Case dismissed: lending discrimination--hard to detect, even harder to prove.

After much searching, Alyce Lyle found the home she wanted to buy. was a three-bedroom, single-level home in downstate Springfield with an asking price of $50,500, which was just doable on her substitute teacher's salary. But when Lyle made an offer of $50,500 she was turned down.

Believing she was rejected because she is black, Lyle complained to the U.S. Department of Housing and Urban Development. But by the time her complaint was heard, the house had already been sold. HUD found no evidence of discrimination and Lyle decided not to pursue her complaint further.

Lyle's situation is unusual--not because she stopped fighting her case, but that she complained at all.

A 2002 HUD-commissioned study found racially disparate treatment in mortgage lending in Chicago, as did the Reporter's own recent analysis. Yet few people have formally complained of discrimination. And there may even be fewer in the future since federal prosecutions of civil rights violations are declining and federal banking regulations may soon become less stringent.

Last year, HUD received about a dozen complaints alleging discrimination in mortgage lending in Illinois. In federal and state courts, few people sued lenders alleging discrimination. And local and state government bodies that take mortgage discrimination complaints also reported receiving few cases.

There may not be enough incentive since mortgage discrimination cases are extremely expensive, take months to complete and involve little payout. In addition, some people may not know they can file a complaint with HUD for free and without a lawyer.

But others might have no idea they have been the victims of discrimination.

Brian White, director for development and marketing at the Leadership Council of Metropolitan Open Communities, suggests that lawbreaking lenders have become sophisticated. Instead of simply denying applications from black candidates, lenders will offer loans with less favorable terms and higher interest rates. African Americans might then walk away under the impression that race did not factor into the process.

In the 2002 HUD study, applicants of different races were provided fabricated incomes and credit histories, which were nearly identical, and sent to apply for home loans with various lenders in the city.

"Blacks were denied basic information about loan amount and house price, told about fewer products, offered less coaching, and received less follow-up than comparable white homebuyers," the study concluded. usually must meet this standard--that similarly situated white applicants were treated differently. Typically, such a claim can only be supported by examining the lender's loan records, but plaintiffs are not likely to have access to those files.

Nonprofit agencies that might help say they can't afford to take on these cases. A typical case could cost between $60,000 and $70,000 because of the time-consuming document review involved in finding a pattern of discrimination, said Attorney Charles Petrol, formerly of the Chicago Lawyers' Committee for Civil Rights Under Law, a consortium of Chicago law firms through which attorneys donate thousands of hours each year to work on civil rights cases.

In cases reviewed by The Chicago Reporter, plaintiffs often didn't win back much money to cover those costs.

Petrof said private firms, which handle class-action lawsuits and can afford such costs, might avoid these cases because discrimination is so difficult to prove.

White said the U.S. Department of Justice, with its ability to spend a lot of resources on a case even without the likelihood of a large award, is the only body really equipped to take on such cases.

The department recently sued two major Chicago banks for alleged racially discriminatory practices. Both cases settled before going to trial. In 2002, the department alleged that MidAmerica Bank was not providing enough mortgages and services to low- and moderate-income communities, citing the fact that the bank had never opened a full-service branch office in a predominantly minority area. MidAmerica settled the case, agreeing to open two new full-service branches in nonwhite areas and invest $10 million in a loan program there.

In another case, filed in the summer of 2004, the Justice Department alleged that First American Bank had illegally avoided lending in minority areas. The case was settled in July with a stipulation that First American open branches in minority areas and spend $5 million on financing there.

But such suits are becoming less common. A recent study by a data research organization associated with Syracuse University revealed a downturn in the department's prosecution of all civil rights cases nationwide. A similar trend was observed by the U. S. Commission on Civil Rights.

And advocates claim that the one legislative tool that requires banks to serve low-income communities is quickly disintegrating.

In 1977, Congress enacted the Community Reinvestment Act, which was intended to ensure that the poor got financial services--like bank branches and loan offices--in their neighborhoods.

Banks regulated by the Act are required to keep extensive records about how they are serving low-income and minority communities. The banks are then evaluated on their performance in three areas.

Banks need at least an 83 percent score get an "outstanding" rating and at least a 46 percent for a "satisfactory" rating.

Few banks are rated poorly, said Gail Parson, lead housing staff for the National Training and Information Center, which does research and community organizing in Chicago. And even a negative rating doesn't necessarily mean the bank will be reprimanded in any way, only that it might be required to change its practices.

Yet federal regulators are working to implement a rule that would allow any bank with assets under $1 billion dollars-nearly all banks insured by the Federal Deposit Insurance Corp., or FDIG--to decide how much weight regulators should place on each of the evaluation areas.

Federal regulators argue the change would reduce the record-keeping burden on banks and allow them to emphasize their strongest areas.

But community groups contend the change weakens the Act and will allow banks to limit investing in minority areas.

Parson analogized the proposed rule change, saying: "If you were a kid going to school, you could not get a 46 percent and get a 'satisfactory.' And you certainly couldn't say, 'Teacher, couldn't I just be graded on social studies, because I suck at math?'"