CRC was proud to honor ACT-LA last week for their important work on equitable development and ensuring the needs of working families are a priority, including housing that’s affordable and public transit that’s accessible. Sharon Kinlaw, executive director of Fair Housing Council of San Fernando Valley and CRC board member, was also honored for her role in leading a successful campaign to increase access for people with disabilities who live in affordable housing units. The San Fernando Fair Housing Council, along with Independent Living Center of Southern California (ILCSC), Communities Actively Living Independent and Free (CALIF), and LA resident Mei Ling filed and settled a lawsuit against the City of Los Angeles. As a result of this grassroots advocacy, the City of LA promised to ensure that at least 4,000 units will be made accessible for people with disabilities. A lawsuit against the Redevelopment Agency is still ongoing.
Last week, members of the California Reinvestment Coalition traveled to Washington, DC, for the annual National Community Reinvestment Coalition conference. The theme this year was “Creating a Just Economy.”
Keynote speakers during the conference included Federal Reserve Chair Janet Yellen, CFPB Director Richard Cordray, Representative Maxine Waters who is Ranking Member of the House Financial Services Committee, Comptroller Thomas Curry, Senator Sherrod Brown who is Ranking Member of the Senate Banking Committee, Mark Morial, CEO of the National Urban League, and John Taylor, president and CEO of NCRC.
There were a number of sessions focused on reinvestment, affordable housing, small business lending, home ownership, gentrification, economic development, CDFIs, community health benefit agreements, fintech, rural development, fair housing, the racial wealth gap, the Community Reinvestment Act, redlining, and more, including a session entitled “Defending the CFPB” that Paulina Gonzalez, executive director of CRC, moderated.
In addition to attending the conference, CRC members also met with members of the California Congressional delegation and with bank regulators and their staff as well. During the meetings, CRC members shared what they are seeing from their work in communities, specifically around issues related to small business lending, affordable housing and economic development.
The president’s so-called “skinny budget” proposal was one of several topics covered at the meetings, and more background about the additional issues is included below.
|Budget Proposal||Impact on California|
|Eliminates CDBG, reductions for key programs serving renters||Loss of $357 million in CDBG funds for CA cities;
$130 million in HOME funds for new affordable housing; Thousands of tenants to lose rental assistance vouchers;
More costs for Medicaid as seniors move to nursing homes w/o Meals on Wheels;
|Fewer loans, less support for Small Biz Owners. There are 86 CDFIs in CA that made 39,000+ loans in FY 2016.|
Legal Services Corporation
|11 CA orgs. receive funding through LSC.|
Small Business Administration
|Prime program defunded; Microloan program frozen||Less financing available for CA small businesses.|
|Will harm efforts at building assets, including for 1st time homebuyers, also negative impacts for affordable housing.|
Work on tax returns, literacy, emergency response, health, and economic development.
Community Reinvestment Act
This year, CRA celebrates its 40th anniversary. Because of the CRA, financial institutions are helping to meet important community credit needs and building consumer and community wealth, through small business lending, mortgage lending, affordable housing finance, community development activity and bank branch and account access.
- California Reinvestment Coalition members and other community groups have recently negotiated win-win community commitments with a number of banks, including City National, Bank of Hope, Cathay Bank and Mechanics Bank.
- But bank regulators need to be more rigorous and timely in their CRA and Fair Lending examinations of banks. Wells Fargo had not had a CRA rating made public in 9 years, and several banks, such as BancorpSouth and Evans Bank that received Satisfactory CRA ratings were later sued for redlining.
- Regulators should encourage banks to develop Community Benefit Plan agreements with local community groups, and incorporate these agreements into any bank merger approval and subsequent CRA exams.
- Regulators should also provide CRA downgrades to institutions that engage in discriminatory, unfair, or deceptive practices, or that finance the direct or indirect displacement of low and moderate income people and communities of color, or that finance lenders who make predatory loans in these communities. Banks must diversify management and staff, and develop robust supplier diversity programs.
Rural communities in California face unique and significant challenges. Banks are well placed to help local communities develop and grow through home mortgage and small business lending, affordable housing investments and low cost accounts.
- But nonprofit groups and even some banks report that banks only lend and invest in geographic areas that are subject to “full scope” regulatory review (via CRA exams), that tend to focus on larger, urban areas, especially for the largest banks.
- Bank regulators should expand the number of full scope areas for banks that are among the biggest depositories and lenders in smaller, rural communities. Branch closings, especially in rural areas, are also effectively limiting access to banking for consumers.
The Dodd Frank Act and the creation of the Consumer Financial Protection Bureau are the most effective and publicly popular responses to the financial crisis.
- The CFPB has secured over $12 billion in consumer relief, more than all of the other, relevant federal agencies combined.
- The CFPB developed common sense rules that brought order and transparency to mortgages (Qualified Mortgage and QRM rules, home loan modifications (servicing rules, including successors in interest protections), and the collection of home loan data (HMDA rule).
- Additionally, CFPB enforcement actions have protected consumers and communities from unlawful lending discrimination and unfair and deceptive practices.
