Community Reinvestment Association of North Carolina
From:
Tanya Wolfram [mailto:tanya@cra-nc.org]
Sent: Monday, April 19, 2004 4:06 PM
To: Comments
Subject: EGRPRA burden reduction comments
April 19, 2004
Public Information Room
Office of the Comptroller of the Currency
250 E Street, S.W.
Mailstop 1-5
Washington, D.C. 20219
Docket Number 04-05
Ms. Jennifer J. Johnson
Secretary, Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Docket No. R-1180
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments, Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Docket Number 2003-67
Attention: Comment regarding the Economic Growth and Regulatory Paperwork
Reduction Act of 1996
To Whom It May Concern:
The Community Reinvestment Association of North Carolina (CRA-NC)
submits comments in response to the Notice of Regulatory Review as
required by the Economic Growth and Regulatory Paperwork Reduction
Act (EGRPRA) of 1996. We request that the federal banking agencies
retain and strengthen their regulations concerning Fair Housing,
Equal Credit Opportunity Act (ECOA), Home Mortgage Disclosure Act
(HMDA), Truth in Lending Act (TILA) and Unfair or Deceptive Acts
or Practices.
CRA-NC is a nonprofit advocacy agency dedicated to building and protecting
community wealth by changing the philosophies and practices of financial
institutions. Using the Community Reinvestment Act as a guide, CRA-NC
works with banks to increase their lending, investments, and services
to minority and low- and moderate-income communities. In the past
five years CRA*NC has catalyzed $45 billion in lending commitments
to low- and moderate-income communities from North Carolina’s
large and small financial institutions. It has also played a key
role in fighting predatory lending and payday lending at the state
and national levels in both the corporate and public policy arenas.
CRA-NC staff attended the inter-agency consumer and community outreach
meeting concerning EGRPRA in Arlington, Virginia, on February 20,
2004. From our participation in that meeting and perusal of comment
letters submitted by the financial industry, we are concerned that “easing
regulatory burden” has become a euphemism for stripping consumer
protections. We therefore urge the banking agencies to thoughtfully
consider the recommendations of consumer groups at the inter-agency
meeting in February and use this opportunity to strengthen and expand
consumer protections.
The Fair Housing Act, the Home Mortgage Disclosure Act, the Equal
Credit Opportunity Act, and the Truth-in-Lending Act are intended
to eliminate abusive and discriminatory lending. In light of the
recent decision by the Office of the Comptroller of the Currency
to preempt all state anti-predatory lending legislation, these protections
have become even more important to consumers. Rather than streamline
these protections, CRA-NC would like the regulators to strengthen
consumer protections by expanding the data reporting requirements.
Home Mortgage Disclosure Act
In response to
concerns that financial institutions contributed to the decline
of certain
communities because they failed to provide
adequate home financing with reasonable terms and conditions, Congress
passed the Home Mortgage Disclosure Act (HMDA) requiring banks, savings
and loans associations, credit unions, and other financial institutions
to publicly report detailed data on their home lending activity.
HMDA was designed to provide the public with sufficient information
to determine whether institutions are filling their obligations to
serve the housing needs of all of the communities and neighborhoods
in which they are located. HMDA has been essential to increasing
the amount of lending to low-income and minority communities. Regulators
should not exempt more institutions from reporting HMDA data. Exempting
more institutions from data reporting will thwart HMDA’s purpose
of determining if institutions are serving credit needs.
In rural areas, small lenders play in important role in the local
economy. However, currently, small lenders (with assets under $33
million) and lenders with offices in non-metropolitan areas are exempt
from HMDA data reporting requirements. Data for rural areas is also
incomplete, particularly information on the census tract location
of loans. If banks and thrifts have assets under $250 million dollars
(or are part of holding companies under $1 billion dollars), they
have to report the census tract location for loans in rural, non-metropolitan
areas. These small lenders may be significant contributors to the
local mortgage market. The importance of the bank to the community,
not just asset size, should also determine HMDA reporting.
