The U.S. Department of Housing and Urban Development, aiming to strengthen fair lending practices, said on Wednesday it is creating a new Fair Lending Division that will review mortgage lending practices throughout the nation.

HUD in an announcement said it has hired a senior-level economist and has advertised to hire five fair lending specialists to enhance its capacity to investigate allegations of mortgage lending discrimination.

The new Fair Lending Division will investigate discrimination complaints against lenders who have allegedly violated the Fair Housing Act by refusing to make mortgage loans, refusing to provide the same information regarding loans, or imposing different terms or conditions for granting a loan, such as factors based on the race or national origin of the borrower. The division will also conduct investigations where lending patterns or other information suggests discrimination by a lender, but no individual has come forward to file a complaint.

In addition, the division will conduct HUD’s fair lending oversight of the Government-Sponsored Enterprises, Fannie Mae and Freddie Mac, to ensure their underwriting policies and practices comply with fair lending laws.

“We have launched a record number of investigations this year and have recently announced several major fair lending settlements,” said Kim Kendrick, HUD’s assistant secretary for Fair Housing and Equal Opportunity. “But in today’s lending environment, where consumers sometimes become victims of discriminatory practices, we have to do more to educate and protect potential homeowners and enforce the law.”

HUD’s announcement arrives on the heels of a new analysis of loan data by the National Community Reinvestment Coalition that suggests minorities are more likely to get stuck with high-cost loans because they are targeted by lenders, not because they are less creditworthy.

In its analysis of loan data collected by the Federal Reserve in 2005, NCRC staff found wealthier borrowers of all races were less likely to take out higher-cost loans than low- and moderate-income borrowers of the same race. But the study found the reduction in the use of high-cost loans by relatively wealthy whites was more pronounced than for minorities in the same income range — an indication that race influences lenders in their decisions on what loans to push.

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