- Importantly, over 1 million consumers (including over 118,000 Californians) have already taken advantage of the CFPB’s user-friendly consumer complaint database to file complaints -some telling their stories – to seek relief but also to inform other consumers and CFPB enforcement officers about problematic practices and actors.
- The CFPB’s Director, structure and authority must be vigorously protected.
- Important CFPB rules on payday lending, prepaid cards, mandatory arbitration, debt collection and small business loan data must be finalized and protected from repeal.
- We also support the CFPB’s work on issues that have important impacts on consumers, ranging from student loans to credit reporting agencies to financing for cars.
Small Business Lending
- Small business lending has increased since Dodd Frank Act, not decreased as some Dodd Frank critics have suggested. But small business loans are still less available in LMI neighborhoods and neighborhoods of color
- And many small business owners looking for credit from banks are relegated to higher cost and variable rate credit cards, not term loans.
- 95% of the small business loans in CA from JPMorgan Chase Bank are credit card loans. While credit cards serve a purpose, they can come with higher costs, variable rates and are not well suited for the longer term capital needs that many businesses have.
- Dodd Frank Section 1071 data would bring much needed transparency into who is receiving small business loans- and who is not. In the same way that HMDA data created greater transparency in the home lending market, 1071 small business data will shed light on small business lending trends, highlight disparities, and likely lead to increased lending.
- Fintech, online, and marketplace lenders can present opportunity, but some are clearly also creating harm. CDFIs and community lenders are spending precious capital and staff time refinancing small business owners out of predatory fintech loans and merchant cash advances.
- An Opportunity Fund analysis of 150 “alternative loans” found an average APR of 94%, and among Hispanic borrowers, the average monthly payment was more than 400% of take-home pay.
- Advocates are concerned about a weakening of consumer protection under any OCC national fintech charter which will lead to preemption of state laws, and are concerned that the OCC has not shown itself to be a strong bank regulator (see, Wells Fargo).
- We join Congressman Cleaver in raising concerns that fintech lenders are violating fair lending laws by not making good credit available to neighborhoods of color, that fintech algorithms may be biased, and that predatory fintech loans are destabilizing small business owned by women and people of color. The CFPB and other agencies must vigorously enforce fair lending laws against predatory and discriminatory fintech lenders. Bank partnerships with fintech lenders must be thoroughly scrutinized to ensure fair lending and consumer protection laws are followed
- In addition to bank and fintech loans, small businesses are vulnerable to high cost products like Merchant Cash Advance and installment loans that can financially sink business owners instead of helping them.
Home loans are hard to come by in neighborhoods of color. Banks are increasingly focused on making jumbo loans which disproportionately benefit white borrowers, while making fewer loans to Latino and African American borrowers, and abandoning FHA loans in favor of their own, unproven products, with less than impressive results.
- Any future GSE reform must maintain a duty to serve communities and retain affordable housing goals. Currently, Fannie and Freddie need to be held accountable to meeting ambitious affordable housing goals, and should offer more flexible products to qualified homeowners.
- We are concerned about a return to redlining, and hope to see DOJ, CFPB and HUD continue their important work in enforcing fair housing and fair lending laws.
- HUD is currently investigating CRC’s first HUD redlining complaint (more information and graphs below), filed against OneWest Bank for having few branches and making few home loans in neighborhoods of color in six Southern California counties.
- Given our aging population, increased oversight is needed in the reverse mortgage market to ensure that seniors are not taken advantage of by loan originators and servicers.
- CRC is deeply concerned that seniors are continuing to lose their homes unnecessarily due to servicer bureaucracy, a lack of strong oversight of this industry by HUD, and a very limited infrastructure to help seniors and their families avoid needless foreclosures. The elimination of funding for Legal Aid organizations will exacerbate this problem.
Affordable Rental Housing
California continues to suffer from an affordable housing crisis. The California Housing Partnership Corporation estimates that California needs 1.5 million affordable homes to accommodate the state’s lowest income residents.
- Any HUD budgets cuts to key programs such as HOME, CDBG, Rental Assistance and Low Income Housing Tax Credits, could be devastating.
- California nonprofit housing developers report that many investors, including banks subject to the Community Reinvestment Act, are pulling back from existing commitments in tax credit deals and attempting to renegotiate terms in light of pending tax reform. The result is fewer units produced and more subsidy coughed up at the 11th hour by desperate nonprofits who then must forego developer fees, and local governments which must contribute additional, unplanned subsidies.
- Banks should receive CRA rating downgrades for such behavior as well as for seeking community development lending credit for loans that foreseeably lead to displacement of low and moderate income residents the CRA was meant to benefit.
- CRC is deeply concerned about Fannie Mae’s recent commitment to guarantee up to $1 billion in debt backed by single family rental homes owned by private equity giant Blackstone.
- Fannie Mae and Freddie Mac must continue to invest in the National Housing Trust Fund and Capital Magnet Fund.
- Importantly, HUD must continue to implement Affirmatively Furthering Fair Housing obligations and assist local jurisdictions in meeting critical housing needs, fighting displacement and creating access to areas of opportunity for all.
