Editorial: Try harder on loans for poor people

Friday, Oct. 31, 2003 | 4:58 a.m.

WEEKEND EDITION Nov. 1 - 2, 2003

Private lenders and state officials have had more than a week to respond to a national study that showed Nevada was second-worst in the nation in 2002 regarding home loans to low- and moderate-income people. The figures cited in the study also showed the likelihood that many loan applications were turned down because of discrimination against minorities. Although the report reflects terribly on lending institutions and state government, neither is mobilizing to dispute the figures or deny the study's conclusion.

Banks and mortgage brokers deny that any of their practices fit the definition of redlining, which is to illegally deny loans to people based upon where they live. They also point to various loan programs they have for applicants with low and moderate incomes. But, tellingly, they do not refute the study's findings.

Responding to the study, state Treasurer Brian Krolicki said he would use the state's leverage to pressure banks into meeting the credit needs of all Nevadans. The state uses several banks in managing its cash flow, which amounts to billions of dollars. Banks compete for that business and the winners are those that score the highest on the state's suitability test. One category on the test is a bank's Community Reinvestment Act rating. This is a federal rating based on how well a bank is meeting the credit needs of its community, including the needs of low- and moderate-income people. The higher the rating, the better it stands for the bank when it competes for federal accounts. In the competition for the state's 2004 banking contracts, Krolicki said 5 percent of each bank's score will depend on its CRA rating.

If Krolicki were new to the job, we would praise his response. But he has been treasurer since 1998 and was deputy treasurer for eight years before that. He should have been applying this kind of pressure all along to ensure greater opportunity for the state's poorer residents.

At the very least, the study shows that Nevada lenders are not being pro-active in creating opportunities for low- and moderate-income people to own homes. The organization behind the study -- ACORN, which stands for Association of Community Organizations for Reform Now -- clearly has performed a service for Nevada. Aside from the obvious benefits to the new homeowners, more home loans would lead to better neighborhoods and more tax revenue.