Federal Deposit
Insurance Corporation

January 8, 2006

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

Office of the Comptroller of the Currency
250 E Street SW, Mail Stop 1-5
Washington DC 20219
 Fax: (202) 874-4448
RE: Docket No. 05-17

Board of Governors of the Federal Reserve System
Attn: Jennifer J. Johnson, Secretary
20th St and Constitution Ave NW, Washington DC 20551
Fax: (202) 452-3819 or (202) 452-3102
Docket No. OP-1240

Ladies and Gentlemen:

On behalf of Inner City Press / Community on the Move ("ICP") and the Fair Finance Watch (the "FFW"), this is a timely response to your request for comment on the Interagency questions and answers on the Community Reinvestment Act ("CRA"), 70 Federal Register 68450. In brief, while most of the proposed Q and A is relatively non-controversial, given the issues surrounding of disaster areas, ICP and FFW urge that disparate subprime lending and other forms of predatory lending be explicitly addressed, and discouraged, in such vulnerable areas, including via the Q&A’s.

The preamble to the request for comments in the Federal Register states “The proposed guidance next explains that all revitalization activities in designated disaster areas are not considered equally—those that are most responsive to community needs, including the needs of low- or moderate-income individuals, may be given more weight than other revitalization and stabilization activities.” This phrasing is incomplete, implying as it does that CRA consideration is only of how much positive CRA weigh to give to a particular activity. But proper enforcement of the CRA includes assigning negative as well as positive weight – negative in the case of predatory lending, for example, or discriminatory lending or other consumer abuse. For the record, as these relate to the current disaster zone(s), ICP/FFW’s review of the 2004 Home Mortgage Disclosure Act (HMDA) data, including for the New Orleans metro area, focusing particularly on percentages of conventional home purchase and refinance first-lien loans over the federally-defined rate spread (3% over comparable Treasury securities on first lien loans) –

Conventional Home Purchase Loans Secured by 1st Liens in the New Orleans MSA in 2004

Whites: 9.17% of loans were over the rate spread
African Americans: 37.48% of loans over the rate spread -- 4.09 times higher than for whites
Hispanics: 16.4% of loans over the rate spread -- 1.79 times higher than for whites
Conventional Refinance Loans Secured by 1st Liens in the New Orleans MSA in 2004
Whites: 18.26% of loans were over the rate spread
African Americans: 48.68% of loans over the rate spread -- 2.67 times higher than for whites
Hispanics: 27.1% of loans over the rate spread -- 1.48 times higher than for whites.

This compares unfavorably to the nationwide aggregate.

As to particular lenders supervised by your agencies, in the New Orleans MSA in 2004, AmSouth Bank was 11 times more likely to confine African Americans to higher cost rates spread loans than whites. Chase Manhattan Mortgage Corporation was 5.7 times more likely to confine African Americans to higher cost rates spread loans than whites. National City Bank Indiana was 3.7 times more likely to confine African Americans to higher cost rates spread loans than whites.

In the wider state of Louisiana, Union Planters Bank (now owned by Regions, as permitted by the Federal Reserve Board despite outstanding issues including disparate mortgage lending and the support of highly controversial high-cost car title lenders) was 5.2 times more likely to confine African Americans to higher cost rates spread loans than whites.

In Alabama, Synovus Mortgage Corporation was 6.8 times more likely to confine African Americans to higher cost rates spread loans than whites.

In Mississippi, Citigroup’s CitiMortgage was 5.4 times more likely to confine African Americans to higher cost rates spread loans than whites.

The cumulated Citigroup, in the New Orleans MSA:

Whites: 1461 applications, leading to 484 denials (33.13% denied) and 605 originations; 179 [or 29.59%] exceeded rate spread.

African Americans: 1492 applications, leading to 747 denials (50.07% denied, 1.51 times higher than whites) and 406 originations; 285 [or 70.2 percent] exceeded rate spread [2.37 times higher / more likely to be over rate spread than whites].