The current political environment, with its changing policies and harsh rhetoric is threatening to drive immigrant communities out of the country, or out of sight. A recent CRC survey of confirms that many of our organizational members are seeing clients go underground, fail to show up for jobs, and forego access to needed services because they are concerned about ICE.
- Bank regulators and banks should work together to clarify and simplify the privacy data rights of immigrants so they will not fear that banks will share their private data with the government.
- Banks should also be encouraged to lend directly to qualified immigrant homeowners and small business owners who may have ITIN numbers, as well as invest in CDFIs and community lenders that make such loans.
- For banks serving large immigrant populations, they should consider what information may be helpful to share with their customers about power of attorney and other bank access issues should a household member face deportation.
Payday lending continues to be a scourge on working families, charging 400% APR for short term loans that trap unsuspecting consumers in cycles of debt.
- The CFPB has designed well considered and reasonable rules to protect consumers against abuses.
- Federal intervention is needed as payday lenders and lobbyists have a stranglehold in Sacramento.
- Banks should be incentivized to continue to develop small dollar alternatives to such products and to assist CDFIs and other community lenders that seek to fill this niche, and should also be penalized in their CRA exams for any financing to high-cost, predatory lenders.
According to the CFPB, the majority of overdrafts are on transactions of $24 or less and are repaid within 3 days or less. The CFPB calculated that with a median overdraft fee of $34, this is equivalent to a loan with a 17,000 APR.
- It is telling that payday lenders defend their triple digit APR loans by saying consumers are merely making informed decisions to take out payday loans because they are less expensive than overdraft fees.
- Banks continue to overly rely on overdraft fees as a source of fee revenue, to the detriment of their clients. CFPB rules on abusive overdraft policies are important, and all regulators should independently examine the impact of overdraft on bank customers, and work with their banks to end this product.
More on CRC’s Redlining Complaint Against CIT Group
Redlining Complaint Against OneWest Bank filed by California Reinvestment Coalition
The complaint alleges that OneWest Bank’s lending to borrowers in communities of color is low in absolute terms, low compared to its peer banks, and is lower than one would expect, given the size of the Asian, African American and Latino populations in Southern California.
As part of the complaint, an analysis of the bank’s assessment areas found that OneWest has only 1 branch in an Asian majority census tract, no branches in African American majority census tracts, and 11 branches in Hispanic majority census tracts.
While OneWest’s foreclosure record is not part of the redlining complaint, analysis by CRC and Urban Strategies Council found that OneWest was nine times as likely to foreclose in communities of color as compared to extending mortgage loans in communities of color.
Earlier today, 18 prominent California nonprofits called on the Personal Insurance Federation of California to support transparency in a key insurance reinvestment program- the California Organized Investment Network.
Similar to the Community Reinvestment Act for banks, COIN is an avenue for insurance companies (who collect over $250 billion in premiums from California consumers every year) to invest in California communities- especially low income communities.
COIN was created in 1996 as an alternative to legislation that would have mandated a CRA type requirement on insurance companies. However, the program is set to expire in January 2017.
AB 2728, (Atkins) would reauthorize COIN, however, the current version of the bill doesn’t include the “data call” which is the mechanism requiring insurers to report on their investments in California communities (or lack thereof).
In response, 18 organizations sent a letter to Speaker Emeritus Atkins, urging her to include the data call in AB 2728.
You can read more about COIN and the data call here: Nonprofit Leaders Call on Insurance Lobbying Group to Support Transparency in COIN Reinvestment Program‘
You can also read an OpEd about COIN and the importance of the data call here: Insurance Industry Happy to Receive, But Not to Give
In October 2014, the California Reinvestment Coalition and 40 additional California organizations sent a letter to the Consumer Financial Protection Bureau, urging updates to the Home Mortgage Disclosure Act that will increase transparency while allowing regulators, advocates, and industry to identify troubling trends, such as widowed homeowners being unnecessarily pushed into foreclosure. The recommendations are included below:
Office of the Executive Secretary
Consumer Finance Protection Bureau
1700 G. St. NW
Washington DC 20552
RE: Docket No. CFPB-2014-0019: California community group comments
Dear Ms. Jackson:
The undersigned community groups submit this letter to the Consumer Financial Protection Bureau (CFPB) in response to the recent proposal to amend the Home Mortgage Disclosure Act (HMDA) regulations.
We appreciate the great care that CFPB has taken to craft this proposal, and that the proposal suggests enhancements to HMDA that go beyond the requirements of the Dodd-Frank Act, as well as CFPB’s recent improvements to the HMDA website in response to recommendations by community groups.
At the same time, we have a number of concerns with this proposal, and feel that it does not go far enough to ensure that the data reported to the public meets the stated goals of HMDA; namely, to help the public determine if financial institutions are serving community housing needs, assist public officials in deciding how to distribute public investments, and identify possible discriminatory lending patterns. Specifically, our concerns with this proposal include:
1. The failure to address key priorities, such as:
a.The inclusion of loan modification data as required reporting;
b.The disaggregation of the overly broad “Asian” race category;
c.The absence of any fields relating to language access, including (at a minimum) American Sign Language, Braille, Chinese, Korean, Spanish, Tagalog and Vietnamese;
d.Whether a borrower will own the property with a non-borrowing party (the widows and orphans/successors in interest issue); and
e.Whether the borrower received pre-purchase housing counseling.