Rather than reduce
the number of institutions covered by HMDA, regulators need to
make
HMDA more effective by including pricing information
on all loans, critical loan terms (existence of prepayment penalties,
for example), and key underwriting variables such as loan-to-value
ratios and debt-to-income ratios. With the rise in subprime and predatory
lending, the lending landscape has changed. Low-income and minority
neighborhoods that may have been “redlined” and had no
access to credit in the past may still find themselves “redlined” in
terms of access to prime credit with the same pricing, terms, and
conditions as other neighborhoods. HMDA currently lacks variables
that enable the general public to assess if lenders are providing
credit that is priced fairly and has reasonable terms to all communities.
Technology has
improved to such an extent that even small lenders would be confronted
with
minimal burden in collecting HMDA data.
Also, all lenders would be able to readily collect additional data
items. Overall, the benefits of expanded HMDA data requirements would
greatly outweigh the burdens and would be true to HMDA’s statutory
purpose of assessing the extent to which credit needs are met.
Equal Credit Opportunity Act
The Equal Credit
Opportunity Act and Regulation B prohibits discrimination against
an applicant
because of the applicant’s race, color,
sex, religion, national origin, marital status, age or receipt of
public assistance. Currently, the Federal Reserve’s Regulation
B prohibits lenders from collecting demographic data including race
and gender of business owners seeking small business loans, expect
for limited self-assessment purposes. The Federal Reserve has asserted
that their regulation guarantees that the loan process remains colorblind
for all applicants. In reality, however, this regulation has become
a shield behind which some banks hide their lack of serving women
and minority-owned businesses. The publicly available data provided
by HMDA has been instrumental in increasing access to home loans
for formerly neglected borrowers. Likewise, the federal agencies
would achieve ECOA’s statutory purpose of combating discrimination
if they allowed banks to voluntarily collect and report information
on the demographics of their small business borrowers.
The total number of small business loans increased 24 percent from
2001 to 2002. However, despite the overall increase, the number
of small business loans made to businesses with revenue under $1
million continues to plummet. Lenders issued about 31 percent of
their loans to businesses with revenues under $1 million in 2002.
This is a substantial decrease from 40 percent in 2001 and 60 percent
in 1999. Similarly, lending to businesses in low- and moderate-
income census tracts remains stagnant as the percent of loans made
to businesses in these communities either decreased or remained
the same over the last few years. CRA-NC believes that just like
improvements to HMDA, enhancements to ECOA to allow lenders to
collect demographic data will expand lending to traditionally underserved
communities and borrowers.
Truth in Lending
In 2001, the Federal Reserve Board made valuable improvements to
their regulation implementing the Home Ownership and Equity Protection
Act (HOEPA), which amended TILA. Among other benefits, the changes
applied HOEPA’s protections to more subprime loans, including
most loans with single premium credit insurance. Since abusive
lending continues to increase, the federal agencies must preserve
the changes to HOEPA.
The regulatory agencies must also preserve the critical right of
rescission under TILA. This right empowers borrowers at the closing
table, enabling them to bargain with lenders and eliminate onerous
terms and conditions in their loans. The right of rescission provides
vital protection in the event that a borrower desires to cancel
an abusive loan up to three days after closing, and has been essential
to the fight against predatory lending. As discussed at the inter-agency
meeting for consumers and communities, there are provisions in
the law to help consumers who need their money right away. The
benefit of the right of rescission protection far outweighs any
inconvenience.
Conclusion
EGRPRA should address more than easing regulatory burden – it
should also ensure that consumers are protected. The regulatory
agencies must not weaken HMDA, ECOA, TILA, or protections in regulations
implementing the Fair Housing and Unfair and Deceptive Practices
Acts. We do not want “easing regulatory burden” to
result in fewer consumer protections.
Sincerely,
Peter Skillern
Executive Director
Community Reinvestment Association of North Carolina
****************************************************************************
Tanya Wolfram
Community Reinvestment Association of North Carolina
PO Box 1929
114 W. Parrish St, 2nd Floor
Durham, NC 27702
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