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FDIC Federal Register Citations |
September 10, 2002 Ms. Jennifer J. Johnson Secretary, Board of Governors of The Federal Reserve System 20th and C Streets, NW Washington, DC 20551 Re: Consolidated Reports of Condition and Income 7100-0036 Communications Division Robert E. Feldman Information Collection Comments Ladies and Gentlemen: The National Association of Affordable Housing Lenders (NAAHL) is the only association devoted to supporting private capital investment in low- and moderate-income communities: in affordable housing, small business, microenterprise and community development to create and preserve sustainable communities. Representing the nation's leaders in community investment, NAAHL today encompasses nearly 200 organizations, including 64 insured depository institutions, 45 non-profit providers and 800 individuals as members. Member organizations include banks, thrifts, insurance companies, community development corporations, mortgage companies, loan consortia, financial intermediaries, pension funds, and foundations. We greatly appreciate the opportunity to comment on the addition of a proposed new schedule to the Reports of Condition and Income (Call Report) that would collect data on consumer loans in subprime lending programs of regulated banking institutions. The consequences of the definitions proposed are potentially far-reaching. Our concern is that if the definition of "subprime loans" is overly broad in coverage, it could adversely affect lending activities that are consistent with the Community Reinvestment Act (CRA). For example, two of the specific characteristics used in the guidance to define the term "subprime" - a FICO score of 660 or below and a debt service-to-income ratio of 50% or greater - appear to be setting unrealistically high benchmarks. Intended or not, the result will be that many more borrowers will be defined as subprime, whether or not they possess other credit characteristics that would qualify them as prime borrowers. Ultimately, this will limit access to credit from regulated lenders for low- and moderate-income (lmi) families and neighborhoods. These numbers tend to take on a life of their own. As you know, the characteristics of "subprime", including the FICO score of 660 or below and the debt service-to-income ratio of 50% or greater, were incorporated in the Expanded Guidance for Subprime Lending Programs adopted January 21, 2001. NAAHL and many other organizations expressed strong concern then to community affairs' staff of the agencies that these characteristics should not be interpreted as suggesting higher degrees of credit risk that are associated with "subprime" borrowers. Yet 17 months later, these numbers reappeared. So to reiterate, experienced community investment lenders still continue to believe that a list of unrealistically high standards for the definition of "subprime" will both make it harder for truly creditworthy lmi borrowers to get credit on prime terms and drive consumers to unregulated lenders for credit. To ensure that deserving borrowers are not denied credit and that supervision is
efficiently focused, the agencies' proposed definition should be modified, and the 660 or
below FICO score and 50% or greater debt service-to-income ratio should both be
reconsidered. We also recommend that the guidance should emphasize that a borrower should
not be considered subprime just because he or she has one or two of the characteristics
listed in the notice. We are happy to discuss our concerns with you in greater detail. We look forward to continuing our dialogue with you on these important matters. Sincerely, |
Last Updated 09/11/2002 | regs@fdic.gov |