2. While proposing major advancements in some areas, the proposal does not go far enough:
a.Loans for multifamily rental housing should document the level of affordability of all units, include the number of bedrooms, and include construction lending;
b.Commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose.
3.The reluctance of CFPB to require automatic disclosure to the public of all data collected pursuant to HMDA and the undue credence given to industry’s purported concerns about consumer privacy.
We discuss these concerns in greater detail below.
Loan Modifications: The performance of financial institutions in modifying loans is and will continue to be a major factor in determining whether they are meeting local housing needs and complying with fair housing and fair lending laws. We urge the CFPB to include in its final rule the requirement that financial institutions report data on all loan modification applications, denials, and modification terms, broken out by race, ethnicity, gender and age of applicants and census tract; and that this data be publicly disclosed.
The CFPB has the authority to require detailed reporting of loan modification data. The HMDA statute speaks to the Bureau’s broad authority to provide for any “adjustments … for any class of transactions” (see 12 USC §2804) it deems proper to serve the goals of the Act. Loan modifications represent the very kind of transaction Congress contemplated when crafting the Act, as they go to the heart of current efforts to serve the housing needs of our communities and to protect homeownership and equity in our neighborhoods.
The federal Home Affordable Mortgage Program (HAMP) and recent Department of Justice settlement agreements with large servicers are evidence of the prominence of loan modifications as part of federal housing policy and enforcement.
This data will also help answer the very serious question of whether discrimination is occurring in the foreclosure prevention context. The California Reinvestment Coalition and the National Housing Resource Center have conducted surveys of nonprofit housing counseling agencies serving thousands of consumers a month, and found that housing counselors report repeatedly that borrowers of color are receiving worse loss mitigation outcomes than white borrowers.
Similarly, the National Community Reinvestment Coalition found that people of color in Washington, D.C., were more likely to go into foreclosure, even after controlling for borrower, loan, and neighborhood characteristics. NCRC also surveyed homeowners seeking loan modifications and found that servicers pushed African American borrowers to foreclosure faster than white borrowers, and that white HAMP-eligible borrowers were more likely to receive a loan modification than African American and Latino HAMP-eligible borrowers.
Community groups nationally have decried the uneven distribution of loan modification, including loan modification relief offered as part of implementation of the National Mortgage Settlement and more recent Department of Justice settlement agreements with JPMorgan Chase, Citibank and Bank of America. Indeed, in March of last year, over 100 groups under the umbrella of Americans for Financial Reform signed a letter to the Office of Mortgage Settlement Oversight calling for greater transparency and accountability to ensure that banks comply with their fair lending obligations, and remedy the damage of foreclosures in communities of color and other low-to-moderate income communities.
Assisting distressed borrowers and saving homes from foreclosure is integral to reviving the housing market. Yet, a February General Accounting Office (GAO) report that analyzed nonpublic HAMP data confirmed the concerns of community groups in finding statistically significant differences in the rate of denials and cancellations of trial modifications, and in the potential for re-defaults of loan modifications for Limited English Proficient and African-American borrowers and other populations.
Although the public disclosures are currently limited, the HAMP program does in fact require loan modification reporting and disclosure with the added requirement that servicers report data by race and ethnicity in the public disclosure. This is an important precedent.
Directly consistent with the statutory purposes of HMDA, local governments are keen to understand whether, where and to whom loan modification relief is offered so that they can determine if financial institutions are meeting the needs of their communities and to identify whether further policy responses are necessary. As one example, the City and County of San Francisco, in its Request for Proposals for the city’s banking and credit card business, requests bank applicants to provide local data on the race, ethnicity, and census tract of foreclosure filings and loan modifications, broken out by type of modification.
The San Francisco experience suggests not only that local governments are interested in such data, but also that banks are capable of providing it. To its credit, Bank of America has provided such data to the City and County. But all financial institutions should report this data to all jurisdictions via HMDA.
The data to be reported for loan modifications should be substantially the same as data currently collected under HMDA, in that loan modifications—like mortgages—are transactions which are secured by homes and require underwriting. Ideally, all loan modifications should be reported separately in HMDA data as a separate category under “loan purpose,” or possibly “loan type.”
If reporting in the current HMDA database is not feasible, we urge the CFPB to collect and publicly disclose loan modification information separately. Federal regulators are capable of this type of reporting; for example, the FFIEC currently does separate data collecting and public disclosure of Primary Mortgage Insurance (PMI).
Disaggregating Asian American Pacific Islander Communities in HMDA Data: The HMDA data on race and ethnicity has been ineffective in capturing the diversity of experiences of Asian American and Pacific Islander borrowers. While the HMDA data overall show that “Asian” borrowers tend to experience outcomes at least as favorable as whites, some sub-groups within the AAPI population experience less success in accessing homeownership and staving off foreclosure. We ask the CFPB to require the disaggregation of this data to better reflect the experiences of households within the AAPI community.
