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the Mortgage Bankers Association (MBA)—a group of mortgage fi nancing fi rms
not otherwise regulated by the federal government and not subject to HUD’s legal
144
authority—agreed to join a HUD program called the “Best Practices Initiative.”
Th e circumstances surrounding this agreement are somewhat obscure, but at least
one contemporary account suggests that the MBA signed up to avoid an eff ort by
HUD to cover mortgage bankers under the Community Reinvestment Act (CRA),
which up to that point had only applied only to government-insured banks.
In mid-September [1994], the Mortgage Bankers Association of America-
whose membership includes many bank-owned mortgage companies, signed a
three-year master best-practices agreement with HUD. Th e agreement consisted
of two parts: MBA’s agreement to work on fair-lending issues in consultation
with HUD and a model best-practices agreement that individual mortgage banks
could use to devise their own agreements with HUD. Th e fi rst such agreement,
signed by Countrywide Funding Corp., the nation’s largest mortgage bank, is
summarized [below]. Many have seen the MBA agreement as a preemptive strike
against congressional murmurings that mortgage banks should be pulled under the
umbrella of the CRA. 145
As the fi rst member of the MBA to sign, Countrywide probably realized that
there were political advantages in being seen as assisting low-income mortgage
lending, and it became one of a relatively small group of subprime lenders who
were to prosper enormously as Fannie and Freddie began to look for sources of
the subprime loans that would enable them to meet the AH goals. By 1998, there
were 117 MBA signatories to HUD’s Best Practices Initiative, which was described
as follows:
Th e companies and associations that sign “Best Practices” Agreements not only
commit to meeting the responsibilities under the Fair Housing Act, but also make
a concerted eff ort to exceed those requirements. In general, the signatories agree to
administer a review process for loan applications to ensure that all applicants have
every opportunity to qualify for a mortgage. Th ey also assent to making loans of
any size so that all borrowers may be served and to provide information on all loan
programs for which an applicant qualifi es…. Th e results of the initiative are promising.
As lenders discover new, untapped markets, their minority and low-income loans
applications and originations have risen. Consequently, the homeownership rate for
low-income and minority groups has increased throughout the nation. 146
Countrywide was by far the most important participant in the HUD
program. Under that program, it made a series of multi-billion dollar commitments,
culminating in a “trillion dollar commitment” to lend to minority and low income

144 HUD’s Best Practices Initiative was described this way by HUD: “Since 1994, HUD has signed Fair
Lending Best Practices (FLBP) Agreements with lenders across the nation that are individually tailored
to public-private partnerships that are considered on the leading edge. Th e Agreements not only off er
an opportunity to increase low-income and minority lending but they incorporate fair housing and
equal opportunity principles into mortgage lending standards. Th ese banks and mortgage lenders,
as represented by Countrywide Home Loans, Inc., serve as industry leaders in their communities by
demonstrating a commitment to affi rmatively further fair lending.” Available at: http://www.hud.gov/
local/hi/working/nlwfal2001.cfm.
145 Steve Cocheo, “Fair-Lending Pressure Builds”, ABA Banking Journal, vol. 86, 1994, http://www.
questia.com/googleScholar.qst?docId=5001707340.
146 HUD, “Building Communities and New Markets for the 21st Century,” FY 1998 Report , p.75, http://
www.huduser.org/publications/polleg/98con/NewMarkets.pdf.