Proposed changes to how the government enforces the Community Reinvestment Act (CRA) will make it easier for banks to earn “outstanding” performance ratings even when they fail to meet the credit needs of lower-income borrowers in many communities.
The National Community Reinvestment Coalition (NCRC), representing more than 600 community-based organizations, has urged the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to withdraw the proposal and try again for an update that makes CRA rules clearer for banks but also remains focused on ensuring banks meet the needs of all communities where they take deposits, including the poorest.
“We know our community leaders are extremely well-informed and understand both the dangers of the proposed rule changes and also the vagueness of some of the most important details,” said Jesse Van Tol, NCRC’s CEO. “They understand that the government is setting up a way for banks to pick and choose which neighborhoods they serve, and to ignore others. That’s the exact problem the law was designed to fix. It was called redlining and for decades banks got away with it, with the government’s blessing. Banking has changed and the rules should be modernized. Everybody who knows the law well understands this. But instead of focusing on the purpose of the law, the OCC has pressed ahead with a plan that would roll the clock back, make life easier for banks and harder for people the law is supposed to protect.”
In advance of a hearing on the proposal before the House Financial Services Committee, NCRC asked some community leaders to share their perspectives on the proposed changes.
They offered the following comments:
Catherine Crosby, chief of staff to Toledo, Ohio, Mayor Wade Kapszukiewicz
“I am very concerned about the potential impact of the changes to the Community Reinvestment Act for Midwest communities like Toledo with aging housing stock, high concentrations of poverty and segregation, and experiencing an affordable housing crisis. It is communities like ours that the CRA was designed to benefit. There are large portions of LMI neighborhoods within our city that experience little to no mortgage lending. When you map the branch network in our city, there are areas that don’t have any and there are very few in the entire city. While there is some small business lending, it is sparse. It is impossible for communities like Toledo to advance economic mobility without interventions like CRA. This is not the time to weaken it. Our country is only as strong as our most vulnerable residents and cities. If we care about improving the quality of life for people across the country, we must strengthen the CRA to ensure that everyone has access to fair and equitable banking services.”
Kevin Stein, deputy director of the California Reinvestment Coalition, San Francisco, CA
“As CEO of OneWest Bank, Comptroller Otting was more likely to foreclose on homeowners than make mortgage loans in neighborhoods of color in California. This proposal will lower the bar even further and weaken scrutiny regarding bank reinvestment in LMI communities. The winners and losers here are clear: Big banks will once more gain at the expense of LMI communities, rural areas and working families looking to fight displacement and build wealth through homeownership and small business ownership. The goals of CRA will be seriously undermined, and this proposal may foster increased redlining in the very communities meant to benefit from CRA.”
Matthew Lee, executive director, Fair Finance Watch, Bronx, NY
“Using the CRA comment process on mergers, our organization got a number of banks to open new branches and make lending commitments in the South Bronx and Upper Manhattan. But with the changes at the OCC, we’ve found more recently that comments are already considered under another, weaker standard, or not considered at all – and that FOIA fee waivers Inner City Press obtains from the Federal Reserve are no longer the practice at the OCC. This NPRM must be opposed.”
Jaime Weisberg, senior campaign analyst for the Association for Neighborhood and Housing Development (ANHD), New York, NY
“We knew the CRA proposal would be bad, but we never imagined it would be this bad. Comptroller Otting completely ignored all the data, stories and ideas put before him in letters, reports, official comments, community tours and in-person meetings, and instead chose to stay the course and gut the CRA. His one-ratio approach will lead to less investment in lower-income communities and communities of color, more redlining and fewer impactful investments overall, including for deeply affordable housing and quality jobs. Contrary to Comptroller Otting’s stated goals, the proposal is more complex, less transparent and less rigorous than what we have today, and the consequences will be disastrous, so much so that ANHD and three members of this committee took to the streets last week to protest these changes. The OCC and FDIC must pull this proposal and go back to the table with the Federal Reserve Board to come up with a proposal that will preserve and strengthen the CRA, not weaken it as is the case now.”
Elisabeth Risch, assistant director of the Metropolitan St. Louis Equal Housing and Opportunity Council (EHOC), St. Louis, Missouri
“Our neighborhoods and communities have fought disinvestment and discrimination by lenders for too long. Redlining is not a thing of the past, especially in our St. Louis community. We cannot afford for this crisis to get worse – and it will under the OCC proposed changes to the CRA. We don’t need banks to fund soccer stadiums and call it community development. We need affordable housing, small business loans and access to credit for LMI families and communities. We need a strong CRA that ensures banks are serving all communities fairly and equitably.”
Bethany Sanchez, senior administrator of Fair Lending at the Metropolitan Milwaukee Fair Housing Council, Milwaukee, Wisconsin
“The Metropolitan Milwaukee Fair Housing Council, which combats discrimination and promotes housing choice, is very concerned about proposed changes to regulations implementing CRA. Our Fair Lending Program works to ensure that all credit-worthy borrowers receive equal access to fairly priced credit. But the proposal by the OCC and the FDIC would dramatically reduce CRA’s historical focus on LMI communities, in contradiction to the law’s intent, which was to eliminate redlining. CRA, passed in 1977, has been a major reason that we now have some loans to people in our LMI neighborhoods and neighborhoods of color, and that some banks have located branches there. But we must strengthen CRA, not weaken it. The City of Milwaukee, which is among our primary service areas, has a racially segregated majority-minority population that has historically been redlined, and is still underserved by banks and other financial institutions. While only 35.3% of the city’s population is White, 2018 data shows that 58.38% of the home loans made in the city went to White borrowers. To thrive, Milwaukee and urban, suburban and rural communities across the country need a strong CRA to continue to strengthen fair lending reviews on CRA exams, and to implement other mechanisms that will encourage lending, investments and financial services that focus specifically on LMI families and neighborhoods.”
Jean Pogge, interim director of Woodstock Institute, Chicago, Illinois
“The OCC and FDIC’s proposal would rob communities of billions—trillions, potentially— in critical funds for communities. Chicago activists, including Woodstock Institute and Gale Cincotta, fought hard in the 1970s to pass the CRA to help address the effects of redlining – discriminatory policies that prevented non-White neighborhoods from receiving their fair share of bank capital. Yes, the banking industry has changed over the years, but the need for investment in low- and moderate-income areas has not. Any attempt to modernize the CRA should retain the initial spirit of the law: to hold banks accountable to the communities they serve.”