A 2007 report by the Census Bureau, entitled, “The American Community: Asians 2004,” part of the American Community Survey report series, analyzed experiences of several subcategories of Asian American families, including: Asian, Bangladeshi, Cambodian, Chinese, Filipino, Hmong, Indonesian, Japanese, Korean, Laotian, Malaysian, Pakistani, Sri Lankan, Taiwanese, Thai, Vietnamese, and other Asian. The report noted various differences in experiences for these groups, including differences in owner occupancy and home value.
We support the analysis of the National Coalition for Asian Pacific American Community Development that a workable, federal precedent for disaggregating the broad “Asian” race category exists in Section 4302 of the Affordable Care Act, which calls for data reporting for Asian subcategories which include Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, and Other Asian, as well as Native Hawaiian and Other Pacific Islander subcategories including Native Hawaiian, Guamanian or Chamorro, Samoan, and other Pacific Islander.
HMDA should require disaggregated data for “Asians” that allow borrowers to identify as Cambodian, Chinese, Filipino, Hmong, Indian, Japanese, Korean, Laotian, Thai or Vietnamese American, amongst other subgroups.
Capturing Language Access. Relatedly, immigrant and Limited English Proficient borrowers and communities have been preyed upon by unscrupulous brokers, lenders and loan servicers over the last several years with painful results. While Census data show that 18 percent of Americans speak languages other than English in their homes, almost 40 percent of Californians fall into this category; more than half of this population speaks English less than “very well.” Spanish, Chinese, Tagalog, Vietnamese and Korean are spoken by approximately 83 percent of all Californians who speak a language other than English.
In the summer of 2006, a series of borrowers and housing counselors testified at Federal Reserve Board hearings held in San Francisco regarding the then-increasing prevalence of “bait-and-switch” tactics perpetrated on borrowers who negotiated their loans in a non-English language but received English-only documents with less favorable terms than promised.
The California legislature responded to this very real dynamic by passing a law meant to require a translation of most financial documents when the contract was negotiated in any of the five most-spoken non-English languages spoken in the state. Significant evidence shows that many lenders continue to fail to comply with the statute. Among the results of CRC’s housing counselling surveys was that over 60 percent of responding agencies stated that they commonly saw non-English speakers (who presumably negotiated their loans in a non-English language) who did not receive any translations of their loan. In those cases, 60 percent of the agencies noted that the loan terms that these Limited English Proficient borrowers actually received were less favorable than what they had been promised, and 65 percent reported that the loan was unaffordable when made to the borrower. In another survey, this one by Neighborhood Legal Services of Los Angeles County, 40 percent of Spanish-speaking homeowners reported that they did not fully understand the terms of their loan documents.
The February 2014 GAO report discussed above found statistically significant disparities in the rate of loan modification denials, cancellations, and re-defaults for LEP borrowers and other protected groups as compared to non-Hispanic white borrowers after analyzing certain loan modification data under the HAMP program.
To help address these problems, HMDA should be enhanced to require the reporting of loan data that include:
·The primary language spoken by the loan or loan mod applicant;
·The language in which the loan or loan modification application and contract were negotiated;
·The language of the loan documents.
Widows Data. We propose a data field be crafted to capture whether there is a co-owner of the property who is not on the loan, or where that person co-owns the property with someone who signs the deed of trust as a “guarantor.” Usually the other person is a spouse. This phenomenon is not uncommon, particularly among limited English speaking families and families of color, and can cause significant problems upon divorce or the death of one spouse. The practice could be a sign that the broker or originator is railroading the borrower into specific loan products, or that the broker or lender is wrongfully pressuring spouses to remove one spouse from title to make the broker’s or underwriter’s job easier.
Creating such a field would be consistent with the CFPB’s guidance on successors in interest, and similar concern about this issue as expressed by Fannie Mae, Freddie Mac, and the HAMP guidance and interpretive letters.
The problem of successors in interest and non-borrower spouses will only grow as the population ages. These data are especially important and relevant as the CFPB here proposes to require the reporting of reverse mortgages, where the successors in interest dilemma is all too real.
Housing Counseling. Pre-purchase housing counseling can have a significant impact on a borrower’s ability to attain, and maintain homeownership, while avoiding predators who would seek to siphon off fees and equity. We agree with the National Housing Resource Center HMDA data should include data fields relating to counseling type (counseling or education), counseling mode (in-person, phone, online) and counseling agency HUD ID.
Other concerns. We observe that though a stated goal of HMDA is to identify discriminatory lending patterns, HMDA data do not track all protected groups under various fair housing and fair lending laws. In particular, we are concerned about the growing anecdotal evidence and cases relating to discrimination against disabled persons, including where disability can be ascertained by lenders based on source of borrower income. We are also concerned about discrimination against certain religious groups. We urge the CFPB to consider whether to link HMDA to all fair lending protections, and urge CFPB fair lending enforcement staff to be vigorous in ensuring ECOA violations are challenged.
In some respects, the proposal suggests important enhancements to data collection requirements, but does not go far enough.
