The Carter administration yesterday proposed regulations that officials said would reduce "redlining," the practice of denying housing loans in aging and often predominantly black city neighborhoods.
The most important of the regulations, proposed by the Federal Home Loan Bank Board, which regulates the savings and loan industry, would prohibit lending institutions from denying mortgages simply because of the age of a house or the condition of a neighborhood.
At the same time, however, the board reassured the industry it has no intention of forcing savings associations to make high-risk loans or marginal property that might endanger their solvency.
The administration announced the proposed regulations at a time when it is coming under increasing pressure from blacks and other constituencies to provide additional assistance to inner-city areas. President Carter has promised to develop a national "urban policy" by next year, and there is discussion within the administration of diverting some resources from the suburbs to the inner cities.
The President had planned to speak briefly at the White House announcement yesterday of the regulations but canceled to attend a meeting with the congressional Black Caucus, at which one of the most difficult urban problems - unemployment among blacks - was discussed.
In Carter's place, Vice President Mondale appeared to emphasize the administration's concern over urban decay. He called the regulations "the strongest action ever taken by a federal agency to prohibit mortage credit practices which discriminate against older neighborhoods."
In addition to the neighborhood and age-of-the-house provisions, the regulations would require savings and loan institutions to develop written standards to be used in processing loans, and to review advertising and marketing practices to ensure equal opportunity in home financing.
In addition, the bank board decreed that in making loans a savings and loan association should not give "undue consideration" to a loan applicant's arrest record, if any, education, previous home ownership or employment history.
The proposed regulations will not be adopted by the bank board for at cast 60 days, during which time various segments of the public are invited to comment.
The immediate reaction from the savings and loan industry yesterday was criticism.
In a two-page statements, the United States Legue of Savings Associations said. "From our point of view, there has been entirely too much emphasis on the denial of housing credit being primarily responsible for the decline of urban neighborhoods. In fact, the problems of urban neighborhoods go far beyond the granting or denial of housing credit."
The savings league said "all the housing credit in the world" will not make up for urban decay caused by inadequate public services in blighted neighborhoods.
"To divert attention from terribly difficult, major urban problems by pinpointing blame on housing lenders does not bring us any closer to solving those problems," the league said.
In enforcing the regulations, the bank board is empowered to issue "cease and desist" orders to any institution found guilty of violations. If that fails, the board can obtain a court order for the institution to cease a prohibited practice.
Bank board officials said the regulations are not designed to prevent a savings and loan association from considering the age of a house or condition of a neigborhood in making a housing loan. But under the proposed regulations, the officials said, savings and loan associations will be required to document findings that the age of a house or the neighborhood would make a loan unsound.
"They are going to have to justify to us - and we are going to let them justify by written documentation - why they can't make that loan or why that loan has to be made at a lesser figure," said Robert McKinney, chairman of the bank board. But no longer can they just say it is a bad neigborhood or it is an old house."