Prosperity Now, 66 Collaborators Issue Public Comment to Treasury Dept.
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
The comment, on Docket No. OCC-2022-0002-0001, was sent to the Chief Counsel's Office at the
* * *
Enacted in 1977, the CRA requires federal banking regulators to assess the extent to which financial institutions are meeting the credit needs of the "entire community"--including low- and moderate-income (LMI) neighborhoods--while operating in a safe and sound manner.
The CRA was a part of a series of government interventions--including the Fair Housing Act and the Equal Credit Opportunity Act--designed to respond to our country's history of redlining, the federally endorsed practice under which lenders refused to lend, especially for home mortgages, to Black, Indigenous, People of Color (BIPOC).
Despite the efforts of the CRA, the racial wealth gap has not only persisted but is expanding. Data from the 2019 Survey of Consumer Finances shows that the typical White family has eight times the wealth of the typical Black family and five times the wealth of the typical Latinx family./i
Furthermore, we know that the COVID-19 pandemic has only exacerbated these inequities. The homeownership gap between Black and White households in 2020 was worse than at any point in the 20th century, as discriminatory and predatory lending practices have continued to exist despite the CRA./ii
Recent analysis of Home Mortgage Disclosure Act (HMDA) data found that Black applicants were denied a mortgage at an 84 percent higher rate than White applicants in 2020./iii
Further, rising housing costs and outside investors threaten the financial and housing stability of low-income, BIPOC communities and will likely further this housing crisis.
While entrepreneurship has the potential to help close the racial wealth gap, BIPOC entrepreneurs continue to face barriers caused by little support from the government and mainstream lenders, lack of access to capital, and lending discrimination. Despite opening businesses at faster rates, BIPOC entrepreneurs are more likely to be rejected from formal financial bank loans. Even when controlling for factors such as "firm characteristics and performance," Black-owned businesses are still 20 percent less likely than White-owned businesses to obtain a loan from a large bank./iv
Moreover, data from the 2018
Despite these ongoing disparities in lending by race, 98% of financial institutions received a 'satisfactory' or 'outstanding' grade in their CRA report, calling for the need for more rigorous examinations and stronger standards and accountability./vi
It has been more than a quarter century since the CRA regulatory framework was updated; therefore, it is important that the regulators get it right.
The
Below, we outline the strengths of the proposal to modernize the CRA as well as the opportunities to make the proposal more effective:
The CRA must explicitly evaluate based on race
Despite the clear purpose to redress redlining and other racist policies in housing and banking systems, the regulations originally implementing the CRA focused on LMI communities only, without specific requirements to target BIPOC borrowers. This race-neutral approach, however, is not working. Research from the
The CRA must, therefore, require banks to gather and report disaggregated racial and demographic data as part of the CRA exams. While the CRA statute does not mention race, it requires banks to serve all communities, which provides room for the federal banking regulators to incorporate race in CRA exams. Persistent racial disparities in lending should compel the agencies to incorporate race and ethnicity in CRA exams. Recent national level analysis from the
While the agencies have proposed to use the HMDA data to produce exam tables describing lending by race, these results currently will not influence a bank's rating. Changes to the CRA would comply with legal standards if the CRA examined lending by race and ethnicity in geographical areas experiencing ongoing discrimination or exhibiting significant racial disparities in lending./ix
We also support the proposal from NCRC to include analyses of lending in underserved neighborhoods with low levels of lending, which are disproportionately communities of color./x
While we believe the agencies can examine banks' record of lending by race, the agencies should at least bolster fair lending reviews accompanying CRA exams for banks that perform poorly in the HMDA data analysis of lending by race. In addition, the agencies proposed using Section 1071 data on small business lending by race and gender of the business owner, and this data should be used as a screen for fair lending reviews.
Fair Lending Continues to be Important
We are pleased to see that the proposal continues to take fair lending violations seriously by indicating that such conduct could lead to a ratings downgrade. While accountability for discrimination will increase under this proposal, the agencies need to bolster their reviews concerning the quality of lending. Reviews of lending should include affordability analyses and impose penalties when banks offer on their own or in partnerships with non-banks abusive, high-cost loans that exceed state usury caps and that exceed borrowers' abilities to repay.
More Clearly Define What Constitutes Eligible Community Development Activities
To create more transparency and greater certainty for banks about what lending and investment activities meet their CRA obligations, we applaud the efforts to create a non-exhaustive list of what community development activities would count on a CRA examination. However, it would be prudent to put this list together thoughtfully. Depending on the context, some activities are more impactful than others, and finding a way to assist banks with prioritizing projects as well as making the list not too burdensome would be useful. As far as specific activities, having financial literacy counseling count for all income levels is not the right approach; instead, these limited resources should be preserved for low-income households with the greatest needs for these services. However, we must note that financial literacy alone cannot solve for inequities in access to lending and other financial services.
Codify that targeted, responsible small-dollar mortgages and loans are CRA activities
In
This guidance is a start but not a substitute for developing metrics to consider targeted small-dollar loans as CRA-eligible activities. These loans, when responsibly made and serviced, can advance homeownership, entrepreneurship, and financial stability, especially in rural areas and in communities of color.