Loans for Affordable Multifamily Lending: A severely underutilized aspect of HMDA is its multifamily lending data. There has been little to no analysis of this data, most researchers probably do not know it exists, and multifamily lenders may not even know whether and how to report it. It is critical to understanding whether community needs are being met to know whether institutions are supporting the development of affordable rental housing. We are very pleased to see that CFPB is considering requiring lenders to report on whether multifamily loans are for affordable housing, and how many units were constructed through use of the financing.
We further urge the CFPB to require reporting on the number of bedrooms per unit to help determine whether fair lending laws are being followed, include all construction loans which are an important way for lenders to meet community credit needs, and designate whether the developer is a nonprofit organization which is mission driven to serve the community. It is also important to know the level of affordability (for very low-, low-, or moderate-income tenants) for all units of housing. There is a strong precedent for this in Fannie Mae and Freddie Mac data collection efforts. Finally, lenders should be required to report on whether such housing is targeted to particular groups, such as seniors or persons with disabilities. These projects can be harder to finance, and the manner in which financial institutions deal with them can raise fair lending issues.
For financial institutions that are financing affordable, multifamily housing, enhancing data elements and transparency would enable them to better claim credit for this important work.
Commercial loans and “small business” purpose. We are pleased that the CFPB recognized that requiring the reporting of Home Equity Lines of Credit (HELOCs) is necessary in the wake of the problematic practices associated with these loan types during the 2000s. The proposal to require reporting of home-secured loans that finance businesses will also enhance our understanding of credit needs. But to illuminate the impact of lending practices on the intersection of small business ownership, homeownership, and jobs, commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose, alongside “home purchase,” “home improvement,” and “refinance.” This is of particular relevance in immigrant communities, where home-secured lending is often used to help finance a small business and hire workers. We also recommend creation of a “consolidate consumer debt” loan purpose category.
Covered lenders and rural areas. We are grateful that the CFPB contemplates improving HMDA’s coverage of non-depository lenders. However, we are concerned that the proposed 25-loan threshold would eliminate 1,775 depository institutions as HMDA reporters, and we urge the CFPB to reject this proposal as it would significantly reduce coverage of lending in rural counties. The requirement of one loan to trigger HMDA reporting for depository institutions should be retained. Additionally, the 25-loan threshold (for non-depositories as we suggest, or all lenders as proposed) should require reporting by all lenders originating twenty five multi-family or single family loans.
There are a number of welcome enhancements proposed for HMDA reporting. We are particularly pleased to see CFPB go beyond the statutorily required data elements, to propose inclusion of other important data. We support the inclusion of all of these extra data fields.
Universal Loan ID. To the extent that a universal identifier could be created to track a loan across the life of the loan, this would be particularly useful, especially across servicing transfers or note sales. In a market in which such transfers and sales are common, a standardized number could be useful for the consumer, regulators and for industry. We would ask that the CFPB provide a common framework for identification, or that each financial institution be required to register its identifier with the CFPB, all other relevant federal regulators and state regulators. It may be simplest to have a single registration location on-line for such a system. Identifiers should also be made publicly available.
We also support various other proposed enhancements, including:
·More transparency around lending for manufactured housing, which is a significant source of housing in California’s rural communities;
·Reasons for all loan denials;
·Age of borrower, which should be captured by actual age, or age ranges of five years;
·Points and fees, origination charges, discount points;
·Loan to value and combined loan to value;
·Reporting of race, ethnicity and gender based on visual observation and surname if data are not provided by applicant;
·Nontraditional loan features, such as Interest Only, and balloon payments;
·Expanding occupancy fields to include “investment property with rental income.” This will help uncover the growth of investor purchasers of residential properties and their impact on neighborhoods;
·Considering the role of brokers in the mortgage crisis, the proposals for identifying wholesale and retail channels will make it easier for the public to identify market participants engaged in discriminatory, abusive, or illegal practices;
·Providing for quarterly reporting for larger institutions so the data are more timely and relevant.
We greatly appreciate that the CFPB is proposing to require data reporting beyond Dodd-Frank requirements, as this will greatly assist in monitoring trends in access, affordability, and sustainability of home loans. We urge the agency to consider our additional recommendations—in particular around including loan modifications, disaggregating AAPI data, language access, refining affordable multi-family housing data—and to make all the data publicly available so that the core statutory purposes of HMDA, such as holding lenders accountable for meeting housing needs and identifying discriminatory lending patterns, can be attained.
Thank you for your consideration of our views. Should you have any questions about this letter, please contact Kevin Stein.
Advocates for Neighbors, Inc.
AnewAmerica Community Corporation
Asian Pacific Islander Small Business Program
Asian Pacific Policy & Planning Council (A3PCON)
California Coalition for Rural Housing
California Housing Partnership
California/Nevada Community Action Partnership
California Reinvestment Coalition
California Resources and Training (CARAT)
Community Action Agency of Butte County, Inc.
