Federal Deposit
Insurance Corporation

Office of the Comptroller of the Currency
250 E. K Street, SW
Mail Stop 1-5
Washington, DC 20219
Re: Docket Number 05-17

Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve
20th Street and Constitution Ave., NW
Washington, DC 20551 Re: Docket No.OP-1240

Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
RIN number 3064-AC97

Dear Sir or Madam:

Local Initiatives Support Corporation appreciates the opportunity to comment on proposed interagency questions and answers regarding the Community Reinvestment Act. LISC is a leading nonprofit community development support organization, with extensive experience in rural as well as urban areas.

LISC supports or is comfortable with most of the proposed policies. For example, we appreciate that in disaster areas, the agencies “will give greater weight to those activities that are most responsive to community needs, including the needs of low- or moderate-income individuals or neighborhoods.”

However, we do not support favorable consideration of upper-income housing activities in distressed and underserved non-metropolitan middle-income areas. We are more comfortable, however, with recognition for middle-income housing activities in such areas.

• First, CRA recognition for any activities not primarily benefiting low- or moderate-income (LMI) people or places marks a significant policy departure. We recognize the validity of some exceptions to the traditional approach, and we are generally comfortable that the agencies have limited this departure to distressed and underserved non-metropolitan areas. Nevertheless, this new approach does bear risks, and therefore should be pursued cautiously.

• An abiding concern is the risk that recognizing too broad a range of activities will obviate a bank’s need to benefit LMI individuals. In short, if CRA encompasses too much, it risks losing its unique value.

• Moreover, we generally do not see a shortage of financing for upper-income housing, even in distressed or underserved rural areas. We often see luxury homes and condominiums in rural areas, especially near recreational opportunities such as ski resorts and coastal areas.

• The small scale of rural markets means that relatively modest developments can trigger substantial change in conditions. Sometimes this is good because revitalization can take hold. But in other cases we see previously cold rural markets heat up to the point where affordable housing disappears, while rising land costs combine with infrastructure limitations to make the development of new affordable housing all but impossible.

• In such contexts, we are much more comfortable with favorable CRA consideration for middle-income (and of course LMI) housing activities. In distressed non-metropolitan middle-income areas, we understand that tourism is often the basis for economic development and that upper-income housing is part of that process. However, we do not believe that CRA recognition will make or break that activity. Such activity typically raises the need for LMI and middle-income housing, which the marketplace has far more difficulty providing and, in our view, is more consistent with the spirit of CRA.

• In underserved non-metropolitan middle-income areas, we are comfortable with CRA recognition for mixed-income housing, provided that LMI families would benefit substantially, and not just incidentally.

This concludes our comments.

Sincerely,

Benson F. Roberts
Senior Vice President for Policy and Program Development