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COMMUNITY REINVESTMENT ACT

HEARINGS
BEFORE THE
SUBCOMMITTEE ON
FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
OF THE

COMMITTEE ON BANKING AND
FINANCIAL SERVICES

FIRST SESSION

MARCH 8, 9, 1995

Printed for the use of the Committee on Banking and Financial Services

Serial No. 104-8

88-882 CC

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1995

For sale by the U.S. Government Printing Office
ISBN 0-16-047553-8

HOUSE COMMITTEE ON BANKING AND FINANCIAL SERVICES
JAMES A. LEACH, Iowa, Chairman
BILL MCCOLLUM, Florida, Vice Chairman
MARGE ROUKEMA, New Jersey
HENRY B. GONZALEZ, Texas
DOUG BEREUTER, Nebraska
JOHN J. LAFALCE, New York
TOBY ROTH , Wisconsin

BERNARD SANDERS, Vermont
SUE W. KELLY, New York

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
MARGE ROUKEMA, New Jersey, Chairperson
DOUG BEREUTER, Nebraska
PETER KING, New York
EDWARD ROYCE, California
FRANK LUCAS, Oklahoma
JERRY WELLER, Illinois

BRUCE F. VENTO, Minnesota
JOHN J. LAFALCE, New York
CHARLES E. SCHUMER, New York
PAUL E. KANJORSKI, Pennsylvania
KWEISI MFUME, Maryland

( II)

CONTENTS

Page
Hearings held on:
March 8, 1995
March 9, 1995

1
59

March 8, 1995
March 9, 1995

117
333
WITNESSES
WEDNESDAY, MARCH 8, 1995
"

Kennedy, Hon. Joseph P., II, a Representative in Congress from the State
of Massachusetts ....

#

44
48
20
41
13

272279

Brown, Ned, Financial Modeling Concepts ....
Fiechter, Hon. Jonathan L. , Acting Director, Office of Thrift Supervision
Griffin, Lucy H., Compliance Management Services ......

17
40
46

Traiger, Warren, CRA Practitioner ....
APPENDIX
Prepared statements:
Roukema, Hon. Marge
Kennedy, Hon. Joseph P.
Bessant, Catherine P. ( with attachments)

Lindsey, Lawrence B.
Ludwig, Hon. Eugene A.
Niskanen, William A. ......
Traiger, Warren W. ( with attachments)

118
125
120
212
263
158
201
128
176
148
196
243

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Fiechter, Hon. Jonathan L. , oral statement

169
282

300

328

123

( III)

IV

Page
Minority Bank Amendments to the Community Reinvestment Act, as proposed to the Senate Banking Committee by Western Independent Bankers
Association ....
Pittsburgh Community Reinvestment Group [ PCRG] , written comments on
the Community Reinvestment Act

318
322

WITNESSES
THURSDAY, MARCH 9, 1995
Abbate, Tony, President and Chief Executive Officer, Interchange State Bank,
Saddlebrook, NJ, representing the Independent Bankers Association of
America [ IBAA] .....

64
100
62
98
102

OH, representing America's Community Bankers
Roberts, Benson F., Local Initiatives Support Corp.

66
103
97
92

APPENDIX
Prepared statements:
Abbate, Tony
Cincotta, Gale ( with attachments)
Culberson, James M. Jr.
Fishbein, Allen J. ( with appendices)
Meier, Michelle
Milligan, Mark ( with attachments)
………………............
Taylor, John E. ....

