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Resolution To Protect The Community Reinvestment Act – To Ensure That Efforts To Modernize Regulations Do Not Undermine The Intent Of The Law

The following sample resolution provides the history, purpose, and some of the basic functions of CRA and includes the key principles that are critical to preserve in the on-going regulatory reform effort by the nation’s bank regulators.

This template is a start and can be adapted by non-profits, localities, state legislatures and other governing bodies moved for immediate adoption. It should also include one or more clauses about the importance of CRA or the role it has played that is specific to the moving organizations or the local/state jurisdiction.

Resolution To Protect The Community Reinvestment Act – To Ensure That Efforts To Modernize Regulations Do Not Undermine The Intent Of The Law

WHEREAS, the Community Reinvestment Act (CRA) was enacted on October 12, 1977, to end the practice of “redlining” by financial institutions where they would draw a red line on a map around the neighborhoods they did not want to offer financial services; before the enactment of the CRA, redlining made it near impossible for low- and moderate-income Americans, people of color, and their neighborhoods to access credit services, such as mortgages and business loans, regardless of their qualifications or creditworthiness; and

WHEREAS, CRA was a landmark civil rights law passed in 1977 to end discrimination that was once common in America’s banking and housing markets; and

WHEREAS, discrimination in lending is still a problem; and

WHEREAS, the CRA states that “regulated financial institutions have continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered”; and

WHEREAS, the CRA establishes a regulatory regime for monitoring the level of lending, investments, and services in low- and moderate-income neighborhoods traditionally underserved by lending institutions; examiners from three federal agencies assess and rate a bank’s activities in low- and moderate-income neighborhoods; and

WHEREAS, the federal agencies conducting CRA examinations are: the Office of the Comptroller of the Currency (OCC), which examines nationally chartered banks and the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board – both of whom examine state-chartered banks; and

WHEREAS, if a regulatory agency finds a bank not serving these neighborhoods, it can delay or deny that institution’s request to merge with another bank or to open a branch or expand any of its other services; the bank’s regulatory agency can also approve the merger application subject to specific improvements in a bank’s lending or investment record in low- and moderate-income neighborhoods; and

WHEREAS, a bank’s CRA rating can be downgraded if a federal agency uncovers evidence of illegal, abusive or discriminatory lending on their fair lending exams that occur at about the same time as CRA exams; and

WHEREAS, since 1996, according to analysis of bank lending data by the National Community Reinvestment Coalition (NCRC), CRA-covered banks issued more than 32 million small business loans in low- and moderate-income tracts, totaling $1.334 trillion, and $1.459 trillion in community development loans that support affordable housing and economic development projects benefiting low- and moderate-income communities; and

WHEREAS, a NCRC review of the CRA examinations of intermediate small banks (ISBs)/mid-sized banks (banks with asset sizes today between $346 million and $1.384 billion) found that ISBs produced over $9.3 billion of community development (CD) loans and grants about every three years; and

WHEREAS, studies have found that CRA-covered home lending is safer and sounder than non-CRA covered lending; when a larger share of lending is issued by CRA-covered banks than by independent mortgage companies, a neighborhood experiences lower delinquency rates and less risky lending; and

WHEREAS, despite the tremendous benefits of CRA to communities, the full potential of CRA has not been realized because it has not been updated to take into account changes in the banking industry and the economy; independent mortgage companies not covered by CRA now make more than 50 percent of the home mortgage loans in America and financial technology companies (“Fintech”) not covered by CRA operating via the internet are rapidly increasing their lending; and

WHEREAS, as part of CRA modernization, geographic assessment areas must remain the focus of CRA exams for all banks; banks should continue to be rated based on every geography where they lend or receive a significant percentage of their deposits; banks cannot be allowed to cherry-pick where they lend – or to ignore the credit needs of distressed and vulnerable communities; and

WHEREAS, as part of CRA modernization, CRA must consider bank lending, investing and services to communities of color in order to narrow racial and ethnic disparities in lending and wealth; and

WHEREAS, CRA should explicitly state the law’s obligation to fairly serve all races and ethnicities; banks that engage in large-scale illegal and harmful activities should fail their CRA exams; the federal bank agencies should improve their proposal to analyze data on lending by race and ethnicity but not to use that analysis in a meaningful way to inform fair lending review; and

WHEREAS, any new proposed scoring system must reduce CRA grade inflation under which 98% of banks pass and 90% receive the same rating of Satisfactory; changes in the ratings system that more accurately reflects bank performance will provide more incentive for the lagging banks to increase their lending, investing and services to underserved populations;

THEREFORE BE IT RESOLVED, that the (organization’s name), will support efforts to modernize CRA, but not relax or undermine the law’s goal and intent; and

BE IT FURTHER RESOLVED, that the  (organization’s name), will oppose regulators efforts including in the just issued interagency Notice of Proposed Rulemaking to raise bank thresholds and exempt more banks, such as ISBs/mid-sized banks, from examination of their community development lending and investments; and

BE IT FURTHER RESOLVED, that the (organization’s name), will support modernizing CRA to apply it to non-bank institutions including mortgage companies, financial technology companies, and credit unions; and

BE IT FURTHER RESOLVED, that the (organization’s name), will oppose any effort to water down the penalties under CRA for discrimination; and

BE IT FURTHER RESOLVED, that the (organization’s name), will support a CRA with a clearly-defined ratings system that emphasizes lending, bank branches, fair lending performance, and responsible loan products for working class families;

BE IT FURTHER RESOLVED, that the recently issued federal interagency notice of proposed rulemaking expands geographical areas to consider lending beyond bank branches, bolsters the lending test to combat grade inflation, and positively expands data on community development financing to better assess banks’ records of financing neighborhood revitalization; and

BE IT FINALLY RESOLVED, that the (organization’s name) urges the agencies to recognize and encourage community benefit agreements that some banks negotiate with community-based organizations during the merger application process and which commit banks to make more loans, investments, and services available to traditionally underserved communities.

Respectfully submitted on _____,

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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