| Action for a Better
Community, Inc. April 5, 2004
Dear Regulator:
I am writing to you on behalf of Action for a Better Community, Inc.
(ABC), a member of the Greater Rochester Community Reinvestment
Coalition, to urge you to withdraw the proposed changes to the Community
Reinvestment Act (CRA) regulations.
ABC is the federally and state designated community action agency
serving Monroe and Ontario Counties, New York, dedicated to assisting
poor and disadvantaged individuals and their families as they move
toward self-sufficiency. Since its formation in 1964, has been a strong
advocate on public policy affecting the capacity of low-income
individuals and their families.
The proposed CRA 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 lending and home lending. The beneficial impacts of the
third proposal are overwhelmed by the damage that would result from the
adoption of the first two proposals. We believe that 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 and regulations.
The proposed changes would reduce the rigor of CRA exams for 1,111
banks that account for more than $387 billion in assets. This 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.
ABC consumers have been affected by this policy in their ability to
maintain bank accounts. Low-income families struggle with banking rules
that require minimum balances. When balances are lower than minimums
required, fees are attached, further reducing the liquid cash of
consumers, or placing them in deficit predicaments. Many are forced to
close accounts and labeled as high credit risk customers. As such, loans
are out of the reach of low to moderate income individuals and the
attainment of wealth in the form of small businesses or homeownership is
thwarted.
ABC suggests that the CRA definition of predatory lending should
mirror the New York State anti-predatory lending law definition of high
cost loans and curtail the same practices that the New York State law
prohibits. The law includes a reasonable cap on fees and points,
provisions against pre-payment penalties, loan flipping, mandatory
arbitration, balloon payments, etc.
We support the proposal that federal agencies publicly report the
specific census tracts of small businesses receiving loans in addition
to the current items in the CRA small business data for each depository
institution. This will improve the ability of the general public to
determine if banks are serving traditionally neglected neighborhoods
with small business loans. Also the regulators propose to report
separately “purchases” and “loan originations” on CRA exams and report
separately high cost lending (per the new HMDA data requirement starting
with the 2004 data).
The positive aspects of the proposed data enhancements do not begin
to make up for the significant harm caused by the first two proposals.
In fact, ABC believes that more weight should be given to loan
originations than loan purchases on CRA exams. The Rochester community
is able to see the immediate impact of increased originations in
underserved communities, while purchases only reflect the potential of a
selling lender to make additional loans. Banks should receive more
credit for doing the hard work at the front lines of originating loans
rather than purchasing them.
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,
James H. Norman
President & CEO
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