Habitat for Humanity International
The Washington Office
1010 Vermont Ave. N.W., Suite 900
Washington, D C 20005
TO: Robert E. Feldman, Executive Secretary
Comments on FDIC NPR on Community Reinvestment
Published August 20, 2004
RIN #3064-AC50
September 17, 2004
Mission of Habitat for Humanity International
Habitat for Humanity
International (HFHI) is a non-profit organization with 1,689 affiliates
in the
United States. Habitat for Humanity’s
mission is to build or rehabilitate simple, decent, affordable homes
with people in need of housing and to eliminate substandard housing
from the face of the earth. In this role, HFHI affiliates are the
recipients of certain types of benefits under the Community Reinvestment
Act requirements, which is why Habitat for Humanity is submitting
comments on this proposed regulatory change.
Summary of Proposed Rule
The FDIC is proposing
revisions to 12 CFR Part 345, regulations implementing the Community
Reinvestment Act (CRA) that would: (a)
change the definition of “small bank” to raise the asset
size threshold from $250 million to $1 billion regardless of holding
company affiliation; (b) add a mandatory community development performance
criterion for those banks in the $250 million - $1 billion range;
and (c) for rural areas, expand the definition of “community
development” to encompass a broader range of activities.
General Comments
Habitat for Humanity
International does not have expertise on banking regulatory matters
or familiarity
with any burden on “small
banks” of complying with the current regulations, so it does
not intend to comment on those issues. However, HFHI affiliates have
been able to provide the American Dream of homeownership to more
families as a result of benefits received from local banks under
the Community Reinvestment Act.
It is the understanding of HFHI that the Administrative Procedure
Act requires a cost/benefit analysis to be a part of any proposed
rulemaking. Indeed, the financial institutions regulated by these
regulations recommended, in response to the July 2001 Advance Notice
of Proposed Rulemaking, that any change to the regulations take into
account both process costs and the benefits of change (69 FR 5729,
February 6, 2004, at 5731). HFHI does not see any indication that
the following data were compiled or analyzed by the FDIC: (1) the
costs of complying with the current regulation for banks having $250
million - $1 billion in assets; (2) the reduced costs (if any) to
these banks of the proposed change in definition; or (3) the potential
lost benefits to communities from no longer requiring banks of this
size to comply with the full range of CRA requirements. Instead,
the FDIC in its preamble to the Notice dated August 20, 2004, simply
summarizes the cost and benefit claims made by the various organizations
commenting on the proposal, without doing an actual cost/benefit
analysis of its own. HFHI urges that such an analysis be done before
making such a major change in the regulations.
Section 345.26. Small Bank Performance Standards.
FHI affiliates
have been receiving the following types of benefits from banks
having assets
worth over $250 million (i.e., those not
defined currently as “small”), for which those banks
have received CRA credit under various regulatory tests:
- Grants for housing.
- “Pro bono” mortgage
servicing; and
- Bank sponsorship of Federal Home Loan Bank Affordable Housing Program
grants.
Under
the current regulations, banks defined as “small” only
have to comply with the so-called “streamlined test” in
order to meet the performance standards under the CRA, a test focused
mainly on lending activities. HFHI affiliates normally do not obtain
loans from banks because in most cases the affiliate acts as the
lender for its homeowners. The benefits that HFHI affiliates have
been receiving under the CRA, such as housing grants, free mortgage
servicing, and Affordable Housing Program grants, are evaluated currently
under the “investment test,” and thus are not part of
the present “streamlined test” for small banks.
The proposed
rule recommends adding a community development criterion to the
streamlined test
for small banks. The proposed rule would
evaluate, in subsection (b)(3), a small bank’s responsiveness
to “community development needs;” and in (b)(4), the
bank’s “indirect activities,” including “community
development services provide by an affiliate of the bank.” How
these terms will be defined or applied is not explained. If this
proposed rule is eventually adopted, HFHI recommends that the rule
require the inclusion of activities such as housing grants, pro bono
mortgage servicing, and sponsorship of Federal Home Loan Bank Affordable
Housing Program grants when applying the proposed expanded streamlined
test to the newly defined “small banks” – i.e.,
those having between $250 million and $ 1 billion in assets.
Section 345.12. Definitions, and Development in Rural Areas.
HFHI is pleased
to note that this new community development requirement within
the streamlined
test is covered in the proposed definitions
in section 345.12(g), which defines “community development” to
include: (1) affordable housing for low- or moderate-income individuals
or for individuals in rural areas; (2) community services targeted
to low- or moderate-income individuals or to individuals in rural
areas; and (3) activities that revitalize or stabilize low- or moderate-income
geographies or rural areas. Since HFHI has many affiliates in rural
areas working to eliminate substandard housing, it supports giving
CRA credit to banks doing activities that revitalize or stabilize
low- or moderate-income housing in rural areas.
However, the
definitions as presently written could be interpreted to permit
CRA credit
for activities in rural areas that are not focused
on low- or moderate-income individuals, or on revitalizing rural
areas. Under that interpretation, it could be possible that a “small
bank” supporting a development designed for affluent individuals,
but located in a rural area, could receive CRA credit. If that is
the intent of the definition of “community development,” HFHI
respectfully suggests that such a result is not within the original
goals of the Community Reinvestment Act.
Conclusion
As a first priority,
HFHI recommends, as did the financial institutions in February
of 2004, that a cost/benefit analysis be done before
this proposed rule is adopted as a final rule.
Secondly, if
the FDIC does adopt a final rule, HFHI urges the FDIC to include
a community
development criterion in the test, and to
give credit to “small banks” for activities such as housing
grants, pro bono mortgage servicing, and Federal Home Loan Bank Affordable
Housing Program grants.
Thank you for the opportunity to comment on this important regulatory
matter.
Sincerely,
David Williams
Executive Vice President and Chief Operating Officer
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