Only real estate agents located in predominantly white Atlanta neighborhoods have been invited to join the referral network of Citicorp Mortgage Inc., America's largest lender to homebuyers.
Citicorp's "targeted source list," obtained by The Atlanta Journal-Constitution, shows that all of the 298 real estate agencies solicited for the company's MortgagePower program in metro Atlanta have their offices in neighborhoods that are more than 75 percent white. MortgagePower accounts for 90 percent of Citicorp's business in Georgia.
Homebuyers who apply to Citicorp without going through an agent or broker in the referral network must pay higher fees, fill out more paperwork and wait an extra 30 days to find out if they get the loan.
Legal experts say the Citicorp marketing practice may violate the federal Fair Housing Act. Congress and federal courts have held that a marketing practice with a racially discriminatory effect is prohibited even if no discriminatory intent is proved.
Citicorp denies that it discriminates, intentionally or unintentionally.
Len Druger, national director of sales for Citicorp, said the internal documents are "clearly not a current list of what's being done. We cover the extreme Northside to the extreme Southside. If we're excluding any areas, it's not how we're doing business. The information you have is either outdated or inaccurate."
He would not provide a more current list, saying it was irrelevant because the company had not been successful at signing up many agents in any area.
Citicorp points instead to its success in signing mortgage brokers, including several who receive referrals from real estate agents in black neighborhoods. Mr. Druger named six minority-owned companies and three more that he said work in minority areas, accounting for 17 percent of the MortgagePower members.
"We're kind of proud of that record," Dr. Druger said. "We think that's a respectable showing. It's self-evident that we are not discriminating."
One of the firms that Citicorp cited as active in minority communities was Standard Home Equities, a white-owned firm in Conyers.
"You're not going to find any discriminatory actions on the part of Citicorp," said Jim Strickland, the company president. "I've sent about six applications, three of them black, and the only one I've gotten approved was one of the blacks."
Yet many of the most successful black real estate agents in metro Atlanta said they have not been invited to participate in MortgagePower. That includes officers of the Empire Real Estate Board, the black real estate society.
"I have never heard of this program or been solicited for it," said Barbara Clay, Empire's real estate agent of 1988, who has sold more than $1 million in real estate 12 years in a row.
Mr. Druger responded: "It beats me, frankly. I can't believe she never heard about it or never received any marketing material. We have been aggressively sourcing members in that market (Atlanta) for the last year and a half."
Revolutionary Loan Program
Eight years ago, Citicorp Mortgage was not among the top 100 mortgage lenders in America.
Last year it was No. 1.
Its rocket to the top is called MortgagePower.
Citicorp calls the program revolutionary, innovative, the no-hassle loan of the future.
To apply for a MortgagePower loan, a homebuyer must go through one of the nearly 4,000 real estate agents, mortgage brokers and financial counselors in 37 states who have signed agreements to refer clients to Citicorp Mortgage, a subsidiary of Citicorp, the largest banking company in America.
The homebuyer usually pays a fee of one-half percent of the loan amount to the agent or mortgage broker for the referral but receives a break of 1 1/2 percent of the loan amount off the normal Citicorp loan origination fee.
The homebuyer also fills out a shorter application, and the company promises a quick response, usually within 15 business days.
The program has been criticized by competitors, who claim it violates the 1974 Real Estate Practices Act, which prohibits kickbacks, or payments from lenders to brokers for referrals. But in 1986 Citicorp secured from the U.S. Department of Housing and Urban Development a legal opinion saying the program was not prohibited because the fee is paid by homebuyers, not the lender.
A second criticism is that real estate agents, who work for the seller of the home, not the buyer, might steer buyers to Citicorp because of the signed agreements, although Citicorp may not have the lowest interest rates in the market. In Atlanta, Citicorp is consistently above the market rate.
Nevertheless, MortgagePower works. It accounts for 90 percent of Citicorp Mortgage's $160 million business in Georgia, and 75 percent of the company's $13 billion business last year across the nation, company officials said.
