Wisconsin Partnership for Housing Development
From: Bill Perkins [mailto:billperkins@wphd.org]
Sent: Tuesday, April 06, 2004 11:31 AM
To: Comments; Federal Reserve Board; Office of the Comptroller of
the Currency; Office of Thrift Supervision
Subject: Comments on Proposed Changes to CRA Regulations
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
Ms. Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington DC 20551
Mr. 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 Regulators:
The Wisconsin Partnership for Housing Development, Inc. respectfully
requests that you reconsider the proposed changes to the Community
Reinvestment Act (CRA) regulations. As I'm sure you agree, CRA has
been extremely important as an incentive for sound investments in
expanding affordable housing options and home ownership. It has also
helped to stimulate investments in job creation and entrepreneurship
in low and moderate income and minority communities. We believe that
the proposed changes to the CRA regulations changes are also inconsistent
with the Administration's stated goals of improving the economic
status of immigrants and creating 5.5 million new minority home owners
by 2010.
"
Small" banks are extremely important to housing and economic
development in Wisconsin. We are a state distinguished by a vital
role for smaller, independent lending institutions. In 1990, I
was appointed by President George H.W. Bush as the first "community
interest director" on the Federal Housing Finance Board. I
served in that capacity through 1993, and oversaw the implementation
of the Affordable Housing Program and other community reinvestment
initiatives within the Federal Home Loan Bank System. That experience
reinforced my awareness of the critical importance of CRA in encouraging
lenders to fully consider ways in which they can contribute to
community development. In my role on the Finance Board, I was an
outspoken advocate for ensuring the financial health and competitiveness
of smaller community-based thrifts and banks, because I believe
they play a unique role in the nation's credit framework. Because
of their unique role, I also believe we need to maintain a strong
role for those institutions in community reinvestment.
I offer some more specific comments:
• Under current CRA regulations, 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 to the regulations would eliminate
the investment and service tests for banks and thrifts with assets
between $250 and $500 million. Over 1,000 of those banks account
for more than $387 billion in assets. In my own organization's
work as a developer of affordable housing and as a provider of
HUD-funded technical assistance to other nonprofit developers,
we have made extensive use of Low Income Housing Tax Credits. LIHTCs
are a valuable tool, but their complexity can be daunting to smaller
banks and thrifts in their roles as both lenders and investors.
The investment test is an important incentive to smaller banks
and thrifts who, in turn, are particularly important sources of
capital in smaller communities and rural areas. Services such as
branches, checking accounts, Individual Development Accounts (IDAs)
and debit card services, which are addressed by the service test,
are also of crucial importance to communities where small banks
and thrifts have a vital role.
•
We believe that the proposed standards with regard to predatory
lending in the regulations need substantial improvement. The proposed
changes provide that loans based on the foreclosure value of the
collateral rather than the borrower's ability to repay may be grounds
for lower CRA ratings. That standard is unquestionably an important
indicator of predatory lending. However, there are other that are
equally important. They include excessive fees, sale of unnecessary
ancillary products in connection with the loan, "packing" of
fees into mortgage loans, high prepayment penalties, "flipping," mandatory
arbitration, and other abuses. A more comprehensive anti-predatory
lending standard should also apply to all loans made by the bank
and all of its affiliates, and not only to loans secured by real
estate made by a bank or thrift in its assessment area.
•
The proposed changes to the regulations provide that the regulatory
agencies will publicly report the specific census tract location
of small businesses receiving loans, in addition to the other small
business data reported under the current regulations. The proposed
regulations also provide for separately reporting purchases and
loan originations, and separately reporting high cost lending.
Those are good changes, but we believe they could be further improved.
We believe that regulators should also give less "credit" in
CRA exams to high cost loans and loan purchases, compared to lower-cost
(or "prime") loans and direct loan originations.
•
The proposed regulations could close important loopholes in the
existing CRA regulations. Under current regulations, including
affiliates in CRA exams in an option for regulated lenders. That
option can allow lenders to exclude affiliates that do not serve
low and moderate income borrowers and affiliates that may be engaged
in predatory lending, thereby "skewing" the results of
CRA examinations. We believe that all affiliates of regulated lenders
should be included in examinations.
• Finally, we believe that the proposed changes to the regulations
should provide that a lender's assessment area all of the areas
in which the lender does business, and not simply the areas near
branches.
Thank you for your consideration of these comments and suggestions.
William C. Perkins
Executive Director, The Wisconsin Partnership for Housing Development,
Inc.
121 S. Pinckney Street, Suite 200, Madison, WI 53703
|
