Editor’s note: The letter below was sent to the CEOs of OneWest Bank and CIT Group, two banks who have proposed to the Federal Reserve to merge. The California Reinvestment Coalition and its members and allies are concerned about the proposed merger and outline these concerns in the letter below:
September 16, 2014
Dear Mr. Otting and Mr. Thain:
This letter is meant to suggest a framework for discussing how a combined OneWest/CIT Bank could effectively meet community credit needs by developing a strong and public Community Benefits and Reinvestment Plan with commitments proportional for a bank of its prospective size.
The California Reinvestment Coalition (CRC), based in San Francisco, is a nonprofit membership organization of over three hundred (300) nonprofit organizations and public agencies across the state of California. We work with community-based organizations to promote the economic revitalization of California’s low-income communities and communities of color. CRC promotes increased access to credit for affordable housing and community economic development, and to financial services for these communities.
We believe that strong partnerships with local community organizations, coupled with a strong Community Benefits and Reinvestment Plan that provides a roadmap for the bank’s planned CRA activity specifically geared to Southern California’s low and moderate income communities and communities of color, are essential components to the overall success of the bank’s CRA program and to its acceptance in the community.
We offer the following recommendations in the spirit of CRC and its members working to identify community needs and the appropriate reinvestment benchmarks for a bank of your size. CRC and its members urge the Bank to agree to a 5 year Community Reinvestment and Benefits Plan that the Bank would file with the Federal Reserve Board as a supplement to your application. Plan components include:
- The bank will set annual goals for total CRA activity (in the areas of lending, community development investing, contributions and financial services) that exceed 25% of California deposits.
- The bank will devote at least .30% of deposits annually towards community development investments. These community development investments could include affordable housing development, small business lending, and equity equivalents to California CDFIs, CDC’s and other non-profit community development funds. No more than half of community development investments should be for tax credits or mortgage backed securities. The bank should set a subgoal for community development investments targeted to affordable projects at or near transit stops that are being developed in LMI communities, and actively provide both residential and commercial loan products that inspire affordable developments.
- The bank will set aside an initial $30 million philanthropic fund for community and economic development activities that target small businesses and families still hurting from the economic recession. Additionally, starting in year one, the bank will devote at least .030% of deposits annually towards contributions. Of this amount, 60% or more will be towards housing and economic development activities that support low/moderate income people including organizations providing technical assistance to small businesses, fair housing or mortgage counseling, affordable housing development, and other similar activities.
- The bank should commit at least 1% of deposits for community development lending that supports the construction and rehabilitation of housing that is deed restricted as to be affordable to very low, and low income households.
- The bank should develop a one stop construction to permanent loan product for multi-family housing finance.
- The bank should develop a line of credit for nonprofit housing developers to enable them to acquire properties, including REOs, for the benefit of borrowers, including low to moderate income first time homebuyers.
- The bank will designate at least one staff person who will work with nonprofit groups representing homeowners seeking to secure loan modifications and/or Keep Your Home California program benefits.
- The bank will develop a policy to prefer nonprofits and owner occupants in the sale of distressed loans and REO properties.
- The bank will make available affordable mortgage loan products with flexible underwriting guidelines for families earning less than 120% AMI adjusted for family size. The bank should allow nonprofits, CDFIS and other affordable mortgage loan providers to become brokers through all of its distribution channels.
- The bank should originate SBA loans to borrowers of color at a percentage that approximates their representation among businesses in the Bank’s assessment or service area, and continue to offer loans in smaller loan sizes.
- An annual goal of half of the number of CRA-qualified small business loans shall be to businesses with annual revenue of less than $1 million or consist of loans less than $150,000 excluding credit card loans. Small business lending in LMI census tracts should approximate the % of businesses located in LMI census tracts with the bank’s assessment area.
- The bank should develop a small business loan and technical assistance referral program so that businesses unable to qualify for small business loans from the bank can be referred seamlessly to local CDFIs and other nonprofit providers that may be able to make the loan and/or provide technical assistance in order to help borrowers better prepare themselves to qualify for conventional financing.
- The bank will participate in the state’s small business Loan Guarantee Program.
- The bank will develop a strong MWDBE vendor program and set a goal of 30% sourceabale spend, with at least 20% spending with MBE contractors.
- The bank will ensure that CalWORKs recipients accessing their funds using Electronic Benefits Transfer cards will not be assessed a fee at OneWest/CIT Bank ATM machines.
- The bank will develop a bank account that complies with CRC’s Safe Money standards.
- The bank will commit that 30% of new branches established outside of a merger will be located in LMI census tracts.
- The bank will sign the Plan, make the Plan public and file it with its application to merge.
- The bank will meet annually with CRC and its members to report on progress in meeting the commitments in its CRA Community Benefit and Reinvestment Plan.
- The bank will strive to have a diverse workforce that reflects the bank’s customer base.
- The Bank will commit to having at least one representative from the Latino, Asian American and Pacific Islander, and African-American community on its board of directors within 3 years.
With a strong CRA plan in place, CRC and its members are willing and ready to work with the bank to further the bank’s CRA and overall business objectives.
We look forward to discussing this proposal with you further when we meet in September. If you have any questions or would like to discuss further, please call Kevin Stein at (415) 864-3980. We look forward to the ongoing dialogue on behalf of California communities.
Affordable Housing Clearinghouse
Asian Pacific Islander Small Business Program
Asian Pacific Policy & Planning Council (A3PCON)
Business Resource Group
California Housing Partnership
California Reinvestment Coalition
California Resources and Training (CARAT)
Community Housing Development Corporation
Community Housing Improvement Program (CHIP)
East Los Angeles Community Corporation
Fair Housing of Marin
Housing and Economic Rights Advocates
Housing Rights Center
Inland Fair Housing and Mediation Board
Korean Churches for Community Development
Los Angeles Local Development Corporation
Multi-Cultural Real Estate Alliance for Urban Change
Neighborhood Housing Services of Los Angeles County
Neighborhood Housing Services of Silicon Valley
NeighborWorks Orange County
Northbay Family Homes
Pacific Asian Consortium in Employment (PACE)
Renaissance Entrepreneurship Center
Sacramento Housing Alliance
Strategic Actions for a Just Economy (SAJE)
Suburban Alternatives Land Institute
Valley Economic Development Corporation
Women’s Economic Ventures