|
NEIGHBORHOOD HOUSING SERVICES OF NEW YORK CITY, INC.
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429
RE: RlN Number 3064-AC50
Dear Mr. Feldman:
I am writing to convey my deepest concern over several fundamentals
of the Federal Deposit Insurance Corporation's (FDIC) proposed changes
to the regulations governing the Community Reinvestment Act (CRA). The
proposition to raise the asset threshold for small banks to $1 billion
would seriously weaken CRA and undermine partnerships that Neighborhood
Housing Services of New York City (NHS) and other community development
organizations have cultivated and formed with banks. The proposed
changes will impede the decades of progress that has been made in
underserved communities.
For over twenty years, NHS has been working to provide low- and
moderate-income residents the opportunity to purchase their own home or
to provide them with the resources to maintain their homes. NHS Is a
not-for-profit organization working to increase and protect investment
in underserved low- and moderate-income neighborhoods, providing
education to inform, and assist people and to build communities
encourage and support neighborhood self-reliance. NHS accomplishes its
mission by rehabilitating housing and mixed-use properties; constructing
new affordable housing and providing pre- aid post-purchase education
which ultimately create neighborhood revitalization. Furthermore, NHS is
a member of NeighborWorks/Neighborhood Reinvestment Corporation, which
is a not for-profit organization chartered by the U.S. Congress that
supports over 200 community based organizations throughout the country
to promote community development and stabilization. In addition, NHS
also holds memberships with a variety of trade associations and advocacy
groups such as the Neighborhood Network Association (NNA) and the
National Community Reinvestment Coalition (NCRC).
CRA has been vital to the work of NHS. CRA not only provides an
incentive for financial institutions to develop relationship with NHS,
but it is also a critical force in maintaining these relationships and
in keeping banks committed to providing services and products to
residents in low- and moderate-income communities. CRA has been
instrumental in the increase of homeownership rates, bolstering the
economic development and enlargement of small businesses in New York
City and throughout the nation's low- and moderate-income neighborhoods.
Under the present CRA regulations, banks with. assets of at least
$250 million are graded by performance based evaluations which examine
their level of lending, investing and-services to low- and
moderate-income communities. The proposed changes will eliminate the
investment and service components of the CRA exam for state-charted
banks with assets between $250 million and $1 billion. In place of the
investment and service parts or the exam, the FDIC proposes to add a
community development criterion. The community development criterion
would obligate banks to offer community
development loans, investments or services.
This community development criterion in which the FDIC seeks to
impose would be clearly deficient as a replacement for the investment
and services tests. Mid-size banks with assets between $250 million and
$1 billion would only have to consider doing one. of three activities;
i.e., community development lending, investing or services. As it is
today, mid-size banks must engage in three activities. In FDIC's
proposal, mid-sized banks would no longer be required to engage in all
three activities but banks could
choose a community development activity that would be easiest or most
convenient to for them as opposed to providing a detailed range of
activities that are evidenced by the low- and moderate- income
communities' demonstrated need.
Moreover, we are concerned that the elimination of the requisite
tests will have injurious consequences for low- and moderate-income
communities that are underserved. The trepidation is that CRA examiners
would no longer expect mid-size banks to maintain or place branches in
low- and moderate- income communities thus restraining the investment in
these neighborhoods.
In furtherance of procuring bank investment, NHS has used CRA to
leverage and expand the availability of bank resources. Incentivized by
CRA requirements, lenders frequently work with NHS to capitalize
existing loan pools or to create new products designed to specifically
to target an underserved market niche. For example, NHS has a loan
product which is comprised of 15 banks called the Consortia. The
Consortia was created to provide loans to low- and moderate-income
residents who might not be considered for a loan from a convention bank
otherwise. The group of lenders pooled their financial resources
together in order to mitigate the risk of clients but provide the client
with the opportunity to improve their home through a home improvement
loan. This product meets a clear community need and implied a greater
risk for the banks and if not for CRA it is unlikely that the banks
would not have collaborated to create such a product.
Not only has CRA urged lenders to provide more appropriate products,
it has also encouraged lenders to become more involved in community
education efforts. NHS is proud to have over forty financial
institutions involved in providing lending, volunteer their professional
expertise and participate in the educational services to our clients.
NHS is concerned that if the proposed changes take effect, it could
dramatically impact the degree of investment in under-served low- and
moderate-income communities in urban and even rural areas. Although NHS
is proud of the banking relationships that we have cultivated with these
various financial groups, it would not have reached this level without
the underlining enforcement from CRA. Without such comprehensive
testing, what incentive would many banks have to continue the degree of
financial investment in many low- and moderate-communities? It is our
hope that many of these long-time partnerships would continue to work
with community development organizations in urban and rural America as
well as NHS.
On behalf of Neighborhood Housing Services of New York City, I
appreciate the opportunity to render comments of the proposed rule and I
firmly recommend that it be withdrawn and that no action be taken on the
current regulations governing CRA.
Thank you for your attention to this critical matter.
Sincerely,
Sarah Gerecke
Chief Executive Officer
cc: National NeighborWorks Association (fax: 310-674-6915)
National Community Reinvestment Coalition (fax: 202-628-9800)
President George W. Bush (fax: 202-456-2461)
Senator John Kerry (fax: 202-224-8525)
Senator John Edwards (fax: 202-228-1374)
Senator Hilary Rodham Clinton (fax: 202-228-0282)
Senator Charles Schumer (fax: 202-228-3027)
Congresswoman Nydia M. Velazquez, 12th District, NY (fax: 202-226-0327) |
