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LONG ISLAND HOUSING SERVICES INC
September 17, 2004
Mr. Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a member of the National Community Reinvestment Coalition, Long
Island Housing Services (LIHS) is the only private, non-profit, fair
housing counseling and enforcement agency which provides its unique
services throughout Nassau and Suffolk counties. Its mission is to
eliminate unlawful housing discrimination and promote decent, safe and
affordable housing through advocacy and education LIHS provides
education and advocacy services related to Fair Housing and unlawful
discrimination, Tenants' Rights, and Mortgage issues related to First
Time Home Buyers, Refinancing, Delinquency and Foreclosure Prevention
and Anti-Predatory Lending. LIHS is the first and only HUD-approved
non-profit serving Nassau and Suffolk counties to receive AARP-HUD
certification for reverse mortgage counseling.
LIHS 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 an administration hope to
promote community revitalization and wealth building when it proposes to
dramatically diminish banks’ obligation to reinvest in their
communities?
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.
New York Nassau/Suffolk County
FDIC oversees 81 institutions in the state of New York, controlling
$161.3 billion in assets. Twenty-six of these banks, or 32%, have
between $250M and $1B in assets and would be added to those receiving
"small bank" exams. Overall, 74% of the FDIC-regulated banks in NY have
under $1B in assets and, if the FDIC proposal is passed, would therefore
fall by the wayside as a result of streamlined CRA exams
In the Nassau-Suffolk region, Long Island Commercial Bank (LICB)
would be impacted by these FDIC changes. With $545 million in assets and
12 branches, LICB would no longer be held to the rigorous "large bank"
CRA exam but instead would receive the streamlined exam. As a result,
community investments and services would be lost, as LICB would not be
required to provide them to its community any longer.
In the past, CRA has had a great impact on the LICB’s lending
performance. In March 2004, LICB received a "High Satisfactory" on the
Investment Test section of its CRA exam conducted by the FDIC. The high
marks were in response to its community development investments and
grants, which totaled $5.7 million. Since its previous CRA exam in
October 2000, LICB invested approximately $5.6 million in
mortgage-backed securities collateralized by mortgages to low- or
moderate-income borrowers.
LICB also provided grants totaling more than $143,000 to numerous
local community development organizations. These included non-profits
that provided long-term housing for persons suffering from mental
illness, food assistance programs, and services for low- income senior
citizens and others in need.
However, if the FDIC proposal were passed, the streamlined exam for
"small banks" that would be applied to LICB would no longer make
activities such as these an obligation for the bank.
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.
We agree with NCRC that the CRA is too vital to be gutted by regulatory
fiat and neglect. If you do not reverse your proposed course of action,
our only recourse will be to ask that Congress halt your efforts before
the damage is done. Thank you for your consideration and response.
Sincerely,
Michelle Santantonio, Executive Director
Long Island Housing Services, Inc.
3900 Veterans Memorial Highway, Suite 251
Bohemia, New York 11716-1027
Ph.: 631-467-5111 Fax: 631-467-5131
Copy: President George W. Bush
Senator John Kerry
Senator John Edwards
National Community Reinvestment Coalition/Noelle Melton |
