Chicago
Community Loan Fund
From:
Juli Miller
Sent: Tuesday, September 07, 2004 4:07 PM
To: Comments
Subject: CRA - Technical Amendments re: MSAs
September 7, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, D.C. 20429
Regulation Comments
To Whom It May Concern:
I am writing from Chicago Communtiy Loan Fund (CCLF) to comment on
the proposal to use updated Office of Management and Budget (OMB)
definitions for metropolitan statistical areas, which in some cases
include a new geographic unit for "metropolitan divisions," to
define CRA assessment areas. CCLF is a nonprofit community development
loan fund that has worked extensively on community reinvestment regulation.
Our mission is to provide low-cost, flexible financing to nonprofit
community development organizations for affordable housing, economic
development and social service initiatives in low- and moderate-income
neighborhoods throughout the Chicago metropolitan area. To date,
the fund has closed 98 loans totaling over $14.8 million in financing,
which in turn has leveraged nearly $213 million in additional public-
and private-sector capital for those community projects. We feel
this proposal threatens to facilitate redlining in CRA assessment
areas and in turn, curb development in the low- and moderate-income
neighborhoods that we--and other nonprofit loan funds like CCLF--serve.
According to the proposal, banking regulators would adopt new OMB
definitions of metropolitan statistical areas (MSAs) for CRA analysis
and bank assessment area designation. The most concerning aspect
of the OMB changes is the addition of a geographic unit for "metropolitan
division." Twelve large MSAs that have some core region of at
least 2.5 million people will now be subdivided into metropolitan
divisions. These metropolitan divisions are defined as groups of
one or more contiguous counties that contain an employment center
or centers that are closely connected through commuting ties. Together
the metropolitan divisions form the overall MSA. Bank regulators
will use metropolitan divisions to calculate median family income
levels for CRA analysis, and financial institutions will be allowed
to designate one or more metropolitan division, up to an entire MSA,
as their assessment area.
While OMB's goal in creating the metropolitan division may be "to
recognize that in large MSAs, demographic and economic conditions
vary wildly," we fear that allowing banks to define their assessment
areas using metropolitan divisions may facilitate redlining and give
financial institutions stronger rationale for excluding portions
of an MSA that would previously have been included in an assessment
area.
In the Detroit-Warren-Livonia MSA, for example, there are two metropolitan
divisions. One is Wayne County, where Detroit is located, and the
other is the suburban collar counties surrounding Wayne. Wayne County
has a median family income far lower than the surrounding counties.
While separating these two metropolitan divisions may have the effect
of more accurately targeting low- and moderate-income census tracts
in both, it also isolates Wayne County, and sets up a condition where
financial institutions can easily exclude it from their CRA assessment
areas. If it is too difficult for a financial institution to lend
or build branches in the lower-income Wayne County, it may choose
to shift resources to the more affluent suburban Detroit metropolitan
division and remove Wayne County from its assessment area altogether.
Such a scenario is very possible under the proposed rule.
Although other MSAs do not offer examples as dramatic as Detroit,
we feel this proposal sets up a condition where banks have increased
rationale and regulatory backing for excluding less desirable parts
of MSAs from their assessment areas and shifting business away from
those communities. While we support more accurate targeting of low-
and moderate-income communities, we do not support allowing financial
institutions to use metropolitan divisions to designate assessment
areas. We ask you to reconsider this proposal.
Sincerely,
Juli Miller
Program Assistant
Chicago Community Loan Fund
29 East Madison Street, Suite 1700
Chicago, Illinois 60602
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