RBO Ordinances, CRA,
HMDA
NCRC Presentation at NCDA
Annual Conference June 2013
HMDA Purposes
• Are financial institutions meeting housing needs
• To assist public officials in distributing public
sector investment in such a way as to encourage
private sector investment to flow to areas in
need.
• Fair lending enforcement
Analysis of Impediments
• Analyze lending to groups of borrowers
• Categories of census tracts
• Loan originations, prime and high cost lending
trends
• Denial rates
• HMDA to improve in future years to have more
information on creditworthiness, home values,
loan terms and conditions, age of borrower
Application of HMDA Data:
San Diego MSA, CA, 2011
Graph 1: Percent of loans to
African American
2.0%
1.9%
1.8%
1.5%
1.1%
1.0%
0.5%
0.0%
Bank of
America
All Lenders Union Bank
Graph 4: Percent of loans to Minority
Neighborhoods
Graph 3: Percent of loans to LMI
Borrowers
25%
20%
15%
10%
5%
0%
22.6%
30%
17.2%
14.5%
26.3%
26.3%
20.9%
20%
8.0%
10%
0%
Bank of
America
All Lenders
Union Bank
% of Owner Bank of
occupied America
units
All Lenders Union Bank
Community Reinvestment Act
• Affirmative obligation to meet credit needs
consistent with safety and soundness
• A report card – members of public can
comment
• Mergers and acquisition – key time for
enforcement; public benefits must be
demonstrated
Federal CRA Greatly Beneficial but
not Enough Local Accountability
• JP Morgan Chase, NA – 2010 OCC Exam, $1.6
trillion in assets, 23 states, For Georgia, exam
has three pages and looks at Atlanta metro area,
not city or its neighborhoods.
• Bank of America, 2009, OCC exam, $1.4 trillion
in assets, 32 states and DC. For Georgia, exam
has three pages and looks at Atlanta metro area,
not city.
Responsible Banking Ordinance:
Rationale
Whereas, bank practices and products have
a measurable impact on tax base, quality
of life, and overall economic viability.
Be it resolved, in return for the privilege of
safeguarding and investing the
community’s wealth and doing business
with the City, the institutions have a
continuing and affirmative obligation….
NCRC Model Bill
• Inspired by Philadelphia, Cleveland, New
York, Los Angeles, Pittsburgh
• Why local ordinances – Federal CRA
exams do not usually evaluate activities in
cities or their neighborhoods
• Elements – Disclosure, Reinvestment
Plans, Community Reinvestment
Committee, Public Input, Accountability
Annual Data Disclosure
• HMDA, home equity, modifications, loan
performance
• CRA small business loan data, race and gender
• Community development loans and investments
on census tract level
• Deposits by census tract
• Consumer loan data
• Minority and female employees – loan officers &
senior officers
Community Reinvestment Plan
• Two year plan for loans, investments, and
services targeted to minority and low- and
moderate-income communities.
• How bank will match or exceed peer
performance in providing safe and sound
products
• In addition to addressing loans & investments,
how will bank offer bank services including
alternatives to payday loans
• How will bank market its products
Community Reinvestment
Committee
•
•
•
•
•
•
Composition – 11 members
City Treasurer (chair rotates)
Director, Dept of Housing & Com Dev
Director, Dept of Economic Development
Two members of City Council
Six members from community
organizations whose purpose is
neighborhood development or civil rights
enforcement
CRC Committee – Data Collection
and Study
• Collects annual data disclosure and
Community Reinvestment plans (CRP)
• Once every two years, issues an RFP for
a study comparing and ranking banks that
receive city deposits
• Use annual data, study, and CRP to
determine which banks are in compliance
with affidavits and eligible to receive
deposits
CRC Committee & Public Input
• Data, study, and community reinvestment
plans available to public
• CRC Committee holds a 60 day comment
period
• CRC Committee holds hearings to solicit
public input on bank performance
CRC Committee
Recommendations
• CRC is to consider study, community
reinvestment plans, and public input
• CRC recommends which institutions
receive city deposits
• CRC recommends dollar amount and
percentage of deposits received by
institutions
Anti-Predatory Safeguards
• City Treasurer will not make deposits in or
invest in any institution that makes
predatory loans
• Will not invest in MBS or other securities
that finance predatory lending
• Six month divestiture process
Affidavit
• Depository signs an affidavit requiring
commitment to responsible lending and
investing
• Provide loan officers focused on neighborhood
development finance
• Willingness to participate in publicly-subsidized
neighborhood development projects
• Commit to affirmatively market products
Branch Closures
• 120 days prior to closing, depository provide
written notice to Mayor and City Treasurer
• Depository to participate in public meetings with
CRC Committee, state, and/or federal agencies,
community organizations, and members of the
public to consider alternatives to branch closure
Reflections on NCRC Philadelphia
Studies
• Conducted studies in ‘05 and ‘06 using 2003
and 2004 data
• Nine banks receiving city deposits at that time
• Most success in prime home lending, home
purchase lending in particular, when compared
to peers. More than half of depositories
exceeded performance of their peers on 14 of
15 indicators in 2004 for home purchase lending
NCRC reflections on Philadelphia
study contd.
• Less success in small business – more than half
of city depositories exceeded performance of
other lenders on just 40 percent of indicators in
2004; same results in 2003.
• Depositories commendable in target
neighborhoods – higher market share than
overall in city, but lending in target
neighborhoods overall lagged that in city as a
whole.
Conclusion
• Elements for success – publicly available data,
CRP, studies, using CRA/fair lending
performance as part of criteria for municipal
deposits
• Transparency, accountability, public input
• Accountability on multiple fronts – City law, CRA
exams/bank mergers, Analysis of Impediments
Appendix: More specifics for a few
cities
Philadelphia: CRA Goals and
Strategic Plan for Depositories
• Each depository required to provide an annual
statement of CRA goals including number of
home & small business loans and investments in
LMI neighborhoods
• A long term strategic plan addressing race and
gender disparities. Plan must indicate how bank
will meet or exceed peer lending performance
• City Treasurer shall certify compliance & has
authority to withdraw funds from banks not in
compliance
Philadelphia contd.
• Commissions annual study of overall lending
trends and performance of city depositories in
home, small business lending, branching
patterns, CRA and fair lending performance
• City extended the ordinance to cover payroll
deposits
• City also requires depositories to provide 90 day
notice to city of branch closures and reasons for
closures as well as statistical or other
information in support of such reasons
City of Cleveland
• City evaluates banks on their reinvestment
performance & awards banks deposits
based on their rankings
• More than $550 million in municipal
deposits including $450 million in payroll
For more information
• Josh Silver, Vice President of Research and
Policy
• 202-464-2708
• jsilver@ncrc.org
• http://www.ncrc.org