A Washington-based civil rights group filed a lawsuit yesterday alleging that NationsBank Corp. and its mortgage subsidiary "intentionally discriminated" against black mortgage-loan applicants.
The Washington Lawyers' Committee for Civil Rights and Urban Affairs filed the suit in U.S. District Court for the District of Columbia on behalf of 11 black applicants who live in the Washington metropolitan area.
The suit, which seeks unspecified punitive and compensatory damages, alleges that NationsBank applied different sets of underwriting standards for white and black home-loan applicants.
The suit was filed 13 months after Maryland's Chevy Chase Bank agreed to settle a fair-lending claim brought by the Justice Department. The agency alleged that the bank avoided setting up branches in minority areas. Chevy Chase put an end to the dispute by agreeing to fund $140 million in loans to blacks.
"This complaint puts the banking world on notice that enforcement of our nation's fair lending laws will be pursued just as vigorously by private plaintiffs as by the Department of Justice," said John P. Relman, director of housing with Washington Lawyers. "Loan bias will be fought wherever and whenever it occurs."
Cathy Bessant, the executive who heads Charlotte, N.C.-based NationsBank's community reinvestment program, dismissed the charges, saying the banking company has had a "very aggressive outreach" program in the area aimed at generating home loans for blacks.
"I think this [suit] is misguided and misinformed," she said. "They have picked the wrong bank to target here. We are not settlement-minded, and they cannot scare us."
Ms. Bessant said mortgage loans to black applicants in the Washington area had grown to 357 in 1994 from 119 in 1992, while dropping to 414 from 515 for whites over the same period. But she acknowledged that of the blacks who applied for mortgage loans in 1992 and 1994, 27 percent were rejected, compared with rejection rates of 9 percent and 8 percent, respectively, for whites.
"I never said there wasn't a disparity," Ms. Bessant said. The difference in the rejection rates is "driven by more aggressive outreach, not by discriminatory behavior. When you cast a wider net, you get more applications that you have to deny."
The suit stemmed from a study released in December by Washington Lawyers that used Home Mortgage Disclosure Act data to investigate the lending patterns of dozens of banks and mortgage companies that do business in the Washington metropolitan area. It showed that blacks who applied for home loans at NationsBank were 12 times more likely to be turned down because of "allegedly poor credit" than whites, said Richard Ritter, co-counsel for the group and the former Department of Justice attorney who headed the Chevy Chase probe.