Federal Deposit
Insurance Corporation

Housing Assistance Council
 

January 9, 2006


Office of the Comptroller
of the Currency
250 E St. SW
Mailstop 1-5
Washington DC 20219
Docket No. 05-17
RIN #3064-AC97

Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St. NW
Washington, DC 20429
RIN #3064-AC97

Jennifer J. Johnson
Secretary,
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Docket No. OP-1240


To Whom It May Concern:

The Housing Assistance Council (HAC) is a national nonprofit intermediary
that improves housing conditions for the rural poor with an emphasis on the
poorest of the poor in the most rural places in the country.  HAC
appreciates that the federal banking agencies are considering adjusting the
guidance relating to the Community Reinvestment Act (CRA) to address
revisions that have been made to the regulations that implement CRA.  HAC
believes that CRA has been instrumental in increasing lending and investing
to rural communities across the country.  Making necessary changes to the
Interagency Questions and Answers to ensure that CRA continues to be an
effective tool in rural communities is imperative.

Overall, HAC supports the outlined criteria that will be used to identify a
distressed or underserved rural middle-income census tract.  Updating the
list of these census tracts on an annual basis will ensure that these
communities continue to meet the criteria outlined.  However, the proposed
question and answer that provides CRA points for financing middle- and
upper-income housing developments in distressed rural middle-income census
tracts should be changed.  The proposed guidance would allow the agencies
to provide credit for mixed-income housing developments.  HAC acknowledges
that mixed-income housing helps to overcome segregation by income and is an
activity worthy of CRA points, if the housing contains an adequate number
of low- and moderate-income families.

HAC is concerned that banks could receive significant CRA points for
financing middle- and upper-income housing and this potential should be
eliminated.  Instead, points should be provided for mixed-income housing
that addresses low-income housing needs first and foremost.  The proposed
guidance could encourage lenders to emphasize community development that
supports low-income housing by structuring a point allocation system that
is based on the extent to which the project meets low-income housing needs.
The regulators may also want to use the Interagency Question and Answer
document to provide examples of rural housing program opportunities.

Similarly, awarding CRA points for financing certain infrastructure
projects that service low- and moderate-income families is acceptable;
however, the CRA examiners should quantify the number of low- and
moderate-income families that are expected to use the infrastructure in
question.  Additional CRA points should be awarded for infrastructure that
has the most direct benefits to low-and moderate-income families.

Meeting the community development needs of communities impacted by natural
disasters is challenging.  It is appreciated that the agencies have
clarified how banks will receive favorable consideration in their Community
Reinvestment Act (CRA) exams for financing community development activities
in geographical areas impacted by natural disasters.  It is encouraging
that the federal agencies direct banks to focus on low- and moderate-income
families in these areas.  The agencies are providing more “weight” or
credit to community development activities that are most responsive to the
needs of low- and moderate-income individuals that have been impacted by
the natural disaster.  The proposal to provide CRA points for investments
that benefit families displaced by disasters also promises to be very
beneficial to rural areas, in particular, that are now home to a families
that cannot return home after Hurricane Katrina and future natural
calamities.

It causes some concern, however, that other proposed questions divert bank
financing to middle- and upper-income housing.  CRA should be implemented
in a manner that maintains the law’s central objective of ending redlining
and expanding access to credit for low- and moderate-income families and
communities.

The proposed questions on community development services provide an
important emphasis on low-cost banking services for low- and
moderate-income consumers.  Low-cost checking accounts, electronic
transfers, and remittances provide critical alternatives to payday loans
and other high cost fringe products.  Low cost banking services enable
low-income consumers to save and build wealth in contrast to usurious
products that strip wealth.  Once these proposed questions are finalized,
the agencies should consider providing CRA points for low-cost banking
services and also penalizing those banks that continue to offer abusive
products such as bounce protection, whose wealth stripping features are not
advertised clearly to consumers.

The CRA provision of service criterion for mid-size banks with assets
between $250 million to $1 billion should be clarified in the Interagency
Questions and Answers.  It should be made clear that this exam criterion,
which assesses a bank’s provision of services through branches and other
facilities, includes an examination of the number and percent of branches
in low- and moderate-income communities.  A recent Federal Reserve study
shows that racial disparities in high cost lending are lessened when banks
conduct the lending through branches as opposed to using brokers.  Thus,
locating branches in low- and moderate-income communities is vital to
promoting fair and equitable access to credit.

The most effective way to expand access to credit to underserved borrowers
is by implementing rigorous and comprehensive CRA exams that maintain focus
on meeting the credit and deposit needs of low- and moderate-income
borrowers and communities.  Responding to these comments on the proposed
Interagency Question and Answers will make CRA exams more rigorous.

Thank you for consideration of our comments.

Sincerely,


Moises Loza
Executive Director