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THE WOMEN'S CENTER
From: Elizabeth Waugh-Stewart [mailto:financial@womenspace.org]
Sent: Monday, September 27, 2004 3:39 PM
To: Comments
Cc: cfc@womenspace.org
Subject: RIN 3064-AC50
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
Washington, DC
RE: RIN 3064-AC50
Dear Mr. Feldman:
As an affordable housing advocate, The Women’s Center urges you to
withdraw your proposed changes to the Community Reinvestment Act (CRA)
regulations. CRA has been instrumental in increasing homeownership,
boosting economic development, and expanding small businesses in the
nation’s minority, immigrant, and low- and moderate-income communities.
Your proposed changes are contrary to the CRA statute and Congress’
intent because they will slow down, if not halt, the progress made in
community reinvestment.
The proposed changes will thwart the Administration’s goals of
improving the economic status of immigrants and creating 5.5 million new
minority homeowners by the end of the decade. Since FDIC Chairman
Powell, a Bush Administration appointee, is proposing the changes, the
sincerity of the Administration’s commitment to expanding homeownership
and economic development is called into question. How can the
administration hope to promote community revitalization and wealth
building when it proposes to dramatically diminish banks’ obligation to
reinvest in their communities?
To highlight how the proposed changes in the CRA would directly
impact The Women’s Center’s low-wealth clients, I have included
information about the price of homeownership in Orange County, NC, where
The Women’s Center assists families with purchasing their first homes.
Currently, the average sales price for a home in Orange County is well
over $300,000. The number of housing units sold in Orange County during
the past four years has declined in every price category except for
those priced higher than $250,000. The number of homes sold at less than
this amount has decreased by 55% in the past four years as well (data
from Report of the Orange County Commissioners Affordable Housing Task
Force). For the families we work with, who are predominantly
female-headed, minority households, and whose incomes fall between 80%
and 50% of the local median income, these home prices are completely out
of reach. Should your proposal pass, even less affordable housing will
be available in our community for the families we serve, since banks
will no longer be required to provide loans to this type of client.
Under the current CRA regulations, 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 state-charted banks with assets
between $250 million and $1 billion. In place of the investment and
service parts of the CRA exam, the FDIC proposes to add a community
development criterion. The community development criterion would require
banks to offer community development loans, investments or services.
The community development criterion would be seriously deficient as a
replacement for the investment and service tests. Mid-size banks with
assets between $250 million and $1 billion would only have to engage in
one of three activities: community development lending, investing or
services. Currently, mid-size banks must engage in all three activities.
Under your proposal, a mid-size bank can now choose a community
development activity that is easiest for the bank instead of providing
an array of comprehensive community development activities needed by
low- and moderate-income communities.
The proposed community development criterion will result in
significantly fewer loans and investments in affordable rental housing,
Low-Income Housing Tax Credits, community service facilities such as
health clinics, and economic development projects. It will be too easy
for a mid-size bank to demonstrate compliance with a community
development criterion by spreading around a few grants or sponsoring a
few homeownership fairs rather than engaging in a comprehensive effort
to provide community development loans, investments, and services.
Your proposal would make 879 state-chartered banks with over $392
billion in assets eligible for the streamlined and cursory exam. In
total, 95.7 percent or more than 5,000 of the state-charted banks your
agency regulates have less than $1 billion in assets. These 5,000 banks
have combined assets of more than $754 billion. The combined assets of
these banks rival that of the largest banks in the United States,
including Bank of America and JP Morgan Chase. Your proposal will
drastically reduce, by hundreds of billions of dollars, the bank assets
available for community development lending, investing, and services.
Currently, the average sales price for a home in Orange County, North
Carolina, where The Women’s Center assists low-wealth families with
purchasing homes, is well over $300,000. The number of housing units
sold in Orange County during the past four years has declined in every
price category except for those priced higher than $250,000. The number
of homes sold at less than this amount has decreased by 55% in the past
four years as well (data from Report of the Orange County Commissioners
Affordable Housing Task Force). For the families we work with, who are
predominantly female-headed, minority households, and whose incomes fall
between 80% and 50% of the local median income, these home prices are
completely out of reach. Should your proposal pass, even less affordable
housing will be available in our community for the families we serve,
since banks will no longer be required to provide loans to these
low-wealth communities.
The elimination of the service test will also have harmful
consequences for low- and moderate-income communities. CRA examiners
will no longer expect mid-size banks to maintain and/or build bank
branches in low- and moderate-income communities. Mid-size banks will no
longer make sustained efforts to provide affordable banking services,
and checking and savings accounts to consumers with modest incomes.
Mid-size banks will also not respond to the needs for the growing demand
for services needed by immigrants such as low cost remittances overseas.
Banks eligible for the FDIC proposal with assets between $250 million
and $1 billion have 7,860 branches. All banks regulated by the FDIC with
assets under $1 billion have 18,811 branches. Your proposal leaves banks
with thousands of branches “off the hook” for placing any branches in
low- and moderate-income communities.
Another destructive element in your proposal is the elimination of
the small business lending data reporting requirement for mid-size
banks. Mid-size banks with assets between $250 million and $1 billion
will no longer be required to report small business lending by census
tracts or revenue size of the small business borrowers. Without data on
lending to small businesses, it is impossible for the public at large to
hold the mid-size banks accountable for responding to the credit needs
of minority-owned, women-owned, and other small businesses. Data
disclosure has been responsible for increasing access to credit
precisely because disclosure holds banks accountable. Your proposal will
decrease access to credit for small businesses, which is directly
contrary to CRA’s goals.
Lastly, to make matters worse, you propose that community development
activities in rural areas can benefit any group of individuals instead
of only low- and moderate-income individuals. Since banks will be able
to focus on affluent residents of rural areas, your proposal threatens
to divert community development activities away from the low- and
moderate-income communities and consumers that CRA targets. Your
proposal for rural America merely exacerbates the harm of your proposed
streamlined exam for mid-size banks. Your streamlined exam will result
in much less community development activity. In rural America, that
reduced amount of community development activity can now earn CRA points
if it benefits affluent consumers and communities. What’s left over for
low- and moderate-income rural residents are the crumbs of a shrinking
CRA pie of community development activity.
In sum, your proposal is directly the opposite of CRA’s statutory
mandate of imposing a continuing and affirmative obligation to meet
community needs. Your proposal will dramatically reduce community
development lending, investing, and services. You compound the damage of
your proposal in rural areas, which are least able to afford reductions
in credit and capital. You also eliminate critical data on small
business lending. Two other regulatory agencies, the Federal Reserve
Board and the Office of the Comptroller of the Currency, did not embark
upon the path you are taking because they recognized the harm it would
cause.
If your agency was serious about CRA’s continuing and affirmative
obligation to meet credit needs, you would be proposing additional
community development and data reporting requirements for more banks
instead of reducing existing obligations. A mandate of affirmative and
continuing obligations implies expanding and enlarging community
reinvestment, not significantly reducing the level of community
reinvestment.
CRA is too vital to be gutted by regulatory fiat and neglect. If you
do not reverse your proposed course of action, we will ask that Congress
halt your efforts before the damage is done.
Sincerely,
Elizabeth Waugh-Stewart, MSW
Director of Financial & Housing Programs
Cc: National Community Reinvestment Coalition
President George W. Bush
Senators John Kerry and John Edwards
Elizabeth Waugh-Stewart, MSW
Director of Financial & Housing Programs
The Women's Center
210 Henderson St., P.O. Box 1057
Chapel Hill, NC 27514
Ph: 919.968.4610; Fax: 919.932.3125
Web: www.womenspace.org
Email: financial@womenspace.org |