350
672
334
656
693
469
701
650
502

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Abbate, Tony, IBAA:
Revised Community Reinvestment Act Regulations, November 21, 1994 ...
Executive Summary of key points from the IBAA comment letter on
the proposed CRA revisions with letter of transmittal dated March
24, 1994, from John Shivers, President
Letter from IBAA president John Shivers, dated November 15, 1994,
to Robert E. Feldman re CRA Regulatory Proposal- Comments ………........
Study entitled " Regulatory Burden, The Cost to Community Banks," prepared for IBAA by Grant Thornton, January 1993 ........
Letter from IBAA president John Shivers, dated February 2, 1995, to
the regulatory agencies re CRA and agencies written responses
Letter from IBAA president John Shivers, dated March 24, 1994, to
the regulatory agencies re Revised Community Reinvestment Act Regulations
Bush, Malcolm, President, Woodstock Institute, written testimony ( with
appendices)
Cincotta Gale:
Continental Bank Corp., news release, " Continental and BankAmerica
Target $ 1 Billion in Community Lending and Investments in Chicago
Area"
......
Harris Trust and Savings Bank, news release, " Harris Sets $ 305 Million
Five Year Community Lending Goal"
Consumer Bankers Association:
Written statement
"
" Taking Responsibility: Financing America's Community Development,'
February 1995 ....
Hanggi, Elena, Association of Community Organizations for Reform Now
[ ACORN ] , written testimony

362

384
420

424
463
389

815

688
691

752
768

744

V

Page
Miller, Edward D., President, Chemical Banking Corp., keynote remarks before the Annual Community Reinvestment Conference, Houston, August
23, 1994 .......
Taylor, John E., publication entitled " America's Worst Lenders! " published
by National Community Reinvestment Coalition, Washington, DC. , January
1995 ...
Tugwell, John, Chairman of the Board and CEO, National Westminster
Bancorp Inc., written testimony ( with attachment)

734

520
850

COMMUNITY REINVESTMENT ACT

WEDNESDAY, MARCH 8, 1995

HOUSE OF REPRESENTATIVES ,

COMMITTEE ON BANKING AND FINANCIAL SERVICES ,

Mr. KENNEDY . Thank you .
Chairwoman ROUKEMA. And we are looking forward to hearing
'our testimony. You have a long history, of course, of association
nd advocacy on this particular subject, so we are anxious to hear
your testimony today.

( 1)

2
Chairwoman ROUKEMA. I will tell you that-the subcommittee
will be in order. I will have order in the hearing room.

[ Recess. ]
Chairwoman ROUKEMA. Will everyone please be seated and the
subcommittee come to order, please?

Mr. FRANK. Madam Chairwoman.

3
Chairwoman ROUKEMA. Touche, Mr. Frank. Touche.

4
We will be looking at a revised proposal put forth by the banking
regulators that could represent a dramatic and complex change in
the administration of CRA, and I think we will find shortly that
there is wide divergence of opinion even among the regulators.

5
I might say with the three panels and our response to witnesses
that we had talked about, I have been happy to try to work with
you and with others that want to provide testimony. I recognize
I think all of us recognize, that have had roles in terms of chairing
committees or subcommittees , that it is impossible to hear from everyone. It becomes sort of the reiteration of the self- evident, is one
of the problems . In fact, I would say that that has become one of
the problems with CRA in terms of the number of statements and
comments made about it.

6
into effect. The regulators' credibility demand such , and the goodfaith effort and participation of all involved merit conclusion .

7
We have had an onslaught of paperwork. A recent Senate report
said that agencies already have enough information to enforce the
Act without additional red tape . Yet what I see in these regulations
right now is the likelihood we will have considerably more.

Mr. Wynn.
Mr. WYNN. Thank you , Madam Chairwoman. I would be happy
to defer to Mr. Frank.

manner.
I think the existence of this kind of demonstration , however, reflects the intensity of feelings surrounding this issue. There is , obviously, a great sense at the community level that the legitimate
credit needs of low-income, moderate-income communities are not
being met, and it is my hope that as a result of these hearings we
can address that concern .

8
applicants for small business loans- minority small business loans.
And I believe the disclosure of that data, I think, is absolutely
essential.

Thank you, Madam Chairwoman.
Mr. Roth .
Mr. ROTH. Madam Chairwoman, I shall endeavor to be brief.
Let me say I commend you for having these hearings on the revised proposed regulations for our banks operating under the Community Reinvestment Act. There is a good deal of controversy
about that Act, of course.