Community Housing Council of Fresno
Community Legal Services in East Palo Alto
East Bay Asian Local Development Corporation (EBALDC)
East Bay Housing Organizations (EBHO)
East Los Angeles Community Corporation
East Palo Alto Community Alliance Neighborhood Development Organization (EPA CAN DO)
Fair Housing Council of the San Fernando Valley
Fair Housing of Marin
Housing and Economic Rights Advocates
Inland Fair Housing and Mediation Board
Korean Churches for Community Development
Law Foundation of Silicon Valley
Montebello Housing Development Corporation
National Housing Law Project
Neighborhood Housing Services Silicon Valley
Neighborhood Partnership Housing Services
NeighborWorks Orange County
Non-Profit Housing Association of Northern California (NPH)
Northbay Family Homes
Oakland Business Development Corporation
Orange County Community Housing Corporation
Rural Community Assistance Corporation
Sacramento Hosing Alliance
Capping a five-day awareness public awareness campaign, the California Reinvestment Coalition focused on the community benefits (or lack thereof) of a merger between OneWest Bank (former IndyMac) and CIT Group.
One way regulators can measure public benefit is through a bank’s Community Reinvestment Act (CRA) Plan, a written commitment outlining how the bank will serve the community in the future.
Thus far, the draft plan offered by the leadership at CIT Group and OneWest appears to have been created without community input, commiting the bank to very little in the way of reinvesting in California communities.
CRC, and 37 other organizations have sent letters to bank regulators, opposing the merger in its current form.
According to Kevin Stein, associate director at the California Reinvestment Coalition, the community benefit is lacking from the proposed merger: “Right now, this merger doesn’t pass muster. Investors and the CEOs will benefit greatly, but what about California communities, especially those that were already harmed by OneWest through thousands of foreclosures and inadequate reinvestment? This merger will create the newest Too Big To Fail Bank, facilitate investor and bank officer windfalls, and provide for ongoing public subsidy. Yet the merger offers no public or community benefit. The regulators should reject this merger until a strong public benefit is guaranteed through a Community Reinvestment Plan to ensure communities don’t lose out again.”
Roberto Barragan, president of Valley Economic Development Corporation, comments: “Here’s two banks that wouldn’t be alive without the support of taxpayers and bank regulators, and yet, they’re not willing to outline a strong plan of reinvesting in the communities where they do business? Until they are willing to come to the table with the community, this is a no-brainer for regulators. No public benefit means no merger approval.”
Regulators can also assess whether a bank is meeting the community’s credit needs by examining a bank’s history of reinvestment in the community.
OneWest’s Community Reinvestment Record:
1) Bank Branches: 15% of OneWest’s branches are located in low and moderate-income census tracts, as compared to a statewide average of 30% of bank branches being located in LMI tracts. Only two of the bank’s 73 branches are located in low-income tracts, according to research by the LA Local Development Corporation.
2) Small Business Lending: The majority of “small-business” loans originated by OneWest bank are to businesses with revenue of over $1 million, leaving smaller businesses behind.
3) Foreclosures: 35,000 Californians have lost their homes due to foreclosures by OneWest and its subsidiary, Financial Freedom.
4) CRA Grades: The Bank earned a “Low Satisfactory” on its last Performance Evaluation for its investments in the community
5) Contracting with MWDBE: The Bank hesitates in setting goals to hire businesses owned by Minorities, Women, and Disabled Persons (MWDBE).
6) Philanthropy: It appears OneWest’s historical charitable contributions are below the level of its peers.
7) Reinvesting Consumer Deposits: The Bank currently takes $14 billion in deposits via the Internet from throughout the country, but only reinvests these deposits back into its Salt Lake City assessment area, frustrating the purposes of the Community Reinvestment Act. It has no meaningful plans to reinvest Internet deposits back into communities where its Internet customers reside.
Additional Background on other Banks Creating Community Benefit and Reinvestment Plans as Part of Mergers
There is a precedent for banks committing to the communities they serve through the development of Community Benefit and Reinvestment Plan. Recent examples include:
1) Banc of California: After opposition from the California Reinvestment Coalition and 46 other organizations, in September 2014, leadership at Banc of California negotiated a five-year, public Community Benefit and Reinvestment Plan as part of its acquisition of 20 Banco Popular branches. Under the plan, Banc of California (which about one-tenth the size of the proposed CIT/OneWest merger) is devoting an amount equal to or greater than 20% of its annual deposits to community reinvestment activities.
2) Pacific Western Bank acquired CapitalSource, which was also opposed by the California Reinvestment Coalition, citing a record of “low satisfactory” CRA ratings and a lack of a public CRA plan. After an FDIC-facilitated meeting with CRC and the Greenlining Institute, PacWest Bank agreed to develop a CRA plan with input from the community.
3) Umpqua Bank applied to purchase Sterling Bank, but did not have a CRA plan. CRC opposed the merger, and the Federal Reserve later made its approval of the merger contingent on Umpqua developing a CRA plan.
To see the previous four issues highlighted in this week’s campaign:
CRC’s detailed letter to the Federal Reserve Bank of New York includes an analysis of the merger and a long list of concerns and unanswered questions about the proposed merger.
