This week, I joined several of my affordable housing colleagues at the Office of the Comptroller of the Currency (OCC) for a meeting with Comptroller Joseph Otting to discuss his efforts to modernize the Community Reinvestment Act of 1977 (CRA). It was an excellent opportunity for us to become acquainted in advance of what will be an extensive regulatory process likely to last throughout the rest of the year and well into 2019. I expect that this process will begin soon with the release of the OCC’s Advance Notice of Proposed Rulemaking (ANPR), the first in a series of legal steps necessary to revise the existing CRA regulation.
To help facilitate NHC’s leadership in this important initiative, I am announcing the formation of a CRA Modernization Working Group so our members can actively participate in this important work. Issues that require additional deliberation and debate may also be taken up by the NHC Policy Committee as well. If you are member with an interest in the CRA rulemaking process, I encourage you to join us in this effort by notifying Kaitlyn Snyder. If you are not currently a member and would like to be involved, please contact Amanda Mitchell so you can join today. The first meeting of the CRA Working Group will take place in September.
Last week, I wrote an article for HousingWire’s ReWired blog, which you can read here. In it, I say I believe there is a unique opportunity to improve this important tool to make access to credit and investment fairer while maintaining the safety and soundness of our financial institutions. Most banks have long ago learned to appreciate the value of CRA; though they are often frustrated by the how it is applied. We want CRA compliance to be fair, timely and accurate, and so do they. I am optimistic that this process will result in a strengthening of the effectiveness of CRA through sensible improvements.
There is unusually broad agreement on many areas that are overdue for CRA modernization. With the rise of interstate banking and bank consolidation, as well as the merging of investment banking and commercial banking in so many large banks, defining what constitutes a bank’s Assessment Area and how to count investments outside those boundaries is a key point of interest and one that potentially has the greatest impact for America’s cities – as well as the greatest risk to CRA’s effectiveness. This is an area that must be done right.
Assessment Area definition and application present unique challenges today because banks have alternate channels for accepting deposits, like mobile and online banking, that did not exist in 1977; customers with deposits are much more mobile today, and rural areas have experienced a disproportionate number of bank branch closures not envisioned in 1977. At our meeting with Comptroller Otting, I suggested that the following tests be applied to any new approach:
- Will there be more or less investment in low- and moderate-income communities under a new regulatory structure? Successful CRA modernization must increase investment in communities that are currently underserved.
- Who is likely to be served by CRA investments? Will they benefit more or less underserved communities and individuals? CRA changes that disadvantage low- and moderate-income individuals, particularly people of color, are unacceptable and put all other CRA reforms at risk.
- Will gentrification (the displacement of low- and moderate-income residents from their communities) increase or decrease? Limiting gentrification through federal policy is a vexing problem. We want underserved communities to benefit from new investment, but current residents should not be displaced by the arrival of amenities that improve their community.
- Will bank performance be more or less transparent? Transparency is critical to CRA’s success.
We have an historic opportunity to modernize the CRA and improve the lives of millions of Americans. Let’s do it right!