities and women. The Commission's
purpose has not been to uncover individual
instances of discrimination but to answer this
question: If left to operate in accordance with
traditional banking processes and standards,
will the system of mortgage finance in the city
assure fair treatment for minorities and
women ? The basic finding of this report is that
it will not. For minorities and women, the
mortgage finance system is a stacked deck—
stacked sometimes inadvertently, often
unthinkingly, but stacked nonetheless.
As the Commission and other agencies and
organizations have documented, mortgage
lending traditionally has been a closed community, operated largely by white male decisionmakers, and its standards have been geared
to facilitate service to white male customers.
Minorities and women have had great difficulty
in joining this community, either as decisionmakers or customers.
The principal problem for minorities in the
past was overt discrimination. Regardless of
their personal or financial worth, minorities,
simply because of race or national origin, were
considered less desirable risks than whites.
Moreover, it was deemed virtually unthinkable
to provide them mortgages for houses in nonminority areas. In the past, these discriminatory policies were openly admitted by representatives of the mortgage lending community
and stoutly defended as essential elements of
prudent banking, even by agencies of the
Federal Government charged with responsibility for supervising and regulating mortgage

Since the enactment of Title VIII of the Civil
Rights Act of 1968, mortgage lending discrimination on the basis of race or ethnic
origin has been unlawful. Public pronouncements advocating such discrimination are now
rarely heard. It is unlikely, however, that the
traditional banking attitudes and perceptions
about minorities, which developed and hardened over decades, have changed substantially
in the 6 short years since Title VIII was
enacted. The fact that mortgage lenders no
longer openly avow discriminatory practices
does not mean that they no longer engage in
such practices. Rather, it suggests that they
have gone underground.
In examining the mortgage lending system
as it relates to minorities, the Commission's
principal concern was to determine the extent
to which safeguards were provided to assure
against decisions based on racial or ethnic
discrimination rather than on objective credit
criteria. It also sought to determine whether
the system afforded sufficient opportunity for
minorities subjected to discrimination to have
their grievances redressed. The Commission
found that the mortgage finance system in
Hartford not only lacks sufficient safeguards to
assure against discriminatory decisions but
facilitates discriminatory rejection of minorities. The Commission also found that the
system affords little opportunity for such
decisions to be reversed.
The process of obtaining a mortgage is
arduous for everyone. But running the threestage gauntlet required to obtain a loan is even
more difficult for minorities. Before reaching
the final stage of formal submission of a mortgage loan application to the loan committee,

minorities must first clear two formidable
obstacles: the real estate broker and the loan
officer. Each of these first two stages carries
broad opportunities for discriminatory or
other irrational rejection.
Brokers may reject minority applicants on
the basis of their own bias. Further, because
brokers seek to stay in the good graces of
lending institutions, they prefer not to refer
questionable applicants who may not qualify or,
if approved, may default on the mortgage payment. Thus, brokers may reject minority
applicants because they think, rightly or
wrongly, that the lending institution frowns on
minority applications, or because they misunderstand the criteria used by the lending
institution. Moreover, this stage of the transaction is entirely .informal. Rejected minority
applicants usually are merely told that they do
not qualify for a mortgage loan and the matter
ends there.
Even if minority applicants clear the hurdle
of the broker, they are still one difficult step
away from a formal application. The second
hurdle is the loan officer, who also handles the
transaction on an informal basis. The loan
officer's decision to recommend or discourage
submission of a final mortgage loan application
is based upon a number of factors, including
some that are highly subjective, such as motivation, character, and the quality of the
applicant's domestic life. Furthermore, loan
officers, whose opportunities for career advancement depend in part on the default rate
on applications they refer for approval to the
loan committee, prefer to err on the side of
extreme caution. Indeed, they are reluctant to
accept applications which they feel may be
rejected by the loan committee, since this
reflects adversely on their judgment.
Even criteria that appear objective on the
surface often turn out on closer examination to
have subjective factors that discriminate
against minorities. Criteria such as the maximum permissible ratio of monthly payment to
monthly income, the definition of income,
credit standards, and appraisals are applied
inconsistently by Hartford lenders and have the
effect of screening out qualified minority

Thus, the system of mortgage finance, represented by the screening process and the subjectivity of many of the criteria on which
qualifications are measured, affords ample
opportunity for discriminatory rejection of
minorities. Even though discrimination in
mortgage lending may have gone largely
underground since enactment of Title VIII,
the Commission's assessment of the policies
and practices of Hartford lenders offers little
assurance that such discrimination has ceased
to exist.
While discrimination against minorities 'by
Hartford lenders is subtle, discrimination
against women is blatant. Minority women
suffer the double effect of both sex and race
Women as a class, unlike minorities, are
unprotected against discrimination in mortgage
lending under Federal law. Connecticut and a
number of other States now prohibit sex
discrimination in credit transactions, but
women, by their very status as women, nevertheless are openly considered questionable
risks by mortgage lenders. Their treatment
varies, depending upon whether they are
married, unmarried, widowed, separated, or
divorced, but none receives treatment equal to
that received by men.
The income of married women, a substantial
percentage of whom are gainfully employed, is
considered "secondary" and rarely credited
more than 50 percent, if at all, in determining
a family's financial status. This policy works
considerable hardship on all families for whom
the wife's income is essential. However, it
compounds the problems of minority families,
a substantial percentage of whom rely on the
wife's earnings to meet their needs. The policy
of discounting- some or all of a working wife's
income has a doubly discriminating effect on
these families, as they are thus penalized
because of both race and sex.
The policies of mortgage lending institutions
on the discounting of a working wife's income
vary widely from institution to institution and
frequently within the same institution. Some
general standards do exist, however. The most
favored working wife is beyond child-bearing
years, holds a job considered "professional,"

