Federal Deposit
Insurance Corporation

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

RE: RlN Number 3064-AC50

Dear Mr. Feldman:

I am writing to convey my deepest concern over several fundamentals of the Federal Deposit Insurance Corporation's (FDIC) proposed changes to the regulations governing the Community Reinvestment Act (CRA). The proposition to raise the asset threshold for small banks to $1 billion would seriously weaken CRA and undermine partnerships that Neighborhood Housing Services of New York City (NHS) and other community development organizations have cultivated and formed with banks. The proposed changes will impede the decades of progress that has been made in underserved communities.

For over twenty years, NHS has been working to provide low- and moderate-income residents the opportunity to purchase their own home or to provide them with the resources to maintain their homes. NHS Is a not-for-profit organization working to increase and protect investment in underserved low- and moderate-income neighborhoods, providing education to inform, and assist people and to build communities encourage and support neighborhood self-reliance. NHS accomplishes its mission by rehabilitating housing and mixed-use properties; constructing new affordable housing and providing pre- aid post-purchase education which ultimately create neighborhood revitalization. Furthermore, NHS is a member of NeighborWorks/Neighborhood Reinvestment Corporation, which is a not for-profit organization chartered by the U.S. Congress that supports over 200 community based organizations throughout the country to promote community development and stabilization. In addition, NHS also holds memberships with a variety of trade associations and advocacy groups such as the Neighborhood Network Association (NNA) and the National Community Reinvestment Coalition (NCRC).

CRA has been vital to the work of NHS. CRA not only provides an incentive for financial institutions to develop relationship with NHS, but it is also a critical force in maintaining these relationships and in keeping banks committed to providing services and products to residents in low- and moderate-income communities. CRA has been instrumental in the increase of homeownership rates, bolstering the economic development and enlargement of small businesses in New York City and throughout the nation's low- and moderate-income neighborhoods.

Under the present CRA regulations, banks with. assets of at least $250 million are graded by performance based evaluations which examine their level of lending, investing and-services to low- and moderate-income communities. The proposed changes will eliminate the investment and service components of the CRA exam for state-charted banks with assets between $250 million and $1 billion. In place of the investment and service parts or the exam, the FDIC proposes to add a community development criterion. The community development criterion would obligate banks to offer community development loans, investments or services.

This community development criterion in which the FDIC seeks to impose would be clearly deficient as a replacement for the investment and services tests. Mid-size banks with assets between $250 million and $1 billion would only have to consider doing one. of three activities; i.e., community development lending, investing or services. As it is today, mid-size banks must engage in three activities. In FDIC's proposal, mid-sized banks would no longer be required to engage in all three activities but banks could choose a community development activity that would be easiest or most convenient to for them as opposed to providing a detailed range of activities that are evidenced by the low- and moderate- income communities' demonstrated need.

Moreover, we are concerned that the elimination of the requisite tests will have injurious consequences for low- and moderate-income communities that are underserved. The trepidation is that CRA examiners would no longer expect mid-size banks to maintain or place branches in low- and moderate- income communities thus restraining the investment in these neighborhoods.

In furtherance of procuring bank investment, NHS has used CRA to leverage and expand the availability of bank resources. Incentivized by CRA requirements, lenders frequently work with NHS to capitalize existing loan pools or to create new products designed to specifically to target an underserved market niche. For example, NHS has a loan product which is comprised of 15 banks called the Consortia. The Consortia was created to provide loans to low- and moderate-income residents who might not be considered for a loan from a convention bank otherwise. The group of lenders pooled their financial resources together in order to mitigate the risk of clients but provide the client with the opportunity to improve their home through a home improvement loan. This product meets a clear community need and implied a greater risk for the banks and if not for CRA it is unlikely that the banks would not have collaborated to create such a product.

Not only has CRA urged lenders to provide more appropriate products, it has also encouraged lenders to become more involved in community education efforts. NHS is proud to have over forty financial institutions involved in providing lending, volunteer their professional expertise and participate in the educational services to our clients. NHS is concerned that if the proposed changes take effect, it could dramatically impact the degree of investment in under-served low- and moderate-income communities in urban and even rural areas. Although NHS is proud of the banking relationships that we have cultivated with these various financial groups, it would not have reached this level without the underlining enforcement from CRA. Without such comprehensive testing, what incentive would many banks have to continue the degree of financial investment in many low- and moderate-communities? It is our hope that many of these long-time partnerships would continue to work with community development organizations in urban and rural America as well as NHS.

On behalf of Neighborhood Housing Services of New York City, I appreciate the opportunity to render comments of the proposed rule and I firmly recommend that it be withdrawn and that no action be taken on the current regulations governing CRA.

Thank you for your attention to this critical matter.

Sincerely,
Sarah Gerecke
Chief Executive Officer

cc: National NeighborWorks Association (fax: 310-674-6915)
National Community Reinvestment Coalition (fax: 202-628-9800)
President George W. Bush (fax: 202-456-2461)
Senator John Kerry (fax: 202-224-8525)
Senator John Edwards (fax: 202-228-1374)
Senator Hilary Rodham Clinton (fax: 202-228-0282)
Senator Charles Schumer (fax: 202-228-3027)
Congresswoman Nydia M. Velazquez, 12th District, NY (fax: 202-226-0327)