Community Legal Services, Regional Housing Legal Services Issue Public Comment on Comptroller of Currency Proposed Rule
* * *
Regional Housing Legal Services and
Regional Housing Legal Services (RHLS) represents community-based non-profit organizations that develop affordable housing projects throughout
Although redlining traces back to the 1930s, people of color living in low-income neighborhoods are still living its effects every day. Many CLS clients have spent decades living under the staggering financial weight of predatory home purchase or home equity loans with soaring interest rates that only someone with no other option would accept. There is a shortage of affordable housing units across
And many of the people we represent still live in bank deserts.
It is essential that any changes to the CRA rules increase the ability of the clients and community organizations we represent to access fair loans to buy or repair their home; affordable, quality rental housing; and banking services in their neighborhood. The proposed rule changes do not meet this standard. Instead, they threaten to shutter bank branches and restrict access to affordable housing and fair credit in lower income communities, exacerbating the pernicious racial inequity that spurred the law's passage.
The proposed CRA changes would allow banks to dramatically reduce their mortgage lending to low- and middle-income (LMI) borrowers and still pass their CRA exams./2
From 2009 through 2018, banks in the
It is difficult to isolate the impact of the CRA, but we know that much of this lending may be at risk with the proposed roll back. Researchers found in 2017 that, when census tracts in
By expanding the definition of what counts for CRA credit and loosening the CRA exam metrics, the proposed rules all but eliminate the incentive for banks to make mortgage loans to people of color in low-income communities.
And there can be no doubt that banks in
And despite similarly sized populations in the city, white Philadelphians received ten times as many conventional loans as Black Philadelphians. Reveal found similar inequity in lending across the country. That 98 percent of banks pass their CRA exams despite these disturbing trends lays bare that now is the time to strengthen--not weaken--the law.
The proposed changes threaten funding for affordable housing by reducing the CRA credit available for those investments. Some of the most significant investment in low-income communities, which improves the quality of the housing stock, increases availability of services, and also can stabilize a community on a downward trajectory, is the Low-Income Housing Tax Credit (LIHTC). LIHTC is a tax credit that leverages private investment to help build affordable housing. The banks that invest in LIHTC also generally get CRA credit for those investments. Reducing the credit available for these investments will likely reduce the funding available for LIHTC, which is the primary source of affordable housing development in the country.
The impact of LIHTC investment motivated by CRA credit is easy to see in
In addition to providing critically-needed housing for these vulnerable populations, the project will provide residents with supportive services in employment, healthcare, and education. Other
In addition to threatening homeownership and affordable rental housing, the proposed rules reduce the incentive for banks to open and preserve branches in low-income areas, making it even harder for people to access the stability and security of basic banking. While many middle-class Americans take banking for granted, many CLS clients are unbanked and must rely on check cashers and prepaid debit cards to manage their money. These high-cost alternatives dip into people's already limited income, and cannot provide the security or stability that a bank in their own community would. For that, people must spend time and money traveling to another part of the city for a simple deposit. And not surprisingly, research shows that bank branches in LMI neighborhoods correlates with an increase in lending to LMI borrowers./7
By eliminating the service test that scrutinizes bank branching and replacing it with a proposal that devalues branches, the proposed rules will lead to fewer bank branches in low-income neighborhoods and fewer loans made to LMI borrowers.
Cutting across each of these issues is a crucial, urgent failure of the proposed regulations: they do not consider race. Instead, they continue to rely on income and geography as a complete proxy. As a result, banks continue to get CRA credit for investing in projects in gentrifying opportunity zones and making home loans to higher-income white people in gentrifying areas. These loopholes defy the spirit of the law, do nothing to encourage fair lending, and can in fact increase the racial wealth gap and hasten displacement of people of color. It is crucially important that the OCC,
Finally, another shortcoming of the CRA rules that the COVID-19 crisis has exposed is the antiquated requirement that banks make their public CRA file available at one branch in each state in which it operates. In this decade, and specifically in a year when public health requires people to stay home, rules must be changed to require banks to make their full CRA file available online.
On behalf of the organizations and people we serve in
Sincerely,
* * *
Footnotes:
1/ See, e.g., https://www.salon.com/2020/04/06/data-suggests-covid-19-deaths-disproportionately-hit-african-american-communities_partner/; https://www.theatlantic.com/ideas/archive/2020/04/stop-looking-away-race-covid-19-victims/609250/; https://www.forbes.com/sites/korihale/2020/03/17/the-economic-impact-of-covid-19-will-hit-minorities-the-hardest/#6f1038c710c0.
2/
3/
4/
5/
6/ Regional Housing Legal Services, https://www.rhls.org/2016/03/project-home-breaks-ground-on-2415-north-broad-latest-housing-in-middleton-partnership/.
7/ See
* * *
The proposed rule can be viewed at: https://www.regulations.gov/document?D=OCC-2018-0008-1960
TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact
Sen. Baldwin, Colleagues Urge Congressional Leaders to Expand Health Care Coverage in Future Coronavirus Legislation
New Duckworth-Durbin Legislation Would Give Americans the Freedom to Purchase Health Insurance During COVID-19 Pandemic
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News