and demonstrates a consistent pattern of continued employment. She has a good chance of
having all or most of her income credited by
the mortgage lending institution.
The least favored working wife is the young
woman of child-bearing years, who may have
young children, and who holds .a job considered
"nonprofessional." This class of working wives
is viewed skeptically by the mortgage lending
community as "unstable." Certain assumptions
are made about her regardless of her real situation. One is that, if she has no children, she is
likely to and will leave her job, at least for a
time, thereby reducing the family income.
Another is that, if she already has young
children, she is even more likely to have additional children. Again, she allegedly will leave
her job, at least for a time. The third assumption is that her "nonprofessional" job is unstable and that somehow makes her unstable.
These assumptions add up to a composite
picture of a person in whom lending institutions place little reliance. Therefore, her income
is automatically discounted, either substantially or entirely. Moreover, whether the family
is approved or disapproved, they frequently
never learn if, or to what extent, the wife's
income was credited.
The single woman has great difficulty in
gaining access to mortgage finance. The fact
that she is without the protection of .a male
makes her suspect to the lending community as
a credit risk. The image of women as "weaker
vessels" also makes lending institutions reluctant to approve mortgage loans, particularly on
multifamily dwellings, on grounds that women
are unable to perform the necessary maintenance.
The young, unmarried woman has the most
trouble securing a mortgage, principally because of the assumption made by lenders that
she will marry, have children, and stop
working, thereby reducing her economic status.
The widow generally is in a more advantageous position, since she often can rely on life
insurance proceeds, social security payments,
or the proceeds of her husband's estate to
provide a healthy downpayment and assure a
steady income.

The separated woman is in an awkward position in seeking to obtain access to mortgage
finance. One reason for this is her uncertain
legal status for debt liability, particularly if
the separation is informal. Another reason is
that her status is assumed to reflect domestic
strife, an added suspect factor, according to
The divorced woman also has considerable
difficulty obtaining a mortgage, both because
of the alleged probability of an unstable
economic situation and because of the social
stigma attached to divorce. If her support is
court ordered, her chances for obtaining a
mortgage are enhanced. If not court ordered,
they are diminished. Furthermore, unless she
has established independent credit, any adverse
information in her former husband's credit
rating reflects on her and further diminishes
her chances to obtain a mortgage.
The Commission also inquired into employment of minorities and women by Hartford
mortgage lenders, particularly in decisionmaking positions. It found that, while women
constitute a majority of the employees at the
institutions surveyed, few occupy positions in
which they can determine or influence lender
policy; the vast majority, in fact, are in clerical and service occupations. Blacks and Puerto
Ricans—both male and female— are scarce in
every level of mortgage finance institutions.
The system of mortgage finance in Hartford,
under which minorities and women are inequitably treated, reflects a reluctance by the
lending community to alter traditional policies
and standards, even though many are unrealistic and others facilitate illegal acts. Discrimination on the basis of race or ethnic origin is
prohibited under Federal and State law, but
the mortgage lending community adheres to a
system under which such discrimination persists, unabated and undetected. Sex discrimination in mortgage finance, although not yet
prohibited by Federal law, is prohibited by
laws recently passed in several States, including
Connecticut, and is totally at odds with the
reality of modem-day America in which
women are an increasing and substantial part
of the labor force. Yet mortgage lending
institutions cling to images of women as un35

stable, unreliable, and in need of male
Reform is clearly needed. One alternative is
for mortgage lending institutions, themselves,
to reexamine their policies and institute the
changes necessary to assure that minorities
and women are treated equitably. The Commission, however, recognizes the severe limitations
of relying on voluntary reform. The agencies
that supervise and regulate most of the mortgage lending institutions in Hartford and
throughout the country should, therefore, require that the needed reforms be instituted.
On several occasions in recent years, the
Commission, other Federal agencies, and
private groups have sought to point the direction for such reform. These recommendations
are still valid. Lending institutions should be
required to maintain records of the race or
ethnic background and sex of mortgage
applicants and persons who make oral inquiries
about home loans. Such data is urgently
needed as a basis for uncovering and correcting
patterns of discrimination. Otherwise, the
burden of redress rests entirely on the complaint process, a most inadequate means of
remedying discrimination. The regulatory
agencies, especially the Federal Deposit
Insurance Corporation and the Federal Home
Loan Bank Board which have considered such
a requirement, should move with speed to
require member institutions to initiate an
effective data collection system.59
Another way to generate reform is to require
lenders to provide homeseekers with written
statements of the criteria used in determining
their eligibility for a mortgage. Lenders also
should be required to notify in writing rejected
applicants and persons advised against making
application, informing them of the reasons
for their rejection. These steps would dis59

The Federal Reserve System, the Federal Deposit
Insurance Corporation, the Comptroller of the Currency, and the Federal Home Loan Bank Board recently
have implemented an experimental program to collect
racial and ethnic data over a 6-month period in 18
cities during 1974. The objective is to develop a recordkeeping requirement for racial data on the disposition
of mortgage loan applications. The information required
under the experiment includes the applicants' age, sex,
marital status, and financial situation.


courage loan officers from arbitrarily dissuading or rejecting applicants, as such actions
would be matters of public record.
Examiners from the financial regulatory
agencies should be charged with the responsibility, of detecting discrimination by lenders. To
this end audits and examinations of lender
practices must be expanded. In particular, the
Federal Home Loan Bank Board should
establish a monitoring system to assure that
its newly established guidelines are being
Title VIII of the Civil Rights Act of 1968
(the Federal Fair Housing Law) must be
amended to prohibit discrimination based on
sex. Single women and working wives could
then more easily fight sex discrimination in
the courts.
Unless these measures are instituted, equal
housing opportunity will remain for most
minorities and women a slogan without