Latinos: 129 applications, leading to 59 denials (45.74% denied, 1.38 times higher than whites) and 35 originations; 22 [or 62.86 percent] exceeded rate spread [2.12 times higher / more likely to be over rate spread than whites].

Beyond mortgage lending disparities as reflected by HMDA data, here for the record is another sample consumer abuse in the disaster zone:

Subject: Chase Home Finance

Date: 12/6/2005 3:03:58 PM Eastern Standard Time

From: [Name withheld]

To: JPMChaseWatch [at] innercitypress.org

My home is located in Hancock County Mississippi. Hurricane Katrina devastated southern Hancock County causing over 90% of homes and businesses catastrophic damage. My home was one with catastrophic damage.

Shortly after the hurricane I contacted Chase to inquire about payment options. I was told that based on the damage and my federally declared zip code that I would not have to make payments for three months. In December I was to assume payments and the months of September, October and November 2005 would be added to the loan without penalty. On September 29 I received a bill from chase detailing my missed payment as past due. I called and spoke to a representative named Andrew who assured me the bill was automatically computer generated but that the system did not identify my loan as late. I again called in October and November when I received my bills. I was told the same thing. On November 22 I received a letter from chase requesting information about intent to rebuild. Again I called, again I was reassured that my credit would not be affected and I would owe but one payment in December.

Today, December 5, I called to make my scheduled payment and was told that not only do I owe four months of payments but that I would be reported to the credit borough starting January if not paid. I asked to speak to a supervisor who told me that Chase made the decision not to honor full deferrals on November 1, 2005 and anyone I spoke to after that misinformed me. Between November 1 and November 29 I had no less than six conversations with Chase Representatives; all of them assured me I was fine. The supervisor advised me that payment plans were being set up to bring people current with their mortgages but I do not qualify for such since I am unemployed (Katrina destroyed my place of employment as well). She told me to make my December payment and call back in January. She could offer no assurance that my credit then would not be affected if I am unable to come up with the almost $4000 it would take to make me current.

I have four children, my home is destroyed, my insurance company is not paying for damages, I am unemployed and I feel I have been deliberately misled by Chase. I was told one thing and at the last moment everything regarding my loan changed.

Beyond the above, ICP joins in the comments of NCRC, of which ICP is a member and on whose board of directors the undersigned serves. Along with NCRC, we are concerned that other proposed questions divert bank financing to middle- and upper-income housing. The agencies must implement CRA in a manner that maintains the law’s central objective of ending redlining and expanding access to credit for low- and moderate-income families and communities. We ask that you clarify the CRA exam criterion for mid-size banks with assets between $250 million to $1 billion that assesses their provision of services through branches and other facilities. You must clarify that this exam criterion includes an examination of the number and percent of branches in low- and moderate-income communities. Placing branches in low- and moderate-income communities is vital since a recent Federal Reserve study shows that racial disparities in high cost lending is less when banks conduct the lending through branches as opposed to using brokers.

We oppose the proposed question and answer that provides CRA points for financing middle- and upper-income housing developments in distressed rural middle-income census tracts. Elsewhere in the existing Question and Answer document and in your proposed questions, the agencies provide credit for mixed-income housing developments. Mixed-income housing helps to overcome segregation by income and is an activity worthy of CRA points if the housing contains a significant number of low- and moderate-income families. We therefore urge you to eliminate the possibilities of banks receiving significant CRA points for financing middle- and upper-income housing. We urge you instead to provide points for mixed-income housing.

Finally, we ask that you add a Question and Answer indicating that a bank will automatically undergo a fair lending exam to test for compliance with federal anti-predatory and anti-discrimination law when the bank or one of its affiliates makes a high concentration of subprime loans to minorities, the elderly, women, low-income borrowers or to communities recovering from natural disasters – see ICP’s presentation, above, and please take all appropriate actions.

Thank you for consideration of our comments.

Sincerely,
Matthew Lee, Esq., Executive Director
Inner City Press / Community on the Move
Board member, NCRC