MICHIGAN COMMUNITY REINVESTMENT CORPORATION
March 8, 2004
Robert E. Feldman
Executive Secretary Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street NW
Washington DC, 20429
Dear Officials of Federal Bank and Thrift Agencies:
As a member of the National Community Reinvestment Coalition,
Michigan Community Reinvestment Corporation urges you to withdraw the
proposed changes to the Community Reinvestment Act (CRA) regulations.
CRA has been instrumental in increasing access to homeownership,
boosting economic development, and expanding small businesses in the
nation's minority, immigrant, and low-and moderate-income communities.
Your proposed changes are contrary to the CRA statute because they will
halt the progress made in community reinvestment.
The proposed CRA changes will thwart the Administration's goals of
improving the economic status of immigrants and creating 5.5 million new
minority homeowners by the end of the decade. Instead, the proposed CRA
changes would facilitate predatory lending and reduce the ability of the
general public to hold financial institutions accountable for compliance
with consumer protection laws.
The proposed changes include three major elements: 1) provide
streamlined and cursory exams for banks with assets between $250 million
and $500 million; 2) establish a weak predatory lending compliance
standard under CRA, and 3) expand data collection and reporting for
small business and home lending. The beneficial impacts of the third
proposal are overwhelmed by the damage imposed by the first two
proposals. In addition, the federal banking agencies did not update
procedures regarding affiliates and assessment areas in their proposal,
and thus missed a vital opportunity to continue CRA's effectiveness.
Streamlined and Cursory Exams. Under the current CRA
regulations, large banks with assets of at least $250 million are rated
by performance evaluations that scrutinize their level of lending,
investing, and services to low-and moderate-income communities. The
proposed changes will eliminate the investment and service parts of the
CRA exam for banks and thrifts with assets between $250 and $500
million. The proposed changes would reduce the rigor of CRA exams for
1,111 banks that account for more than $387 billion in assets.
The elimination of the investment and service tests for more than
1,100 banks translates into considerably less access to banking services
and capital for underserved communities.
For example, these banks would no longer be held accountable under
CRA exams for investing in Low Income Housing Tax Credits, which have
been a major source of affordable rental housing needed by large numbers
of immigrants and lower income segments of the minority population.
Likewise, the banks would no longer be held accountable for the
provision of bank branches, checking accounts, Individual Development
Accounts (IDAs), or debit card services. Thus, the effectiveness of the
Administration's housing and community development programs would be
diminished. Moreover, the federal bank agencies will fail to enforce
CRA.'s statutory requirement that banks have a continuing and
affirmative obligation to serve credit and deposit needs if they
eliminate the investment and service test for a large subset of
depository institutions.
Predatory Lending Standard. The proposed CRA changes contain
an anti-predatory screen that will actually perpetuate abusive lending.
The proposed standard states that loans based on the foreclosure value
of the collateral, instead of the ability of the borrower to repay, can
result in downgrades in CRA ratings. The asset-based standard falls
short because it will not cover many instances of predatory lending. For
example, abusive lending would not result in lower CRA ratings when it
strips equity without leading to delinquency or foreclosure. In other
words, borrowers can have the necessary income to afford monthly
payments, but they are still losing wealth as a result of a lender's
excessive fees or unnecessary products.
We recommend that you withdraw the proposal to change CRA
regulations. Defend the rights of the community, move towards
strengthening CRA and encourage growth of banks investment and services
to Low- and Moderate-Income Communities.
Thank you for your consideration in this matter,
Veronica L. Williams
President & CEO
Michigan Community Reinvestment Corporation
P.O. Box 351274
Detroit, MI 48235
cc: President George Bush
Office of the Comptroller
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Thrift Supervision
