The following sample resolution provides the history, purpose, and some of the basic functions of CRA and includes the key principles that are critical to preserve in the on-going regulatory reform effort by the nation’s bank regulators.
This template is a start and can be adapted by non-profits, localities, state legislatures and other governing bodies moved for immediate adoption. It should also include one or more clauses about the importance of CRA or the role it has played that is specific to the moving organizations or the local/state jurisdiction.
2019 RESOLUTION TO PROTECT THE COMMUNITY REINVESTMENT ACT –TO ENSURE THAT EFFORTS TO MODERNIZE REGULATIONS DO NOT UNDERMINE THE INTENT OF THE LAW
WHEREAS, the Community Reinvestment Act (CRA) was enacted on October 12, 1977 to end the practice of “redlining” by financial institutions where they would draw a red line on a map around the neighborhoods they did not want to offer financial services; before the enactment of the CRA, redlining made it near impossible for low- and moderate-income Americans, racial and ethnic minorities, and their neighborhoods to access credit services, such as mortgages and business loans, regardless of their qualifications or creditworthiness; and
WHEREAS, CRA was a landmark civil rights law passed in 1977 to end discrimination that was once common in America’s banking and housing markets; and
WHEREAS, discrimination in lending is still a problem; and
WHEREAS, the CRA states that “regulated financial institutions have continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered”; and
WHEREAS, the CRA establishes a regulatory regime for monitoring the level of lending, investments, and services in low- and moderate-income neighborhoods traditionally underserved by lending institutions; examiners from three federal agencies assess and “grade” a lending institution’s activities in low- and moderate-income neighborhoods; and
WHEREAS, the federal agencies conducting CRA examinations are: the Office of the Comptroller of the Currency (OCC), which examines nationally chartered banks and the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board – both of whom examine state-chartered banks; and
WHEREAS, if a regulatory agency finds a financial institution not serving these neighborhoods, it can delay or deny that institution’s request to merge with another lender or to open a branch or expand any of its other services; the financial institution regulatory agency can also approve the merger application subject to specific improvements in a bank’s lending or investment record in low- and moderate-income neighborhoods; and
WHEREAS, a financial institution’s CRA grade can be downgraded if a federal agency uncovers evidence of illegal, abusive or discriminatory lending on their fair lending exams that occur at about the same time as CRA exams; and
WHEREAS, since 1996, according to analysis of bank lending data by the National Community Reinvestment Coalition (NCRC), CRA-covered banks issued more than 27 million small business loans in low- and moderate-income tracts, totaling $1.093 trillion, and $1.076 trillion in community development loans that support affordable housing and economic development projects benefiting low- and moderate-income communities; and
WHEREAS, the annual dollar amount of community development loans increased 443 percent from $17.7 billion in 1996 to $96 billion in 2016; and, a 2016 review of the CRA examinations of intermediate small banks(ISBs)/mid-sized banks (banks with asset sizes today between $313 million and $1.252 billion) found that ISBs produced over $9.3 billion of community development (CD) loans and grants; and
WHEREAS, studies have found that CRA-covered home lending is safer and sounder than non-CRA covered lending; when a larger share of lending is issued by CRA-covered banks than by independent mortgage companies, a neighborhood experiences lower delinquency rates and less risky lending; and
WHEREAS, despite the tremendous benefits of CRA to communities, the full potential of CRA has not been realized because it has not been updated to take into account changes in the banking industry and the economy; independent mortgage companies not covered by CRA now make more than 50 percent of the home mortgage loans in America and financial technology companies (“Fintech”) not covered by CRA operating via the internet are rapidly increasing their lending; and
WHEREAS, notwithstanding the need to modernize CRA, we are concerned about ideas from some federal regulators that would substantially weaken the law; and
WHEREAS, geographic assessment areas must remain the focus of CRA exams for all banks; banks should continue to be graded based on every geography where they lend or receive a significant percentage of their deposits; banks cannot be allowed to cherry-pick where they lend – and where they don’t lend at all or to ignore the credit needs of distressed and vulnerable communities; and
WHEREAS, regulators review of a bank’s CRA commitment should not be consumed by a “one ratio” approach on which most or all of a bank’s CRA rating would be based. One ratio would consist of the dollar amount of a bank’s CRA activities (loans, investments, and services to low- and moderate-income people) divided by the bank’s assets or the bank’s “Tier One” capital. One fraction cannot sum up how, if and where a bank is lending and investing and whether they are being responsive to the particular credits needs of their local community; and
WHEREAS, CRA should explicitly state the law’s obligation to fairly serve all races and ethnicities; banks that engage in large-scale illegal and harmful activities should fail their CRA exams.
THEREFORE BE IT RESOLVED, that the (organization’s name), will support efforts to modernize CRA, but not relax or undermine the law’s goal and intent; and
BE IT FURTHER RESOLVED, that federal legislation such as H.R. 1737/S.787, the American Housing and Economic Mobility Act, serve as example of proposals that will strengthen the CRA by covering more financial institutions, promoting investment in activities that help both low- and moderate-income and traditionally underserved communities, as well as strengthening sanctions against institutions that fail to follow the rules; and
BE IT FURTHER RESOLVED, that the (organization’s name), will oppose regulators efforts to raise bank thresholds and exempt more banks, such as ISBs/mid-sized banks, from examination of their community development lending and investments; and
BE IT FURTHER RESOLVED, that the (organization’s name), will support modernizing CRA to apply it to non-bank institutions including mortgage companies, financial technology companies, and credit unions; and
BE IT FURTHER RESOLVED, that the (organization’s name), will oppose regulators efforts to water down the penalties under CRA for discrimination; and
BE IT FURTHER RESOLVED, that the (organization’s name), will support a CRA with a clearly-defined grading system that emphasizes lending, bank branches, fair lending performance, and responsible loan products for working class families; and
BE IT FINALLY RESOLVED, that the (organization’s name), will support efforts to hold a bank accountable if it fails its CRA exam, or wishes to acquire a bank with a better CRA grade, and urge agencies to recognize and encourage community benefit agreements and efforts that motivate banks to make more loans, investments, and services available to traditionally underserved communities.
Respectfully submitted on _____,