9
rated State," writes Dr. Ken Thomas in his book, " Community Reinvestment Performance."

STATEMENT OF HON. JOSEPH P. KENNEDY, II, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS

10
country and how often that is fought by many of the institutions
of this country.

communities within their licensed area that they are not serving.

11
You take my home city of Boston , Massachusetts . Where I live,
in Brighton, Massachusetts, is a blue collar working class neighborhood, made up largely of white families. They pay the same rents
as people in the black neighborhoods . And yet homeownership
rates are much, much lower in Brighton than they are in Roxbury,
Dorchester and Mattapan, other areas of my district that I also
represent.

12
That is where we draw the conclusions. That, in fact, there is racial prejudice, and there is geographic prejudice in where banks
lend money. All we are trying to suggest is that, yes, in fact, it is
time for a change.

13
To my colleague from Massachusetts , he has really, I think, done
yeoman's service in the subcommittee on which he chaired. Do you
agree now, Joe, we should move ahead and issue the regulations
that have been considered for some time? Is that correct?

years .
Now I welcome our panel . Ms. Ricki Tigert Helfer , if you will
please come forward-Mr. Ludwig, Mr. Fiechter and Mr. Lindsey.
I thank you. I will recognize you in the order of your titles , and
then we will hear from you, and we will try to comply with our
5-minute rule.

Ms. Tigert Helfer.
STATEMENT OF RICKI TIGERT HELFER, CHAIRMAN, FEDERAL
DEPOSIT INSURANCE CORPORATION

14
ities previously carried out by the Division of Supervision with the
community outreach, consumer protection and civil rights oversight
functions of the former Office of Consumer Affairs.

15
The legislative history is clear, however, that CRA was not intended to force banks to make unprofitable loans. The law specifi- ,
cally states , " In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall
assess the institution's record of meeting the credit needs of its
entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such
institution."

16
Overall, almost all of the comments called for change, although
there was much disagreement about the specifics of how change
should be accomplished .

ance.
My participation in the process since October has led me to conclude that the FDIC and the other agencies represented here today
are making a serious effort to wrestle with all of the difficult issues
that CRA reform has presented . We are still considering those issues and are not yet ready to publish a final regulation, but the
effort is sincere, and the results, I believe, will be an improvement
over the current regulatory structure for CRA.

17
While our examination standards need to be consistently applied ,
we must have the flexibility to assess the performance of an institution based on its capabilities and the needs of the community it
serves . Each institution , like each community, is unique. We need
to ensure that everyone understands the laws and standards under
which institutions will be evaluated . To accomplish this, we must
provide our examiners with the resources , training and clear guidance they need .

18

pages of testimony, all filled with complaints born of the real experiences of those who must work with the statute day in and day
out in banks and communities all across America.

19
assessment factors with three tests-tests focusing clearly on what
matters to a community-lending, service and investment. We
would recognize that one-size-fits-all is not a sensible approach to
regulation in this area and distinguish appropriately between large
and small banks, between inner city and rural banks , between
statewide or regional and community banks. We proposed alternative ways to assess performance at small banks , wholesale banks
and limited purpose banks. We accommodated lenders' interest in
structuring their activities in accordance with a strategic plan, a
specific request of many lenders .

20
united in opposition to any proposal that would impair safety and
soundness .

Mr. Fiechter.
STATEMENT OF HON. JONATHAN L. FIECHTER, ACTING
DIRECTOR, OFFICE OF THRIFT SUPERVISION

21
on differences in financial institutions and the communities they
serve. Put simply, CRA will not work if we take a cookie-cutter
approach .

22
much of the paperwork burden associated with the existing regulation.

Mr. Lindsey.
STATEMENT OF HON. LAWRENCE LINDSEY, GOVERNOR,
FEDERAL RESERVE BOARD

23
Some of the central issues with which the agencies are now dealing, in fact, have existed from the beginning of CRA. In part, that
is because those issues derive from the unusual content and structure of the law itself. There are, in short, inherent, unavoidable
contradictions in any scheme to administer CRA.

