Washington
Low Income Housing Alliance
October 5, 2004
Robert E. Feldman, Executive Secretary
AATN: Comments/Legal ESS
Federal Deposit Insurance Corporation
RE: Federal Deposit Insurance Corporation proposed rulemaking, RIN
3064-AC50
Greetings:
The Washington
Low Income Housing Alliance (WLIHA) opposes the proposed revisions
to 12 CFR
345 regarding the Community Reinvestment Act
(CRA). We also oppose the options outlined in the proposed rulemaking,
but support adding rural areas to the definition of ‘community
development’ with safeguards to ensure benefit to low-income
and minority individuals. The proposed revisions, with the exception
of adding rural areas to the ‘community development’ definition,
would significantly undermine the intent of the Community Reinvestment
Act, reduce private investment in community development and subvert
the Administration’s goals of alleviating homelessness and
increasing home ownership. The value of the current regulations to
low-income and minority persons and communities far outweighs the
benefits to lending institutions of any regulatory relief.
The Washington Low Income Housing Alliance is a non-profit, membership-based
organization working to ensure that everyone has a safe, affordable
place to call home. Our members represent non-profit and for-profit
housing developers; emergency and transitional housing providers;
homeownership and anti-predatory lending organizations; local governments;
private and public funders; and many, many others..
The current CRA regulations have been essential to the successful
development of affordable housing and other community development
efforts throughout this state. The regulations have encouraged a
broad range of lending institutions to participate in community development
through purchasing Low Income Housing Tax Credits, providing creative
financing and flexible underwriting, making grants to community development
organizations and conducting outreach to low-income and minority
communities. These community development activities have enabled
many organizations to significantly leverage scarce public investments
in affordable housing.
Changing the
definition of ‘small bank’ to the asset
threshold of $1 billion would exempt 31 banks in Washington State
from the CRA standards for large banks, reducing the number of ‘large
banks’ in this state by 74%. We appreciate and recognize those
who would not diminish their community development activities as
result of these changes, but remain concerned about banks who may.
Most lending institutions did not participate in community development
activities before CRA was implemented.
We particularly oppose removing the holding company threshold from
the definition of small bank. This will further reduce the number
of institutions subject to the large bank test and allow holding
companies to restructure simply to evade CRA compliance. While community
banks have the interests of their communities at heart, they must
answer to and follow the directives of their holding companies that
are headquartered elsewhere.
The addition
of a mandatory community development criterion for banks with assets
between $250
million and $1 billion will not mitigate
the impact of increasing the small bank threshold. We are also opposed
to the proposed criterion that would allow banks to ‘perform
well’ by engaging in one or more community development activities
rather than all of the activities. This will encourage institutions
to narrowly focus their activities and ignore the broad range of
community needs. Community development is multifaceted and efforts
such as affordable housing, job creation and micro-enterprise development
are interdependent. The effectiveness of banks’ CRA activities
will be undermined by allowing institutions to choose a limited range
of community development activities.
WLIHA does support
adding rural areas to the definition of ‘community
development’ with safeguards to ensure benefit to low-income
and minority individuals. Rural areas generally have relatively limited
access to community development investments and services because
few if any banks have rural headquarters. Furthermore, rural communities
tend to have lower median incomes and their economies are subject
to the vagaries of economies based on agriculture and natural resource
extraction. These factors greatly complicate community development
activities and make rural areas less attractive markets for lenders.
Any definition
of ‘rural’ should not be based solely
on population. “Rural’ should also include areas whose
economies are dependent on traditional rural activities such as agriculture
and natural resource extraction. Communities included in Metropolitan
and Micropolitan Statistical Areas (MSA’s) should not be categorically
excluded from any definition of rural. MSA’s are designated
on the county level and often include small communities that rural
in nature, based both on population and economy.
We do appreciate
the FDIC’s
efforts to ease administrative burdens on community banks, but
have grave concerns about the proposal
at hand. Again, we urge that the proposed regulations not be adopted.
Thank you for this opportunity to comment.
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