FANNIE MAE
Communications Division
Public Information Room
Mailstop 1-5
Office of the Comptroller of the Currency
250 E Street, S. W.
Washington, D.C. 20219
Docket No. 04-06
Ms. Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D. C. 20551
Docket No. R-1181
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Attention: Docket No. 2004-04
Re: Notice of proposed rulemaking Community Reinvestment Act
Regulations 69 Fed. Reg. 5729 (February 6, 2004)
Dear Sir or Madam:
Fannie Mae welcomes the opportunity to comment on the joint notice of
proposed rulemaking (NPR) regarding the Community Reinvestment Act ("CRA")
regulations issued by the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision
(collectively the "Agencies").
Fannie Mae is a congressionally chartered, shareholder-owned company
whose sole business is to support residential housing by making a market
in residential loans for both single family and multifamily mortgages.
Fannie Mae is both the largest American investor in mortgages, and a
major issuer of mortgage-backed securities secured by properties for
low-, moderate-, and middle-income families. By statute, Fannie Mae is
required to take affirmative steps to help insured depository
institutions meeting their CRA obligations. 12 U.S.C. 4565(3)(B). In
furtherance of this obligation and our affordable housing mission,
Fannie Mae conducts a significant amount of affordable housing business
with financial institutions covered by the CRA.
Based on our experience working with primary market lenders, we
believe the Agencies have the opportunity to increase the effectiveness
of CRA through this rulemaking. We urge the Agencies to consider changes
to both the regulations and examination guidance that would more
explicitly reward lender innovation and special efforts, especially in
low- and moderate-income communities with unique challenges. Such
changes would be consistent with the spirit of the CRA and would
encourage further progress in meeting the toughest housing needs in
communities across the country.
We have heard from many of our partners that the current regulations
and examination process do not appropriately recognize CRA-eligible
activities that require more time and effort. Building in greater
recognition of this extra effort makes sense to us as a way to encourage
innovation and effort. The examination process could benefit from a
mechanism that augments quantitative CRA measures with extra recognition
for the qualitative contributions of institutions. In giving increased
recognition to the qualitative measures of the CRA examination process,
the Agencies need not abandon the certainty and clarity that comes with
a quantitative review.
In many instances, the critical needs of a community can be met only
with innovative solutions that require significant time and resource
commitments by lenders, and will not deliver high volumes of loans or
investments. Examples that illustrate this point include housing for
people with special needs, developing community-by-community solutions
to leverage public funds earmarked to improve the affordability of
homeownership, and programs to help the victims of predatory lending.
The heavy focus on volume in CRA, with uncertain consideration for
"innovative and flexible" activities may be a deterrent for financial
institutions to focus the much needed time and attention on these
transactions.
Conventional mortgage lending to Native Americans on tribal lands is
another excellent example of an innovation that demands a high level of
commitment and effort, but does not have a high-volume payoff. Native
American tribes operate as sovereign entities, the land is held in trust
by the U.S. Government, and the land cannot be transferred out of tribal
control. Lenders working with tribal officials have spent considerable
resources developing the financial and legal infrastructure necessary to
support mortgage lending on tribal lands. Our experience demonstrates
that real progress is being made as a direct result of the commitment
and effort that was invested by lending institutions.
In addition, we encourage the Agencies to recognize the "shelf life"
of innovation. Institutions invest considerable intellectual capital and
time to develop creative financing structures in order to expand the
tools available to them to address the specific needs of a community. In
meeting the needs of a particular community, the right tool that the
institution will need to draw on may be a tool that has been used
before. Notwithstanding the fact that a familiar tool is used, the
institution must invest a considerable amount of effort to meet the need
of the community. It is critical that the CRA regime continue to
encourage institutions to invest this additional effort.
CRA has encouraged financial institutions to make many positive
contributions in expanding the availability of credit, investment and
services to low- and moderate-income borrowers and communities. Changes
to the current CRA structure should build upon these contributions by
increasing competition, fostering innovation, and expanding affordable
housing opportunities consistent with the spirit of CRA.
Anthony Marra
Fannie Mae
3900 Wisconsin Ave., NW
Washington, DC 20016
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