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
Representatives from member organizations of the California Reinvestment Coalition traveled to Washington DC last week to attend the National Community Reinvestment Coalition conference. The theme of the conference was “A Just Economy: Ideas, Action, Impact.”
The conference is a gathering of NCRC’s diverse membership base from around the US, including CDFI’s, fair housing organizations, housing counseling organizations, consumer advocates, credit counselors, small business lenders, community organizing and civil rights groups, and more.
Speakers at the conference included Shaun Donovan, the Secretary of Housing and Urban Development (HUD),Thomas Curry, Comptroller of the Currency, Steven Antonakes from the Consumer Financial Protection Bureau, Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation, and more.
Secretary Donovan spoke about potential reforms to Fannie Mae and Freddie Mac and recognized the conference participants for their work to help people during the foreclosure crisis and to also help with rebuilding afterwards. He also spoke about the ongoing crisis of a lack of affordable housing in communities across America and cited NCRC’s work to ensure that reforms to Fannie and Freddie don’t leave low-income communities behind.
Wednesday night included a screening of “Fleeced”, a documentary about elder financial abuse which was a big draw with a packed room. A panel discussion included Kim Jacobs, the producer of the film, Anita Gardner, a consumer in the film who faced an uphill battle with her bank when she sought assistance with her mortgage after health problems, as well as Robert Zdenek, the Director of National Neighbors Silver at NCRC, and Dory Rand, president of the Woodstock Institute. The film was commissioned by NCRC, with support from the Atlantic Philanthropies. A screening will also be held in Sacramento on April 15th at 5:30pm, as part of the Housing California conference and Annette Smith, a consumer featured in the film will also be one of the panelists who speaks after the screening.
California delegates flew into Washington DC early to meet with our elected officials as well as banking and housing regulators.
On Thursday, as part of NCRC’s Hill Day, CRC Members headed to Capitol Hill to meet with their senators and representatives. There were a number of topics to discuss, a few of the topics the California delegation discussed included:
- Payday lending and the upcoming rule-making by the Consumer Financial Protection Bureau
- The need for more investment in affordable housing in California, especially since the dissolution of redevelopment agencies that funded affordable housing
- GSE reforms (and ensuring that low-income communities aren’t left behind)
- A recent proposal for the USPS to offer financial services through a prepaid card
- Effects of private equity firms and other investors buying up homes
- The Permanently Protect Tenants at Foreclosure Act of 2013
- Extension of the Mortgage Debt Forgiveness Act
- Transparency around foreclosure reporting (to see if mortgage modifications and other assistance is getting to communities equally- a topic recently addressed in a February 2014 GAO report (read more here)
- Small business lending (especially to minority business owners- read our December report about this issue here)
- Future mortgage settlements, and concerns about transparency of who is receiving modifications, and whether modifications are getting to communities hit hardest
- Bank mergers and the impact on rural California- For more on why this is such a pressing matter, see CRC’s “Down in the Valley” 2013 report, or our recent protest against the proposed acquisition of Sterling Bank by Umpqua Bank.
- Issues faced by widowed homeowners who are facing foreclosure instead of receiving assistance from their bank or mortgage servicer. See this December 2013 article that explains why improvements, monitoring, and enforcement are still needed: “Bank might foreclose on home because late husband isn’t residing there“
After meeting with their senators and representatives, attendees were especially excited by the lunchtime speaker: Senator Elizabeth Warren, (D-MA), an outspoken advocate who was paved the way for improvements in policies and programs affecting the same communities and people that NCRC’s members serve.
On Friday afternoon, CRC’s new Executive Director, Paulina Gonzalez spoke at a session: Winning Public Benefits for Your Community, with other advocates including Ernest Hogan, Executive Director of Pittsburgh Reinvestment Group, and Mitria Wilson, from NCRC.
Friday night closed with a bang! The Rev. Dr. William Barber II was awarded the Senator William Proxmire award, which recognizes the individual whose life’s work exemplifies the spirit and work of Senator Proxmire’s contributions to economic mobility. Dr. Barber gave a rousing speech about the need for organizations to work together to stop disinvestment in communities. Senator Proxmire was the author and lead sponsor of the Community Reinvestment Act.
Kevin Stein, Associate Director at CRC, was also confirmed to the National Community Reinvestment Coalition board of directors.
A big thank you to our CRC members who joined the meetings, including:
- Maeve Elise Brown from Housing and Economic Rights Advocates
- Clarence Williams and Debbie Muramoto from California Community Capital Financial Development Corporation
- Selma Taylor, from California Resources and Training
- John Fowler from Peoples’ Self Help Housing of San Luis Obispo
- James Zahradka, from the Law Foundation of Silicon Valley
- Namoch Sokhom from Pacific Asian Consortium in Employment Business Development Center
- Mary Scott Knoll, Fair Housing Council of San Diego
- Roberto Barragan and Lynn Fernandez from Valley Economic Development Center
- Hyepin Im from Korean Churches for Community Development
- Rob Wiener from California Coalition for Rural Housing
- Katherine Peoples McGill, from HPP Cares
It was another excellent conference put on by NCRC- See you next year!