24
Further, the expectation about the CRA performance of banks
has evolved considerably since inception of CRA in 1977. In CRA's
early years, a commonly held view was that CRA's central purpose
was geographic in nature: To help ensure that banks would not
ignore the needs of low- and moderate-income areas in their
communities.

25
Five , any reform structure must recognize the uniqueness of
small institutions and the disproportionate burden they bear from
any regulation, CRA or otherwise .

Thank you Madam Chairwoman .
[ The prepared statement of Mr. Lawrence Lindsey can be found
in the appendix . ]

26
measure this with any specificity. Put that together with what I
think Mr. Lindsey and Mr. Fiechter have said regarding wanting
to be to have fewer regulations, more objectivity, more local control-they don't mesh with me, in my opinion.
Yes, Mr. Ludwig and thenMr. LUDWIG. I think that is a very fair question. The race and
gender reporting under the regulation was for the sole purpose of
determining discrimination . The issue is how can you meet the
statute's terms of serving the credit needs of your entire community if you have an institution that is affirmatively discriminating
against one group?

Chairwoman ROUKEMA. That is a lot of paperwork; isn't it?
Mr. LUDWIG. Well, it is the agency that looks at the files.
Chairwoman ROUKEMA. Anyone else on this particular subject?
You don't want to touch it?

27
far more accurately the communities and potential borrowers that
we are not reaching."

Mr. LINDSEY. And you.
We took a very serious look at this, and one of the inevitable
challenges was to take a body of regulation that was largely in the
form of examiner guidance and guidelines. You might analogize
this to case law in the legal area, and take a look at it and say
what should be put in regulatory language.

|

88-882 - 95 - 2

28
Mr. LINDSEY. Well, the stage we are in again is going through
a lot of very detailed language and making sure that it is
implementable. No one here is insisting on having them take a day
longer than they have to.

Mr. VENTO. I know.
Mr. LINDSEY. Interrelated set of regs. We would have more
groups chanting and more letters coming to both you and us if we
implemented a reform that was not workable when it was applied
in the field or created anomalies among areas.

Mr. LINDSEY. No.
Mr. VENTO. So why don't you leave the small points, but publish
the regulations on the big points then?

29
gone off for weeks , closeted themselves and put in 12-14 hour days .
We all take this very seriously.

Chairman Helfer.
Ms. HELFER. I can tell you that looking at over 6,000 comments ,
which the agencies have received altogether, takes time and that
is what, in fact, the notice and comment rule- making process is
about.

Thank you, Madam Chairwoman.

30
Mr. MCCOLLUM. Thank you , Madam Chairwoman . I take the opposite view. I am pleased you have not implemented these regulations and I hope you take plenty of time in looking at this .

Mr. LUDWIG. Yes.
Mr. MCCOLLUM. It is not spelled out, apparently, in the proposed
regulations that were promulgated, the latest version, that that is
what your use of this data would be. At least this critic doesn't see
it there. Is that a fair criticism?

31
First, let me quote from the revised proposal, which would require institutions to collect certain race and gender data in connection with small business and farm loans . My staff just handed me
this. Here is the quote: " This data was collected in order to support
the fair lending component of CRA assessment. " That statement of
purpose is explicitly in the second proposal.

32
So at least you hear me repeat to you, you can't read volumes
of all this material personally, the essence of the credit allocation
argument. That is the premise I see for most who have come to us
and said they fear what you are doing is indeed going to lead to
credit allocation.

Mr. MCCOLLUM. Thank you.

33
tious to eliminate it in order to clearly move away from any such
suggestion.

Mr. WYNN. Certainly.

34

Chairwoman ROUKEMA. You will have the privilege and opportunity to ask that specific question to the representatives of the
banking community who will be here tomorrow with a panel.

Mr. Frank.
Mr. FRANK. Thank you for indulging me, Madam Chairwoman .
Let me ask each of you whether in the examinations divisions of
each of your agencies, have they ever reported to you that CRA was
in any way a factor in causing bank failures or was a significant
reason for failure? Or even of nonpayment of loans?
Ms. Helfer.
Ms. HELFER. We have, at the FDIC , no evidence that CRA lending has caused a bank failure.
Mr. FRANK. Mr. Ludwig?

