Md. lender, HUD square off; Columbia National calls U.S. version of accord overstated 'We came out clean'; Agency insists action is 'groundbreaking' and 'system worked'


David J. Gallitano, chairman and chief executive officer of Columbia National Inc., and the Department of Housing and Urban Development went toe-to-toe yesterday, trading accusations and disputing figures a day after President Clinton announced that the mortgage company had agreed to a record $6.5 billion discrimination settlement.

Gallitano maintained yesterday that the settlement represented no additional financial commitment by the Maryland company. He said his company basically agreed to adhere to lending practices -- including the amount of money it makes available -- it already followed.

Gallitano claimed that the $6.5 billion settlement figure cited by HUD represents a projection over the agreement's five-year term of funds that the company would normally have spent or made available for such things as loans, training and advertising.

However, Ginny Terzano, spokeswoman for HUD in Washington, said the department was carrying out its mission.

"There was a claim of wrongdoing and we have a responsibility to check this claim," Terzano said. "It got the ball rolling. We could have gone further. In this case, Columbia agreed to make the commitments early in the negotiation process, thus obviating the need for a full-scale investigation and a formal charge of discrimination."

Gallitano released parts of the agreement the company signed in December along with internal documentation of the company's minority-lending practices.

The agreement states: "The lender will continue to support the fair lending initiatives it currently has in place and will, during the term of this agreement, undertake the commitments made herein to promote fair lending with low-to-moderate income and minority borrowers."

According to the document, Columbia agreed to make $1 billion available nationwide and $200 million in Texas to qualified low- and moderate-income families and members of minority groups. According to Gallitano, the company already makes that amount available.

"We went dancing through this thing, thinking we came out clean, we came out good. We are going to sign this agreement, it's going to confirm that we are continuing to do what we have been doing in the past.

"Every dollar amount [mentioned] in this agreement is what we gave them from our 1998 budget. They asked us, in fact the regulator that we were dealing with, his comment to us at the end of last year was, 'Let's put an agreement together just to put this thing to bed.' "

'Incredibly inaccurate'

Gallitano called "flatly untrue" the charge that his company in 1997 made just $51.6 million in loan originations -- what HUD called 5 percent of its mortgage volume -- to low- and moderate-income families and minority applicants.

"Just incredibly inaccurate. We did about $276 million to minorities and another $313 million to low- and moderate-income families," Gallitano explained, saying that represented 21.6 percent of Columbia's mortgage originations compared with the national average of 17.7 percent.

"Our history here is stellar," Gallitano said.

Gallitano -- who said his staff stayed up all night to gather details -- said he had not heard from HUD officials yesterday, but said he had sent the White House copies of the agreement and internal documentation of their lending practices to nonwhites.

In December, Columbia National -- after a yearlong dialogue with HUD -- agreed to a settlement involving a complaint that was filed in Fort Worth, Texas.

According to HUD, two government "testers" -- one white and one black -- visited a Columbia National office, inquiring about a loan. HUD asserts that the white loan applicant was told he qualified for a loan amount that was $20,000 more than the black applicant's and that more time was spent with the white applicant.

But Gallitano disputed the findings, saying that government "testers" didn't give loan officers key information -- such as Social Security numbers and credit reports.

Gallitano said he decided to settle with HUD after getting the suggestion from a HUD investigator that if his company didn't sign, the situation could get worse.

"The threat is, 'You either enter into an agreement with us or we are going to come in and order every loan file that you've done for the last 100 years.' That was not even implied. He was very clear about it," Gallitano said.

'System worked'

Terzano, the HUD spokeswoman, said the department stood by its characterization of the settlement. "The facts have not changed. This is a groundbreaking settlement. HUD did what it was supposed to do and the system worked. We are here to protect the rights of people. We should not lose sight of what took place."

Staff reporter Marcia Myers contributed to this article.

Pub Date: 1/20/99

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