SUMMARY OF COMMENTS REGARDING THE CRA NPR
Interagency Consumer Group EGRPRA Meeting
February, 2004
FDIC
Arlington, Virginia
Consumer and group representatives provided views and comments
regarding the CRA ANPR to staff representatives of the Federal Deposit
Insurance Corporation, the U.S. Treasury Office of Thrift Supervision
and Office of the Comptroller of the Currency; and the Federal Reserve
Board. The following synopsis generally captures comments made by
participants to the agency representatives. Participants were encouraged
to provide the agencies with written comments to ensure their comments
are complete and fully understood.
• Small bank asset-size threshold:
o Do not raise the small bank size threshold. Community
organization coalition members and lenders view any change as
burdensome.
o As the performance context takes into account limited community
development opportunities and competition for these opportunities,
there is no reason, relating to the investment test requirements of
large banks, to raise the threshold.
o There is concern that small institutions in rural areas already are
expected to do less, when they may need to do more. Raising the
threshold would compound the problem by lowering expectations further
for more banks.
o The regulators should research what the market share is for banks
between $250-500 million in rural areas. These banks are critical to
meeting investment and service needs in rural areas. Large banks tend
to emphasize urban rather than rural areas.
o For example, in North Carolina, over 60% of banks are below $250
million in assets; if you raise the threshold, then you should also
raise the expectations for good performance in the small bank
evaluation method to compensate for fewer large banks.
o If the small bank threshold is raised, then increase the scrutiny
(of large and small banks) if only in those areas (whether rural or
urban) where this change would have a significant or negative impact.
• Predatory lending:
o There is general agreement that illegal credit practices should
have a negative effect on CRA evaluations.
o We object to only importing the OCC’s so-called “pre-emption
standard”. Addressing the negative effect of asset-based lending alone
in the proposal is not enough; rather, high fees, prepayment penalties
and other potentially harmful or predatory features should also be
included in the review and should have a negative effect on CRA
evaluations and ratings.
o Consider defining predatory lending evaluated under CRA using the
Federal Reserve’s HOEPA standards and closely review those loans.
o Review investment securities that may be backed by predatory loans,
which should also have a negative effect on a rating.
o Define a set of subprime loans, suing HMDA and HOEPA information, to
scrutinize during CRA evaluations.
• Data enhancement:
o Our members support more data disclosure.
o The agencies should use it to improve evaluations: purchases should
count less than originations which is harder to do and, therefore,
deserve more credit.
• Assessment areas:
o The proposal misses a “golden” opportunity to address assessment
area problems arising from changes in banking.
o Large regional or nationwide banks tend to have small geographic
assessment areas that do not encompass much of their lending that
should be included in the evaluation.
• Affiliates:
o Rather than permit banks to elect product lines, the agencies
should review all loans in the affiliate.
o Object to considering only asset-based loans inside the bank’s
assessment area, you should also include such loans outside the
assessment area.
o Non-bank affiliates that are subprime lenders should be reviewed
during CRA examinations.
o Subprime loans should be counted less than prime loans, that is
prime loans to low and moderate income, minority and elderly should
count more. Studies show the number of high cost loans increases
dramatically to minority and elderly populations compared to others.
