Federal Deposit
Insurance Corporation

National Community Reinvestment Coalition

December 6, 2005 

Robert E. Feldman 
Executive Secretary 
Attention: Comments/Legal ESS 
Federal Deposit Insurance Corporation 
550 17th Street NW 
Washington, D.C. 20429 

     Re: RIN 3064-AC95 

Dear Mr. Feldman: 

The National Community Reinvestment Coalition (NCRC), the nation’s economic justice 
trade association of 600 community group organizations, urges you to drop your proposal 
to permit state-chartered banks preempt certain state laws. 

NCRC believes the implications of your request are profound. Your proposal would 
allow FDIC-chartered banks to skirt strong consumer protection laws in states in which 
they make loans and follow weaker laws of the state in which they are headquartered. 
Ultimately, your proposal would strip states of their power to enforce and enact 
meaningful consumer protections for its citizens. 

A large number of states including North Carolina, New York, New Mexico, New Jersey, 
and California have enacted comprehensive anti-predatory lending laws in order to 
protect their citizens from the increasing amount of abusive lending in their states. If 
your proposal is granted, state-charted banks headquartered in states with weaker anti-
predatory laws will be able to override the rigorous and comprehensive laws when they 
make loans or buy loans from brokers operating in states like North Carolina and New 
Mexico. If this proposal is enacted, state-chartered banks will be tempted to place their 
headquarters in states with weak laws and then “export” these laws to other states in 
which they make loans. 

The end result would be a regulatory race to the bottom and the stripping away of states 
rights, leaving consumers without strong protections against predatory lenders. 

New HMDA Data Show Lending Disparities Persist 

Your proposal will further exacerbate predatory lending and fair lending disparities we 
have seen in the recent HMDA pricing data. A recent Federal Reserve study of the new 
2004 HMDA data confirmed two NCRC reports, which found that minorities continue to 
pay more for loans as they are more likely to receive high cost loans than whites. Even 
after controlling for income levels, loan amounts, metropolitan area, and type of lender, 
the Federal Reserve reported large disparities in a number of instances. 
For example, the “unadjusted” data shows that 32.4 percent of the conventional, first lien 
home purchase loans for African-Americans were high cost but that just 8.7 percent were 
high cost for whites. When controlling for borrower characteristics, the figures are 26.7 
percent for African-Americans and 8.7 percent for whites. When controlling for 
borrower and lender characteristics, the disparities remain large – 15.7 percent of the 
home purchase loans are high cost for African-Americans and 8.7 percent are high cost 
for whites. For Hispanics, the disparities are not as large but remain throughout the 
exercise – 20.3 percent high cost versus 8.7 for whites when not adjusted; 16.6 percent 
versus 8.7 percent for whites when controlling for borrower characteristics; and 12.2 
percent versus 8.7 percent when controlling for borrower and lender characteristics. 

NCRC conducted two studies this spring and summer using the 2004 HMDA data and a 
sample of large lenders. Our “unadjusted” data found results similar to the Federal 
Reserve’s unadjusted data. A study NCRC conducted in June (Preapprovals and Pricing 
Disparities in the Mortgage Marketplace, available via www.ncrc.org) found that the 
price of first-time homeownership is likely to be higher than for minorities and 
immigrants than their white counterparts. The NCRC sample showed that 28.7 percent of 
the conventional home mortgage loans issued to African-Americans was subprime in 
contrast to 7.8 percent for whites. Of all the conventional home purchase loans made to 
Hispanics, 15.4 percent were subprime, almost twice as much in percentage point terms 
as whites. Almost 12 percent of the conventional purchase loans received by Native 
Americans were subprime. An earlier NCRC study (The Broken Credit System, available 
via www.ncrc.org) found that after controlling for credit worthiness, subprime lending 
increased as the percent of minorities and elderly persons increased in neighborhoods 
across ten large metropolitan areas. 

With these consistent signs of price discrimination and steering, the new HMDA data 
suggests that predatory lending is a widespread problem and that states must have the 
authority to clamp down on predatory practices. 

CRA Regulations Being Weakened 

These disparities occur at a time when regulatory officials are eroding the laws and 
regulations that empower communities to thrive and prosper. The federal banking 
agencies have approved regulations changes that chip away at the Community 
Reinvestment Act (CRA), a law prohibiting lending discrimination against 
neighborhoods. Last year, the Office of the Comptroller of the Currency (OCC) joined 
the OTS in preempting state laws prohibiting predatory lending. In light of the recent 
HMDA data and the widespread scourge of predatory lending now is not the time to 
again weaken regulations for state-chartered banks. 

As we have stated the lending disparities are stubborn and persistent. The approval of 
your proposal would handcuff states and prevent them from enforcing their laws and 
protecting consumers from predatory lenders and price discrimination. The totality of 
further weakening of banking regulations in the guise of regulatory relief will further 
undermine the gains we have seen in CRA, but more importantly undermine the wealth 
building strategies of communities and individual consumers. 

NCRC strongly urges you to drop your proposal and to remind state-chartered banks that 
they have a moral and civic responsibility to respect the will and the rights of the states to 
protect its citizens. 

Thank you for this opportunity for making our views known. If you have further 
questions, feel free to contact myself or Noelle Melton, Research & Policy Analyst, at 
202-628-8866. 

Sincerely, 

John Taylor 
President & CEO