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FDIC Federal Register Citations

North Carolina Fair Housing Center

Sent: Tuesday, December 20, 2005 8:28 PM
To:;; Comments
Subject: Docket No. 05-17 Docket No. OP-1240 Attention: Comments, RIN 3064-AC97

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

Jennifer J. Johnson
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington DC 20551
Docket No. OP-1240

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

To Whom it May Concern:

The North Carolina Fair Housing Center, a member of the National Community Reinvestment Coalition, appreciates that the federal banking agencies have clarified how banks will receive favorable consideration in their Community Reinvestment Act (CRA) exams for financing community development activities in geographical areas impacted by natural disasters. While we are pleased that the federal agencies direct banks to focus on low- and moderate-income families in areas impacted by disasters, we are concerned that other proposed questions divert bank financing to middle- and upper-income housing that may have negative unintended consequences and fair housing implications. 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.

The Center supports the proposal that banks will receive points on their CRA exams for financing community development in geographical areas impacted by disasters for up to one year after the expiration of official federal or state designation of disaster status. Community development financing takes considerable time to plan and implement, meaning that the one year of additional time is important for geographical areas like the Gulf Coast region that have been devastated by natural disasters. North Carolina can serve as a model for why this extension is so critically important.

In September of 1999 Hurricane Floyd devestated North Carolina. Its initial impact included more than 100,000 persons displaced to shelters, 7,000 homes destroyed, and 56,000 homes damaged by extensive flooding from rainfall exceeding 20 inches in most of eastern North Carolina. Sixty-six North Carolina counties were declared eligible for Federal Disaster Assistance while all counties were eligible for disaster mitigation.

The Center agrees that more "weight" or credit to community development activities that are most responsive to the needs of low- and moderate-income individuals who have been impacted by natural disasters is in order. A recent study by the University of North Carolina at Chapel Hill "An integrated County level spatial impact assessment of Hurricane Floyd combining data on damages and social vulnerability" (De Vries, December 2002), states that Disasters have to be seen as the result of an encounter between hazards and people who are vulnerable, not just physically, but also economically, politically, demographically and culturally. The main thesis in this paper is that in the case of Hurricane Floyd, pre-existing social vulnerabilities amplified the damages inflicted on the landscape. Furthermore, it is acknowledged that these social vulnerabilities have deep historical roots related to land use patterns and segregation, and should therefore be included in spatial analysis of the damage impact (A complete copy of this study is attached). These findings certainly apply to the current KATRINA/RITA impact areas.

The Center strongly opposes the proposed question and answer that provides CRA points for financing middle- and upper-income housing developments in distressed rural middle-income census tracts. The Center believes that this will accelerate racial underbounding and minority exclusion in rural communities throughout the country and particularly in the south.

“Underbounding” occurs when African American neighborhoods are kept just outside of a town’s boundaries, resulting in lower levels of services, reduced access to infrastructure, and limited or no political voice in land-use and permitting decisions. African American communities are systematically excluded from towns by administrative decisions made by elected and appointed officials and the gerrymandered exclusion of African American residents from small towns of the South.

In North Carolina, exclusionary segregation results in part from the state's annexation laws and planning practices. These laws give towns the discretion to annex only properties with high tax values, even non-contiguous properties, resulting in discontinuous boundaries that skip over poor and Black neighborhoods (Joyner and Parnell 2003). Whether the unintentional outcome of fiscally driven annexation processes or the intentional result of institutionalized actions by local governments, Blacks are excluded from towns and the associated political and material benefits. The processes vary state-to-state, but the resulting racial gerrymandering is the same. The Center is concerned that providing CRA credit for the building of residential housing in middle and upper income census tracts will exacerbate an already troubling pattern. I have attached to this email a study by the Cedar Grove Institute for Sustainable Communities entitled "The Persistence of Political Segregation: Racial Underbounding in North Carolina" by Alan Parnell. I want you to pay close attention to the parts of the study that refer to Southern Moore County, Pinehurst and Jackson Hamlet. I believe that should you allow CRA credit for middle and upper income census tracts in distressed rural middle income census tracts that you will be encouraging the type of underbounding described in this study, which is not consistent with the spirit of CRA. 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.

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 applaud your proposed question and answer that reiterates that mid-size banks must offer community development loans, investments and services. Mid-size banks cannot ignore one or more of these activities. We also recognize that qualitative factors on CRA exams can be important, but we ask that you add a provision to your proposed questions stating that qualitative factors will not be employed by examiners to excuse low levels of community development lending, investments or services.

Finally, we previously applauded your decision to add an anti-predatory provision to the CRA regulations that will penalize banks for illegal, abusive, and discriminatory loans. 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 and experiencing shortages of credit.

The most effective way to expand access to credit to underserved borrowers is implementing rigorous and comprehensive CRA exams that maintain the focus on meeting the credit and deposit needs of low- and moderate-income borrowers and communities. If you are responsive to our comments on the proposed Question and Answers, CRA exams will become more rigorous.

Thank you for consideration of our comments.


Stella J. Adams
North Carolina Fair Housing Center


Last Updated 12/21/2005

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