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Bill H.R. 6334 to amend the American Community Investment Reform Act of 1977 introduced in the House
October 8, 2010
National Community Reinvestment Coalition (NCRC) is pleased to announce that The American Community Investment Reform Act of 2010, H.R. 6334 has been introduced in the House! The bill significantly expands CRA and includes a number of innovative provisions increasing public involvement and penalties for poor CRA performance.
Here are the actions the NCRC’s campaign’s Legislative and Field Subcommittees have worked together to identify as most important for generating the support we need in the House:
- Call your US Representative — Click here for a suggested phone script. Please let Celeste Perilla, at cperilla@ncrc.org, know how your Representative’s office responds. If there is a rep that needs extra attention to get a sign-on, we can turn up the heat by coordinating phone calls into the district office or visiting the member at the Washington, DC office.
- Email your US Representative — Click to access the email template ready to send to your member of Congress.
- Celebrate the expansion of CRA during CRA Month:
Prepare for a press conference in your district in October — Click to send us CRA success stories and project sites that would serve as venues for the celebration of CRA month with key members of Congress.
- Interfaith Prayer Breakfast in October – please contact Brittany Nixon at bnixon@ncrc.org and let her know of influential faith-based leaders that can advocate for a strong CRA.
NCRC Bill Summary:
In summary, this bill will dramatically increase access to credit, capital, and financial services for traditionally underserved communities and the CRA will be reinvigorated with stronger public participation requirements, ratings reforms, and penalties. As outlined in a previous email, some of the bill’s highlights include:
Expansion of CRA to non-bank institutions - The bill expands CRA to a variety non-bank financial institutions including independent mortgage companies, investment banks, and hedge funds. It appears the Fed may also elect to include insurance companies after consulting with the Office of National Insurance created by Dodd-Frank. However, the legislation exempts credit unions from CRA. As a result of its broad application of CRA throughout the financial industry, the bill would leverage hundreds of billions of additional dollars for loans, investments, and services to low and moderate-income communities!
Inclusion of affiliates and subsidiaries of banks - The bill requires that affiliates and subsidiaries of banks be included on CRA exams. Currently, banks can choose if their mortgage company affiliates are on their exams. Affiliates not on exams have engaged in large scale abusive lending. The closing of the affiliate loophole is long overdue.
Elevation of the role of community development lending and investments - Community development loans and investments finance affordable housing, economic development, and community facilities. For banks, community development is to be weighed at least equally with any other factor. Exams of securities firms are to focus on community development loans and investments. Banks seeking Outstanding ratings can engage in community development outside of their assessment areas (geographical areas rated by their exams) as long as they meet the needs inside their assessment areas. Out-of-assessment area investments and loans to community development financial institutions are also considered favorably.
Increases in the rigor of CRA exams - A new rating is added called “Sufficient” has been added. The new ratings scale is Outstanding, Satisfactory, Sufficient, Needs-to-Improve, and Substantial Noncompliance. This introduces more meaningful gradations in performance. Moreover, an institution must now apply to its regulatory agency if it wants an Outstanding rating, and it must have at least three Satisfactory ratings in a row before applying for an Outstanding rating. Public input while the exam is in process is required. Once an agency finishes its exam, it must provide preliminary exam results to the public and receive comments. Currently, only banks can see and comment upon preliminary exam results. This procedure should help to combat grade inflation. If an institution has a Needs-to-Improve or Substantial Noncompliance rating overall or in any assessment area, it must submit an improvement plan, subject to public comment, to its agency. This will increase public input into how an institution can improve in geographical areas where its performance is weak, and should therefore help make institution performance more uniform.
Provision of incentives to financial institutions – The bill provides a presumption of meeting community needs when an institution with an Outstanding or Satisfactory rating seeks to merge with another institution. Of course, mergers are a key time for CRA enforcement, and we will seek to clarify the regulatory authority when institutions have passing ratings.
The bill presents a positive step towards strengthening and expanding CRA; however we didn’t get all we asked for. Specifically, you will note the exemption of credit unions, the very soft language on insurance companies and questions we all have about the merger process and the presumptions that operate in that environment.
The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America's working families.
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