01/14/2020 - The Community Reinvestment Act: Reviewing Who Wins and Who Loses... - (EventID=110363)

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Tuesday, January 14, 2020 (2:00 PM) -- " The Community Reinvestment Act: Reviewing Who Wins and Who Loses with Comptroller Otting’s Proposal" Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems ________________ This will be a one-panel hearing with the following witnesses: • Ms. Gerron Levi, Director, Policy & Government Affairs, National Community Reinvestment Coalition • Mr. Eric Rodriguez, Senior Vice President, Policy and Advocacy, UnidosUS • Ms. Paulina Gonzalez-Brito, Executive Director of California Reinvestment Coalition • Ms. Hope Knight, President & CEO, Greater Jamaica Development Corporation • Ms. Faith Bautista, President & CEO, National Diversity Coalition The Community Reinvestment Act The Community Reinvestment Act (CRA), enacted into law by Congress in 1977,1 addresses how banks meet the credit and capital needs of the communities they serve. As part of landmark civil rights legislation passed in the 1960s and 1970s, CRA was created in response to redlining, a practice by which banks discriminated against prospective customers based primarily on where they lived, or their racial or ethnic background, rather than creditworthiness. In passing CRA, Congress affirmed that “regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business”, and for “each appropriate federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.” Current CRA Implementation and Bank Examinations Under the current CRA framework, the primary banking regulators – specifically the Federal Reserve Board of Governors (FRB), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) – conduct regular examinations to evaluate banks’ activities to provide credit, services and make investments in low and moderate income (LMI) communities where the banks operate. CRA applies only to banks with federally insured deposits, and excludes bank affiliates, credit unions and nonbank financial companies. CRA examinations focus on LMI loans and investments by institutions in designated assessment areas.’ Assessment areas are defined by banks, and must “consist of one or more [Metropolitan Statistical Areas] or metropolitan divisions or one or more contiguous political subdivisions, such as counties, cities or towns . . . [and] must include geographies in which the bank has its main office, branches and deposit-taking ATMs, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans.” Within assessment areas, CRA examinations evaluate banks’ service to local LMI communities and issue grades for the tests in the following three principal categories: • Lending: an evaluation of a bank’s lending activities to LMI communities. Examiners consider loan to deposit ratios, the percentage of loans in an assessment area, lending to borrowers of different incomes and in different amounts, geographical distribution of loans, and actions on complaints filed against the institution. • Investment: direct lending and investments, or investments in secondary loan markets that qualify as public welfare investments (PWI), or community development investments (CDI) that meet PWI requirements, defined broadly as “affordable housing (including multifamily rental housing) for low- and moderate-income individuals; community services targeted to low-and-moderate income individuals; activities that promote economic development by financing small businesses or small farms (gross annual revenues of $1 million or less); and activities that revitalize or stabilize low- and moderate-income geographies.” • Service: “a service that has as its primary purpose community development, is related to the provision of financial services, has not been considered in the evaluation of the bank’s retail banking services, benefits the bank’s [assessment area (AA)] or a broader statewide or regional area that includes the bank’s AA and has not been claimed by other affiliated institutions.” For the purposes of CRA examinations and grading, banks are subdivided into three groups, by size that are annually adjusted according to inflation: small banks, with assets below $1.305 billion as of December 31 of either of the prior two calendar years; intermediate small banks, with assets between $326 million and $1.305 billion; and large banks, with assets in excess of... Hearing Page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406025