Mr. LINDSEY. No, I would point out from the experience , one of
the complaints we have-

35
Ms. HELFER. You point to 1972. In 1977 , 1976 , in fact , the Equal
Credit Opportunity Act was passed which specifically prohibited
that.

Mr. LINDSEY. It is ambiguities-

Mr. LINDSEY. Yes, I support.
Mr. FRANK. I am distressed at how long it is taking. As I listen
to you , Mr. Lindsey, you sound like we have a will of the wisp you
are pursuing. Yes, it is somewhat ambiguous that if we made it
more specific we would be told we are overspecifying the legislation. But, no regulation can be promulgated in advance that will
anticipate every problem.

I think that is always wrong.
You are getting the equivalent, it seems to me, of a heckler's
veto; that is, you can worry too much about people in the banking
community who will misinterpret the regulation and you therefore

36
try and get a regulation that will anticipate every tremor of nervousness and every form of regulatory hypochondria that the regulator can feel.

Thank you.
Chairwoman ROUKEMA. Have you concluded?
Chairwoman ROUKEMA. I would like to make an observation. I
don't know that you were here, Mr. Frank, when I observed, but
maybe came to a different conclusion or at least came from a different perspective that if you are trying to do this, write these regulations and you are running into so many insurmountable problems with them so you have to go back and revise, and revise, and
revise in order to adhere to your standards of safety and soundness
as well as nondiscrimination and avoid the credit allocation , then
maybe you are trying to do the impossible. Maybe this is not feasible under these circumstances . I mean under this law.

Mr. FRANK. May I respond?
Chairwoman ROUKEMA. I would be happy to have you respond,
but I would prefer to have them respond.

Mr. LUDWIG. I can respond.
Chairwoman ROUKEMA. Mr. Ludwig.

37
Mr. LUDWIG. First, I think at this point we fundamentally agree
on reform . So is this doable? I think everybody at the table would
say, yes, and I think we will have a better regulation .

You think it is impossible.
If you don't like the law, then obviously you don't want to see the
regulations that do it. I say to the gentlewoman her remedy in this
case is obviously repeal it or substantially amend it. But as long

38
as it is on the books, it seems to me we have the right to have the
regulations promulgated.

Mr. FRANK. But I wouldChairwoman RoUKEMA. That have suggested that. Certainly, I
am not advocating that at this point in time, but I do think it requires a very scrupulous analysis of what we are doing here before
we act.
Mr. FRANK. If I could say, Madam Chairwoman.
Mr. FRANK. The fundamental differences and criticisms of people
should not hold up promulgation of the statute as long as the law
is on the book.

Thank you very much.
This subcommittee hearing is closed . We will meet this afternoon
at 2:00 p.m. for the second panel.

We are very pleased to have you with us today, and I apologize
for not pronouncing that correctly. But Mr. NisMr. NISKANEN. Niskanen .
Chairwoman ROUKEMA. Niskanen-I put the accent on the right
syllable Niskanen is chairman of the Cato Institute and is a
strong advocate of repeal of CRA. His well known Institute-certainly it's well known here in Washington, DC. , and across the
country has a notable reputation- regularly reviews or makes a
business of reviewing business and government, and they have

39
published numerous articles and position papers on financial service regulation .
We welcome you here today.
Lucy Griffin has for over 20 years had experience in consulting
with banks on CRA and other compliance-related issues. She has
worked with the Federal Reserve Board, the Federal Home Loan
Bank Board, and the Federal Trade Commission , which I think are
estimable credentials for being here today. She was instrumental
in developing some of the first consumer protection laws in the
area of consumer credit.
We welcome you.
Kathy Bessant-I'm sorry. Mr. Watt has a friend at NationsBank, don't you?

Mr. Niskanen.
Chairwoman ROUKEMA. Thank you . Not bad. Close.