Run by White Staff
Citicorp runs its MortgagePower program for Georgia from a Northside Atlanta office at Perimeter Center with an entirely white sales force, an entirely white corps of real estate attorneys and an entirely white group of real estate appraisers, according to Citicorp documents and employees.
It apparently has also called almost exclusively on white agencies in Atlanta's highly segregated real estate market.
Citicorp's list of targeted real estate agencies was given to the Journal-Constitution by a current Citicorp sales account executive and was verified last week by two former account executives. The current employee said the list, dated April 27, was the most current list.
Citicorp officials said they could not explain why agencies in black areas are not on the list. They said sales agents choose which real estate agents and mortgage brokers to solicit based on sales volume, not location or race.
"We just look for the largest volume potential. It's not hard to see who the biggest firms are," Mr. Druger said.
A former Citicorp marketing planner in the St. Louis office, who spoke on the condition that he would not be named, said MortgagePower was indeed targeted at high-volume agencies -- but only in certain upper-income postal ZIP code areas around the country.
"They called it targeted marketing. `Attractive areas' had a high `ZIP quality' based on occupational type, educational level, household income and home value," the planner said. "They would come up with a map, then find out what real estate firms had what market share, then go after the big ones.
"They knew that they were leaving out probably every minority ZIP in the country, but their view is that this is perfectly legal," the planner said. "It's cookie-cutter time. They have streamlined making money to an extreme."
Citicorp officials deny that any ZIP code maps have ever been used in MortgagePower.
Trouble Getting Citicorp Work
The Journal-Constitution reported in May that Citicorp had no black real estate appraisers on its approved list. A new list obtained in late November still includes no black appraisers.
In addition, a list obtained in late November of approved attorneys for real estate closings also includes no black attorneys.
Citicorp officials did not contest the accuracy of those lists.
A leading black real estate attorney and the president of the black real estate appraisal society say they and their peers have trouble getting business from Citicorp.
"For eight years I was with a major white firm, but when I started my own firm I suddenly wasn't good enough to do their closings anymore," said Robert A. Burroughs, a successful black real estate attorney in Atlanta. "You never know how much business you're missing."
The president of the Atlanta City Council, Marvin S. Arrington, a lawyer whose firm handles real estate closings, says Citicorp ignores him.
"They won't even return my phone calls," Mr. Arrington said. "I've been trying to get on their approved list for months."
In fact, Mr. Arrington is on Citicorp's "approved attorney list" -- but he is listed last, the only attorney listed without an address or phone number, and with the typewritten comment "(political)."
"What does that mean?" Mr. Arrington exclaimed when shown the list. "That means I'm blackballed! They put me on the list, but they don't give me any work."
Citicorp says the fault is Mr. Arrington's, that he failed to return the company's correspondence. The company said he was listed anyway because of his political status.
Covered by Fair Housing Act
Citicorp is not covered by the federal Community Reinvestment Act, which requires banks, but not mortgage companies owned by banks, to meet credit needs throughout their communities. However, Citicorp is covered by the Fair Housing Act and the Equal Credit Opportunity Act, which prohibit discrimination in marketing and credit decisions on home loans.
Legal experts said that marketing to a target audience by ZIP code or other geographic pattern, while a common practice of department stores and political fund-raisers, is dangerous ground for lenders.
"A McDonald's can do that. A dry cleaner's can do that. A mortgage company cannot do that," said Stephen M. Dane of Toledo, Ohio, a leading attorney who has represented plaintiffs in fair housing cases. "You can still be the market leader, still make a lot of money, still do a lot of business, but your marketing must include minority areas.
"If they are using ZIP codes, can you think of a better way to screen out minority neighborhoods than to use income or housing value?" Mr. Dane asked.
Finance discrimination cases are complicated, legal experts agree, but the key issue is simple.
"The question is, why did you do this?" said Robert G. Schwemm, professor of law at the University of Kentucky and author of a leading handbook on fair housing law. "If you have a real good reason that's race neutral, you win. If you have a reason for doing it that could be accomplished by another system that doesn't have such a racial impact, you lose."
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