AFFORDABLE
HOUSING RESOURCES
September
10, 2004
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington,
DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
As a member of
the National Community Capital Association (NCCA), National Campaign
for
HomeOwnership,
The National Conference-for.State
`House-:Boards, and on behalf of AffordableHousing Resources.(AHR),
I urge you to withdraw your proposed changes to the Community Reinvestment
Act (CRA) regulations. If enacted, the FDIC will define small banks.as
$1 billion and less with those banks having assets between
$250 million and. $1 billion subject to community development criteria.
Under current regulations, banks with assets of at least $250 million
have performance evaluations' that review lending,, investing; and
services to low- and moderate-income communities. You propose that
state-chartered banks with assets between $250 million and $1 billion
follow a community development criterion that allows banks to offer
community development loans, investments or services will result
in significantly fewer loans and investments in low-income communities,
the very communities that the CRA was enacted to serve. Currently,
mid-size banks must show activity in all three areas of assessment.
Under the proposed regulations, the banks will now be able to pick
the services convenient for them, regardless of community needs.
AHR is a non-profit organization with a goal of creating homeownership
opportunities for low-income families in Nashville, TN and surrounding
areas. In 2003 AHR, through loan funds, has invested $4,482,000 in
the community. The organization has also gained funding from various
lenders and other sources for over $21,512,000. As a result of this
support, AHR has assisted 284 families with down-payment, financing
and closing cost assistance. In addition, AHR has built and sold
over 650 homes to first-time homebuyers. With the approval of your'proposal,
AHR's funding will decrease significantly which will hinder the development
of better housing options and neighborhoods.
The proposed
regulation is in direct opposition to Congressional intent of the
law. In
a letter signed by 30 U.S. Senators to the
four regulatory agencies regarding an earlier proposal (February
2004) to increase the definition of "small bank" from
$250 million to $500 million, the Senators wrote, "This proposal
dramatically weakens the effectiveness of CRA. . .We are concerned
that the proposed regulation would eliminate the responsibility
of many banks to invest in the communities they serve through programs
such as the Low Income Housing Tax Credit or provide critically
needed services such as low-cost bank accounts for low- and moderate-income
consumers."
This proposal would remove 879 state-chartered banks with over $392
billion in assets from scrutiny. This will have harmful consequences
for low- and moderateTincome communities. Without this examination,
mid-size banks will no longer have to make efforts to provide affordable
banking services or respond to the needs of these emerging domestic
markets.
In addition, your proposal eliminates small business lending data
reporting for mid-size banks. Without data on lending to small businesses,
the public cannot hold mid-size banks accountable for responding
to the credit needs of small businesses. Since 95.7 percent of the
banks you regulate have less than $1 billion in assets, there will
be no accountability for the vast majority of state-chartered banks.
Your proposal
is especially harmful in rural communities. The proposal seeks
to have community development activities in rural areas counted
for any group of individuals regardless of income. This could divert
services from low- and moderate-income communities in rural areas
where the needs are particularly great. Wyoming and Idaho would have
NO banks with a CRA impetus to both invest in and provide services
to their communities. Vermont, Alaska, and Montana would only have
one bank each. Commenters advocating for this change state that raising
the limit to $1 billion would have only a small effect on the amount
of total industry assets covered under the large bank tests. I think
this would be very hard to justify to the low-income communities
in Idaho left without meaningful services.
Instead of weakening
the CRA, the FDIC should be doing more to protect our communities.
CRA covers only banks and does not differentiate
between stand-alone banks and banks that are part of large holding
companies. All financial services companies that receive direct or
indirect taxpayer support or subsidy should have to comply with the
CRA. Small banks that are part of large holding companies should
have to conform to the CRA's standards that are more stringent.
CRA exams look at a bank's performance in geographical areas where
a bank has branches and deposit-taking ATMs. In 1977, taking deposits
was a bank's primary function. In 2004, banks no longer just accept
deposits: they market investments, sell insurance, issue securities
and are rapidly expanding into more profitable lines of business
like electronic banking. Defining CRA assessment areas based on
deposits no longer makes sense. Customer base should be the focus
for CRA assessment. For instance, if a Philadelphia bank has credit
card customers in Oregon, it should have CRA obligations there.
The regulators also must protect consumers from abusive lending.
The FDIC's proposal completely ignores this issue. Predatory lending
strips billions in wealth from low-income consumers and communities
in the U.S. each year. Borrowers lose an estimated $9.1 billion annually
due to predatory mortgages; $3.4 billion from payday loans; and $3.5
billion in other lending abuses, such as overdraft loans, excessive
credit card debt, and tax refund loans.
Without a comprehensive standard, the CRA becomes nearly meaningless.
The regulation should contain a comprehensive, enforceable provision
to consider abusive practices, and assess CRA compliance accordingly,
and it must apply to ALL loans.
The impetus for the creation of the CRA was to encourage federally
insured financial institutions to meet the credit and banking needs
of the communities they serve, especially low- and moderate-income
communities. This proposal undermines the intent of CRA, and threatens
to undo the years of effort to bring unbanked consumers into the
financial mainstream. I urge you to remove this dangerous proposal
from consideration.
Sincerely,
Eddie Latimer
Executive Director
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