40
STATEMENT OF WILLIAM A. NISKANEN, CHAIRMAN, CATO
INSTITUTE
Mr. NISKANEN. Madam Chairwoman and members of the subcommittee, the Community Reinvestment Act should be repealed ,
not reformed, not restricted, but repealed, for there is no conceivable set of regulations on a bank that is consistent with the objective of the Act to meet, quote, the credit needs of its entire community including low- and moderate-income neighborhoods consistent
with safe and sound operation of this institution , unquote .

41
the race and gender of the owners of small firms that make loan
applications or receive loans. The CRA does not provide authority
for any regulatory decisions based on such data, and the potential
use of these data is not defined in the proposed regulations , and
the potential for abuse in the use of these data is also substantial .
The above comparisons should be sufficient to illustrate why the
Community Reinvestment Act should be repealed . Current regulations are only moderately costly but are otherwise fairly innocuous.
The proposed new regulations would be very costly to the economy,
to the banking system, and to the communities they serve.

Thank you .
Chairwoman ROUKEMA . Thank you.
Ms. Griffin .
STATEMENT OF LUCY H. GRIFFIN, COMPLIANCE
MANAGEMENT SERVICES

42
record that complies with the CRA requirements . This is made
more complicated by the fact that agencies have both within themselves and between each other inconsistent interpretations , inconsistent enforcement policies, and inconsistent examination practices.

43
ductive exercise but it actually conceals many low and moderateincome people because they live next door to higher-income people
for whom they work. So in small towns it is an exercise in futility
and a waste of resources. Solutions to some of these problems lie
heavily in increasing the skill level of the examiners and increasing
the coordination between the agencies and between these examiners.
Also critical to this process is , from the beginning, the constructive involvement of community groups , not waiting until the eleventh hour to file a protest but from the beginning of the process
to work with banks to respond to banks' attempts to communicate
to them and, in some cases, to initiate , to call to the bank's attention the fact that they are there and would like to be talked to.

tion.
The regulations specify several points at which the community
group should be involved . They should respond to the bank's outreach . The regulations require the bank to respond to initiatives
from the community group, and they require the bank to respond
to complaints that a group may file, having been frustrated in the
two previous attempts. This is reviewed in an examination and
taken into account, but the reality is , there is not usually anything
there except what the bank generated .

44
proposal to collect data on certain types of loans, when in fact we
have not yet ironed out HMDA yet. Much of my work in the last
several months has been advising institutions on line-by-line item
problems in HMDA laws and how to interpret the rule and how to
correctly enter the line in that. For example, somebody who is taking a five-unit building and converting it to a two-unit, is it a multipurpose or is it a one-to-four? It is one thing before the application; it's another thing after. The commentary doesn't explain this ,
so there is a lot of effort being put in with limited results.

STATEMENT OF CATHERINE P. BESSANT, SENIOR VICE
PRESIDENT, NATIONSBANK

Ms. BESSANT. Thank you.
As many of you know, NationsBank is a company with a goal
that is simple to articulate but not so simple to achieve , simply put,
to be the best community development lender in the United States.
Now I'm going to resist the opportunity this afternoon to tell you
about our progress in that regard, but suffice it to say that we
could not be more serious about getting the business of community
development right. Unlike some of those that expect a big bank to
come forward and urge repeal of the CRA, I'm going to do exactly
the opposite. Nations Bank has long advocated a tougher, more aggressive CRA, one with objective; meaningful standards for measurement. My purpose before you is to advance exactly that objective. To that end, I would like to start out with a couple of observations about what I'd call the state of the community development
industry.

45
First, the Community Reinvestment Act has played a critical role
in advancing community development. Popular estimates of some
$ 4 to $ 6 billion of lending activity per year are, in my opinion ,
conservative.

