Federal Deposit
Insurance Corporation

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

RIN Number 3064-AC50

Dear Mr. Feldman:

I am writing on behalf of Cabrillo Economic Development Corporation (CEDC) to voice opposition to the Federal Deposit Insurance Corporation (FDIC's) proposed changes to the Community Reinvestment Act (CRA) regulations. In particular, we believe raising the Basset threshold for small banks to $1 billion would severely undermine partnerships that community based organizations have developed with banks.

CEDC is a 23 year old housing nonprofit serving Ventura and Santa Barbara counties. We also operate a Homeownership Center where we provide counseling workshops, and loan mortgage services. We service both rural and urban areas. We leverage private dollars in order to create new homeowners, revitalize distressed communities, and build single family and multi-family housing for low- to moderate-income families.

Since 1981 we have developed over 800 new units of housing. These impacts could not have been achieved without the significant participation of our bank partners – as investors, lenders and service providers.

Banks are vital partners in our work and the incentive provided by CRA has been instrumental in
building and maintaining these partnerships. CRA provides an incentive for financial institutions
to reach out and develop relationships and is a critical force in keeping banks committed to providing services and products designed specifically for low and moderate income consumers.  While some banks might continue to serve low and moderate income markets without the incentive of CRA, we firmly believe that most institutions would not.

CEDC and our bank partners have used CRA to leverage and expand the availability of bank products and services in low and moderate communities. Our banking partners know that CEDC is a solid business partner and they are attracted to the opportunity to invest in programs designed to serve emerging markets that most conventional banks overlook. CEDC also provides Homeownership Center services and products that allow non-traditional borrowers to become homeowners and access the marketplace.

Current CRA regulations require that banks with assets of $250 million or more must satisfy CRA performance evaluations that look at the lending, investing, and services provided by the bank to low and moderate income communities in their service area. Small institutions, defined under current regulations as banks with less than $250 million in assets, are subject to a streamlined CRA exam that does not include either an investment test or a services test.

Under the proposed changes the asset threshold for small banks would increase from $250 million to $1 billion, thus allowing more institutions to take advantage of the streamlined CRA exam.

Under the new regulations, 95 percent of the state chartered banks regulated by the FDIC would not be subject to the investment or services test. The proposed rule would have an even deeper impact in rural communities where 99 percent of the FDIC regulated banks have assets of less than $1 billion. This would have a devastating impact on investment in the communities we serve and on the community development industry as a whole.

Without the incentive of CRA, many banks will discontinue or drastically reduce the level of investment and services they provide to low and moderate income individuals and communities. The FDIC's proposal to replace the investments and services test with a new community development test for institutions between $250 million and $1 billion is not sufficient to stimulate new investment. The proposal would only require that these institutions engage in one of the three activities – lending, investing or services – and we firmly believe that all three activities are vital and banks should be required to engage in these activities throughout their service area.

CEDC also opposes the FDIC proposal that any community development activity in a rural area be deemed as a qualified CRA activity. Though CEDC shares FDIC's concern that rural areas need greater access to financial capital and services, it is clear the new proposed regulations ignore the needs of low and moderate income individuals and communities.

Many rural nonprofits are already struggling with the loss of small and medium locally-controlled banks as the banking industry is consolidated through bank mergers. This trend has had a significant impact on low and moderate income communities and resulted in the loss of community lending programs and local loan officers and a reduction in community development resources as grant-making and lending decisions are made at bank headquarters in urban centers which are far removed from their rural customers.

CRA provides one of the few tools by which community based organizations can influence the merger process and we will oppose regulatory changes designed to allow more institutions to bypass the full CRA exam process.

CEDC strongly recommends that the proposed rule be withdrawn and that no action be taken on the current regulations governing CRA.

Sincerely,

Rodney Fernandez
Executive Director
CEDC
11011 Azahar St
Saticoy, CA 93004