|
Los Angeles LDC, Inc.
April 5, 2004
Communications Division
Public Information Room, Mailstop 1-5
Office of the Comptroller of the Currency
250 E St. SW,
Washington 20219
Docket No. R-1181
Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington DC 20551
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St NW
Washington DC 20429
Regulation Comments, Attention: No. 2004-04
Chief Counsel¹s Office
Office of Thrift Supervision
1700 G Street NW
Washington DC 20552
RE: Comments Regarding Revisions to the Regulations Implementing the
CRA
Dear Officials of Federal Bank and Thrift Agencies:
I urge you to withdraw the proposed changes to the Community
Reinvestment Act (CRA) regulations. CRA has been instrumental in
increasing access to homeownership, developing multi-family housing,
boosting economic development, and expanding small businesses in the
nation’s minority, immigrant, and low- and moderate-income communities.
Low income and people of color communities have utilized CRA to abolish
redlining and discrimination in their communities.
I do not agree with the proposed changes that intend to: 1) increase
the asset threshold from $250 million to $500 million for banks to be
eligible for a small bank exam; and 2) establish a weak predatory
lending compliance standard under CRA.
I furthermore urge the federal regulators to reconsider the rejection
of a proposal which would have tied a bank’s CRA obligations to its
market share in a given area rather than just the location of its
branches. In California, Countrywide Home Loans and JP Morgan Chase are
two such entities that despite the high number of loans made in the
state, they have no CRA obligations. The agencies also failed
communities by continuing to allow banks to elect to include affiliates
on CRA exams at their option. Banks have the ability to manipulate their
CRA exams by excluding affiliates not serving low- and moderate-income
borrowers and/or those engaged in predatory lending. The federal
regulators should require that all affiliates be included on exams.
Small Bank Exams
Under the current CRA regulations, large banks with assets of at
least $250 million are rated by performance evaluations that scrutinize
their level of lending, investing, and services to low- and
moderate-income communities. The proposed changes will eliminate the
investment and service parts of the CRA exam for banks and thrifts with
assets between $250 and $500 million. The proposed changes will also no
longer reference affiliations with holding companies. It is expected
that these proposed changes would create streamlined exams for 1,111
banks that account for more than $387 billion in assets.
The elimination of the investment and service tests for more than
1,100 banks translates into considerably less access to banking services
and capital for underserved communities. For example, these banks would
no longer be held accountable under CRA exams for investing in Low
Income Housing Tax Credits, New Market Tax Credits and equity
investments in Community Development Financial Institutions (CDFIs).
Such investments have promoted economic development and multi-family
affordable housing development. Banks in this new category would no
longer be held accountable for the provision of bank branches and
checking/deposit accounts. Many banks with assets under $500 million are
located in rural areas. These banks would no longer be required to have
a continuing and affirmative obligation to serve the investment and
deposit needs of all the communities in which they are chartered and
from which they take deposits.
Predatory Lending
The proposed CRA changes contain an anti-predatory screen that will
actually perpetuate abusive lending. The proposed standard defines
"predatory" loans as those based on the foreclosure value of the
collateral and the borrower’s ability to repay. Both conditions have to
be met before the regulators will downgrade on a exam. The asset-based
standard creates a de-facto definition of predatory lending without
taking into account other predatory tactics. These tactics include: 1.
Targeting of minorities, low-income, and the elderly for sub-prime
lending; 2. Originating sub-prime loans to borrowers that could qualify
for prime loans; 3. Prepayment penalties; 4. Encouraging borrowers to
refinance unsecured debt as a means of increasing the loan size and
related point, fees, and commissions; 5. Selling of single credit
insurance products as part of the home loan; 6. Mandatory arbitration
provisions; 7. Excessive points and fees; 8. Yield spread premium
payments or other compensations that rewards brokers for steering
borrowers to higher cost products and larger loans; and 9. Purchasing
and investing in predatory loans as part of a mortgage backed security.
Any standard that does not address the aforementioned nine tactics
will allow CRA exams to be used to cover up predatory lending practices.
Rigorous fair lending audits and severe penalties on CRA exams for
abusive lending are necessary to ensure that low income and people of
color borrowers are protected.
The proposed changes regarding streamlined exams and the
anti-predatory lending standard threaten CRA’s statutory purpose of the
safe and sound provision of credit and deposit services. Full compliance
with CRA regulations needs to occur where lending and profit making
activities take place in substantial proportion. The proposed data
enhancements would become much more meaningful if the agencies update
procedures regarding assessment areas, affiliates, and the treatment of
high cost loans and purchases on CRA exams. CRA gives ordinary the
citizens the opportunity to have a voice regarding a bank’s lending,
investment and service components. Thank you for your attention to this
critical matter.
Sincerely,
Michael Banner
President and CEO
Los Angeles LDC, Inc.
1055 West 7th St., Suite 2840
Los Angeles, CA 90017 |