Codify public input mechanisms
Since the CRA requires banks to meet the needs of communities, the agencies must elevate the importance of public comments regarding the extent to which banks meet local needs. The agencies proposed to continue the current practice of sending any comments on the CRA performance to banks and are also considering publishing comments received on agency websites.
Posting comments on agency websites will establish accountability on the part of examiners to consider them. In addition, the agencies should establish a public registry that community organizations can use to sign up if they want to be contacted about community needs and bank CRA performance. Furthermore, we request that the agencies start to publish which organizations they consult with to understand local community needs, commit to collecting input from a diverse range of organizations that includes organizations led by people of color and women, follow up on needs identified, and detail how community input was factored into the results of CRA performance evaluations.
Conclusion
We appreciate the opportunity to provide feedback on the joint Notice of Proposed Rulemaking on an approach to strengthen and modernize regulations that implement the CRA. As it stands, the proposal has several strong points, and we believe the recommendations presented above will further strengthen it. We hope the agencies take them under consideration to ensure that the final rule truly meets the intentions of the Community Reinvestment Act to better serve all communities.
Sincerely,
National
Americans for Financial Reform Education
Fund
CDFI Friendly America
Education Leaders of Color
Equal Rights Advocates
Housing Association of
Nonprofit Developers
PolicyLink
Public Advocacy for Kids
SaverLife
Slipstream
TheCaseMade
UpTogether
Welcoming America
Economic Programs
Abrazar
Women's Economic Venture
Georgia Watch
Step Up Savannah
Shifting Hearts & Minds
CDFI Friendly South Bend
Services
CASH Campaign of
Prepare + Prosper
LifeWise StL
La
Winning
Bedford Stuyvesant Restoration
Corporation
Belmont Housing Resources for WNY
Bridgehampton Child Care and
Recreational Center
Corporation
Financial Pathways of the
Casa of
Ceiba
Neighborhood Allies
Housing in the Public Interest
Women of Wisdom Tri-Cities
i "Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances,"
ii "NCRC 2020 Home Mortgage Report: Examining Shifts During COVID-19,"
iii "Black Mortgage Applicants Denied 84% More Often than White Borrowers," Zillow,
iv "Black-owned businesses face an unequal path to recovery,"
v "Can Small Firms Weather the Economic Effects of COVID-19?",
vi "Do CRA Ratings Reflect Differences In Performance: An Examination Using Federal Reserve Data,"
vii "Should the Community Reinvestment Act Consider Race?,"
viii "NCRC 2020 Home Mortgage Report: Examining Shifts During COVID-19,"
ix "Adding Robust Consideration Of Race To Community Reinvestment Act Regulations: An Essential And Constitutional Proposal,"
x "Adding Underserved Census Tracts As Criterion On CRA Exams,"
xi
* * *
Original text here: https://downloads.regulations.gov/OCC-2022-0002-0592/attachment_1.pdf
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
Life Accident Insurance Market to See Huge Growth by 2027 : MetLife, Aviva, ManhattanLife
National Association of Mutual Insurance Companies Issues Public Comment to DOT
Advisor News
- Strong underwriting: what it means for insurers and advisors
- Retirement is increasingly defined by a secure income stream
- Addressing the ‘menopause tax:’ A guide for advisors with female clients
- Alternative investments in 401(k)s: What advisors must know
- The modern advisor: Merging income, insurance, and investments
More Advisor NewsAnnuity News
- ALIRT Insurance Research: U.S. Life Insurance Industry In Transition
- My Annuity Store Launches a Free AI Annuity Research Assistant Trained on 146 Carrier Brochures and Live Annuity Rates
- Ameritas settles with Navy vet in lawsuit over disputed annuity sale
- NAIC annuity guidance updates divide insurance and advisory groups
- Retirement is increasingly defined by a secure income stream
More Annuity NewsHealth/Employee Benefits News
- 4 major class action settlements could put cash in your pocket — See if you qualify
- A LOOK AT NEW OR EXPANDED MEDICAID AND PUBLIC HEALTH PARTNERSHIPS FROM 2025: FINDINGS FROM A SURVEY OF STATE MEDICAID PROGRAMS
- TRUMP ANNOUNCES PROPOSAL TO EXPAND IVF INSURANCE COVERAGE
- New report ranks Texas among worst states for healthcare disparities. Here's why
- Health insurance legislation signed into law by Iowa Gov. Kim Reynolds
More Health/Employee Benefits NewsLife Insurance News
- 5 steps to take before selling your firm
- Bismarck man pleads guilty to taking out insurance policy on dead wife
- ALIRT Insurance Research: U.S. Life Insurance Industry In Transition
- U-Haul Holding Company Schedules Fourth Quarter Fiscal Year End 2026 Financial Results Release and Investor Webcast
- New Empathy and LIMRA Research: The Overlooked Opportunity to Engage the Next Generation After an Insurance Payout
More Life Insurance News