September 29, 2004
Office of the Comptroller of the Currency
250 E. Street, SW
Public Information Room, Mailstop I-5
Washington, DC 20219
RE: Docket Number 04-17
Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
200 Street and Constitution Avenue, NW
Washington, DC 20551
RE: Docket No. R-1205
Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
RE: RIN 3064-AC50
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
RE: No. 2004-25
To Whom It May Concern::
On behalf of the National Housing Development Corporation (NHDC), I
sincerely appreciate the opportunity to enter comments into the record
regarding the interim revisions to the Community Reinvestment Act that
the above agencies propose.
National Housing Development Corporation is a 501(c)(3) nonprofit
organization which serves as the nation's only acquisition intermediary
for the preservation of existing affordable apartments. We take pride in
preserving our nation's aging rental housing stock, much of which is
twenty-five or more years old, and in dire need of the reinvestment that
the Community Reinvestment Act (CRA) provides.
In its short history, the CRA has provided a tremendous boon in bank
participation in revitalization efforts in the communities where they
operate. CRA has been the impetus for economic development and
affordable housing development in declining and underserved
neighborhoods nationwide.
SMALL BANK THRESHOLD
As an organization operating nationwide, NHDC is concerned about the
proposals to increase the "small bank" asset threshold to $1 billion
from its current level of $250 million. NHDC opposes raising CRA's asset
threshold for small banks because we believe that over time, it will
have a particularly negative effect on investments in and services to
underserved communities.
The proposed increase in the small bank threshold would exempt
thousands of banks from the CRA requirement of demonstrable investments
in and service to low- and moderate-income neighborhoods within their
service areas. This would have the unintended consequence of halting or
reversing neighborhood redevelopment by pulling the plug on
well-established CRA-driven bank partnerships with community groups, as
well as on future investments in their 1 neighborhoods.
In December, 2001, NHDC closed its California Investment Pool I LLC (CalPool).
The nation's first private Affordable Housing Preservation Fund, CalPool
provided $15 million in equity to be used to preserve existing
affordable housing throughout California. $13.5 million of CalPool's
equity came from investing financial institutions whose investments were
significantly motivated by CalPool's eligibility for investment test
credit under CRA. Under the proposed rule change, two of our investing
banks would become small banks no longer subject to CRA's investment or
service test requirements.
In addition to the potential damage to urban investment, NHDC
believes that such a rule change could prove particularly devastating in
rural communities that are outside the service reach of large banks. For
these reasons, we urge your agencies to maintain the current asset
threshold for small banks at $250 million.
COMMUNITY DEVELOPMENT DEFINITION & USE OF METROPOLITAN DIVISIONS
Given the great needs in urban and suburban areas that are still not
fully met under the current CRA regulations, NHDC also opposes any
regulation that would weaken CRA's effectiveness in low- and moderate-
income non-rural communities by broadening the scope of qualified
community development activities to include a choice between low- and
moderate- income communities and rural areas.
Permitting lending institutions to elect which of the two they will
serve to satisfy CRA could prove particularly damaging to urban
low-income communities when coupled with the proposed new method of
defining assessment areas according to the Office of Management and
Budget's (OMB) new Metropolitan Divisions rather than the traditional
Metropolitan Statistical Area (MSA).
Given a choice between urban and rural investment, it is conceivable
that some banking institutions would steer their loans, investments and
services towards either rural areas or higher income, suburban
Metropolitan Divisions, resulting in the very redlining CRA was enacted
to combat.
Though NHDC does not recommend you do so, if your agencies ultimately
decide to redefine community development under the Act, they might
better achieve their objectives by continuing to use MSAs to define CRA
assessment areas and by augmenting the examination to require a mix of
both urban and rural activities. To address the issue of encouraging
financial institutions to participate in activities to revitalize and
stabilize areas affected by natural disasters, the Agencies could adopt
the Office of Thrift Supervision's (OTS) policy of providing scoring
consideration for lending and investment in natural disaster zones
within a bank's service area, and within a set period of time after the
disaster.
Again, National Housing Development Corporation appreciates the
opportunity to submit these comments for your consideration. Please do
not hesitate to contact me if you have any questions regarding NHDC's
position.
Sincerely,
O. Angie Nwanodi
Director of Policy
National Housing Development Corporation
Rancho Cucamonga, CA
