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Metropolitan Housing Coalition
From: Jane Walsh
[mailto:jane@metropolitanhousing.org]
Sent: Monday, April 05, 2004 12:46 PM
To: Comments
Subject: Proposed Changes to CRA
April 5, 2004
Docket No. 04-06
Communications Division
Public Information Room, Mailstop 1-5
Office of the Comptroller of the Currency
250 E Street, 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 Street, 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 member of the National Community Reinvestment Coalition, the
Metropolitan Housing Coalition urges 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.
The Metropolitan Housing Coalition is comprised of over 130 member
organizations who have been advocating for fair, decent and affordable
housing options for all people in the metropolitan region of Louisville,
Kentucky. For 15 years, we have represented the united voice for decent
housing, and have recognized the powerful tools offered by CRA to ensure
wider opportunities for low- and moderate income people.
Your proposed changes are contrary to the CRA statute because they
will halt the progress made in community reinvestment. The proposed CRA
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. Instead, the proposed CRA changes would
facilitate predatory lending and reduce the ability of the general
public to hold financial institutions accountable for compliance with
consumer protection laws.
The proposed changes include three major elements: 1) provide
streamlined and cursory exams for banks with assets between $250 million
and $500 million; 2) establish a weak predatory lending compliance
standard under CRA; and 3) expand data collection and reporting for
small business and home lending. The beneficial impacts of the third
proposal are overwhelmed by the damage imposed by the first two
proposals. In addition, the federal banking agencies did not update
procedures regarding affiliates and assessment areas in their proposal,
and thus missed a vital opportunity to continue CRA’s effectiveness.
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.
The proposed CRA changes also 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.
Finally, the federal agencies propose that they will publicly report
the specific census tract location of small businesses receiving loans
in addition to the current items in the CRA small business data for each
depository institution. The positive aspects of the proposed data
enhancements do not begin to make up for the significant harm caused by
the first two proposals. Furthermore, the federal agencies are not
utilizing the data enhancements in order to make CRA exams more
rigorous. The agencies must not merely report the new data on CRA exams,
but must use the new data to provide less weight on CRA exams to high
cost loans than prime loans and assign less weight for purchases than
loan originations.
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,
Jane M. Walsh
Executive Director
Metropolitan Housing Coalition
Louisville, KY
encl: MHC Membership List
cc: National Community Reinvestment Coalition
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