DELAWARE COMMUNITY REINVESTMENT ACTION COUNCIL, INC.
April 2, 2004
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
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 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 Officials of Federal Bank and Thrift Agencies:
On behalf of the Delaware Community Reinvestment Action Council,
Inc., (DCRAC), I am writing to urge you to withdraw the proposed changes
to the Community Reinvestment Act (CRA) regulations. DCRAC is a
statewide non-profit advocacy organization founded to ensure fair and
equal access to credit and capital.
DCRAC is also a member of the National Community Reinvestment
Coalition (NCRC) and supports comments by the NCRC membership asking for
stronger not weaker Community Reinvestment regulations.
In Delaware, CRA has been instrumental to increasing access to
homeownership, boosting economic development, and expanding small
businesses in the nation's minority, immigrant, and low- and
moderate-income communities.
The proposed changes are contrary to the CRA statute because they
will halt the progress made in community reinvestment. Additionally,
they 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.
Our comments are limited to the following 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
3) Expand data collection and reporting for small business and home
lending
In addition, we will address two missed opportunities, namely affiliates
and assessment areas.
Streamlined and Cursory Exams
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 lowand
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 thereby 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. Banks will no longer have the
incentive to invest in Low Income Housing Tax Credits, credited as a
major source of affordable rental housing. Likewise, the banks would no
longer be accountable for the provision of bank branches, checking
accounts, Individual Development Accounts (IDAs), or debit card
services.
Thus, the effectiveness of the Administration's housing and community
development programs would be diminished. Moreover, the federal bank
agencies will fail to enforce CRA's statutory requirement that banks
have a continuing and affirmative obligation to serve credit and deposit
needs if they eliminate the investment and service test for a large
subset of depository institutions.
We propose that at the present time there be no changes to the
current practice of evaluating banks under Lending, Investment, and
Service tests.
Predatory Lending Standard
The proposed CRA changes contain an anti-predatory screen that will
actually perpetuate abusive lending. The asset-based standard does not
cover many instances of predatory lending. For example, the proposal
will lower a CRA rating in abusive lending situations only if such
lending results in delinquency or foreclosure. There are many abuses
associated with predatory lending such as packing of fees into mortgage
loans, high prepayment penalties, loan flipping, mandatory arbitration,
etc. The current proposal fails to address them.
We suggest that rigorous fair lending audits and severe penalties on
CRA exams for abusive lending are necessary in order to ensure that the
new minority homeowners served by the Administration are protected.
We propose that anti-predatory standards must apply to ALL loans made
by the bank and ALL of its affiliates, not just real-estate secured
loans issued by the bank in its "assessment area".
Enhanced data disclosure
We support the proposals for small business data disclosure and
enhancements to HMDA. However, the positive aspects of the proposed data
enhancements do not make up for the harm caused by the first two
proposals.
In addition, the federal agencies are not utilizing the data
enhancements in order to make CRA exams more rigorous. Therefore, the
enhancements become rather meaningless.
We propose that this data is used in CRA exams such that high cost
loans and loan purchases are given less weight than prime loans and loan
originations.
Missed Opportunity to Update Exam Procedures
The proposals failed to close gaping loopholes in the CRA regulation.
Banks can still elect to include affiliates on CRA exams at their
option. They can thus manipulate their CRA exams by excluding affiliates
not serving low- and moderate-income borrowers and excluding affiliates
engaged in predatory lending.
We propose that a CRA exam must include ALL affiliates.
The proposed changes need to update assessment areas to include
geographical areas beyond bank branches. Many banks make considerable
portions of their loans beyond their branches; this non-branch lending
activity MUST be scrutinized under CRA exams.
We propose that Assessment Areas must be expanded to take into
account the degree of non-branch lending activity.
In closing, we reiterate that 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 too vital to be gutted by harmful regulatory changes and
neglect. Thank you for the opportunity to comment and your attention to
this critical matter.
Sincerely,
Rashmi Rangan
Executive Director
CC:
President George W. Bush
Treasury Secretary John W. Snow
Senator Joseph Biden
Senator Thomas Carper
Representative Michael Castle
National Community Reinvestment Coalition
