From: Dafbcarol@aol.com [mailto:Dafbcarol@aol.com]
Sent: Tuesday, April 06, 2004 4:33 PM
To: regs.comments@occ.treas.gov; regs.comments@federalreserve.gov;
Comments; regs.comments@ots.treas.gov
Subject: CRA Proposal Letter
Richard S. Stewart
10234 Cameron
Detroit, MI 48211
April 6, 2004
Docket No. 04-06
Communications Division
Public Information Room, Mailstop 1-5
Office of the Comptroller of the Currency
250 E St. SW,
Washington 20219
Docket No. R-1181
Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington DC 20551
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St NW
Washington DC 20429
Regulation Comments, Attention: No. 2004-04
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street NW
Washington DC 20552
Dear Officials of Federal Bank and Thrift Agencies:
As a senior citizen and a minority resident in the city of Detroit,
I urge you to withdraw the proposed changes to the Community
Reinvestment Act (CRA) regulations. CRA has been instrumental
in increasing access to 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 because they will halt
the progress made in community reinvestment within the state
of Michigan.
Streamlined and Cursory Exams. Under the current CRA regulations,
large 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 banks and thrifts with assets between
$250 and $500 million. The proposed changes would reduce the
rigor of CRA exams for 1,111 banks that account for more than
$387 billion in assets.
The elimination of the investment and service tests for more
than 1,100 banks translates into considerably less access to
banking services and capital for underserved communities. For
example, these banks would no longer be held accountable under
CRA exams for investing in Low Income Housing Tax Credits, which
have been a major source of affordable rental housing needed
by large numbers of immigrants and lower income segments of the
minority population. Likewise, the banks would no longer be held
accountable for the provision of bank branches, checking accounts,
Individual Development Accounts (IDAs), or debit card services.
Thus, the effectiveness of the Administration’s housing
and community development programs would be diminished. Moreover,
the federal bank agencies will fail to enforce CRA’s statutory
requirement that banks have a continuing and affirmative obligation
to serve credit and deposit needs if they eliminate the investment
and service test for a large subset of depository institutions.
Predatory Lending Standard. The proposed CRA changes contain
an anti-predatory screen that will actually perpetuate abusive
lending. The proposed standard states that loans based on the
foreclosure value of the collateral, instead of the ability of
the borrower to repay, can result in downgrades in CRA ratings.
The asset-based standard falls short because it will not cover
many instances of predatory lending. For example, abusive lending
would not result in lower CRA ratings when it strips equity without
leading to delinquency or foreclosure. In other words, borrowers
can have the necessary income to afford monthly payments, but
they are still losing wealth as a result of a lender’s
excessive fees or unnecessary products.
CRA exams will allow abusive lending if they contain the proposed
anti-predatory standard that does not address the problems of
the packing of fees into mortgage loans, high prepayment penalties,
loan flipping, mandatory arbitration, and other numerous abuses.
Rigorous fair lending audits and severe penalties on CRA exams
for abusive lending are necessary in order to ensure that the
new minority homeowners served by the Administration are protected,
but the proposed predatory lending standard will not provide
the necessary protections. In addition, an anti-predatory standard
must apply to all loans made by the bank and all of its affiliates,
not just real-estate secured loans issued by the bank in its “assessment
area” as proposed by the agencies. By shielding banks from
the consequences of abusive lending, the proposed standard will
frustrate CRA’s statutory requirement that banks serve
low- and moderate-income communities consistent with safety and
soundness.
The proposed changes to CRA will directly undercut the Administration’s
emphasis on minority homeownership and immigrant access to jobs
and banking services. The proposals regarding streamlined exams
and the anti-predatory lending standard threaten CRA’s
statutory purpose of the safe and sound provision of credit and
deposit services. The proposed data enhancements would become
much more meaningful if the agencies update procedures regarding
assessment areas, affiliates, and the treatment of high cost
loans and purchases on CRA exams. CRA is simply a law that makes
capitalism work for all Americans. CRA is too vital to be gutted
by harmful regulatory changes and neglect. Thank you for your
attention to this critical matter.
Sincerely,
Richard S. Stewart
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