1

46
NationsBank supports the collection and reporting of race and
gender information on small business lending. We believe such
data is key to understanding and enhancing credit availability for
small, women- and minority-owned businesses . But the CRA is an
ineffective, inaccurate, and unfair vehicle to use to collect this data.
An alternative and far superior approach would be to collect such
information under the Equal Credit Opportunity Act. Use of this
vehicle ensures that all lenders will report, thus generating meaningful data gathered equitably.

Mr. Traiger.
STATEMENT OF WARREN TRAIGER, CRA PRACTITIONER

47
The interagency proposal lacks one important component, a safe
harbor to provide a meaningful incentive for banks to strive for superior CRA performance. Instead , the proposal would perpetuate
the current practice of subjecting even the best CRA performers to
the specter of CRA protests in connection with their regulatory applications. This practice undermines CRA compliance in four primary ways .

48
lator should be shielded from Justice and HUD review of the same
activities.
Thank you.
[ The prepared statement of Mr. Warren Traiger can be found in
the appendix . ]
Ned Brown.
STATEMENT OF NED BROWN, FINANCIAL MODELING
CONCEPTS
Mr. BROWN. Thank you, Madam Chairwoman, members of the
subcommittee. Thank you for the opportunity to provide testimony
on the critical issue of CRA.

49
balance, by the way, is $ 61,000. That was on purchase mortgage.
For installment loans 57 percent of the installment loan base in
our file make between $ 30,000 and their average installment loan
is about $ 13,000.

50
Thank you very much for your attention.

Mr. BROWN. True.
Chairwoman ROUKEMA. Then granting credit to one segment
may mean denial to another. That's just the question. That's not
saying whether it's credit allocation or not, but I think that is still
a troublesome area.

51
regulated part of the financial sector in favor of a variety of unregulated or less regulated financial forms.

52
munity. So that the racially motivated enforcement of the fair lending laws does not necessarily get you to low- and moderate-income
people who are not of that group.

Chairwoman ŘOUKEMA. All right.

Mr. BROWN. Back to the point on focus here , and I think it is important. I have a client that happens to reside in Mr. McCollum's
district, and I was on the phone yesterday with the city manager
in Winter Park where he has his district office . The low/mod area
in Winter Park is called the West Side , and they just completed a
30-year community redevelopment plan, and it is ready to roll ; I
mean it's ready to be implemented right now. They even hired a
CRA specialist-and that's what they call them , a CRA specialist—
for the town, so I asked him, I said, " What would happen if you
didn't have CRA, if the banks didn't have any incentive to make
a loan on the West Side in Winter Park?" and he said it would be

53
devastating; he said , " We wouldn't get the money, we couldn't turn
this area around." So it does fill a real need and it does help the
banks to be focused.

MS . BESSANT. There are.
Mr. VENTO. They may expand . They have got some designs yet,
yes.
Ms. BESSANT. We will.
Mr. VENTO. You know, since you are headquartered in Mr. Watt's
district, I was just wondering what the CRA looked like, but then
I remembered what his district looked like and I thought probably
it would be a little bit of a problem. He has a notoriously interestingly shaped district, which I will let him further comment upon .
But I think the essence here is that the incentives is one point.
I think that even the regulators this morning all said that they
were supportive, recognize the importance of it, I think recognizing
really what is a proactive role, and the concern is, as you look at
HMDA's , you look at the Fair Housing Act, if you look at the Equal
Opportunity Credit Act, the problem is that you want to have a
commonality between them, but, you know, these obviously have a
different focus in many respects, but the idea of having a different
data recording requirement, in other words, where you can and
where it is legal, where it isn't barred by regulation B-the genesis
of that I guess was in the 1970's, the mid- 1970's, and of course
somehow a regulation bars a regulation. I guess it is one of the
rules that two positives don't make a negative here or something
in the banking law. It may in the work that I used to do, but it
doesn't make it here.

54
But the issue is, notwithstanding that there ought to be a commonality so that we do not have a separate type of record keeping,
that we have the commonality between them. I think that has
merit. It shouldn't imply that we are trying to do other things .

it.
I think there is a question here that may or may not have come
up in terms of what Brown has in his software program. He might
want to keep it proprietary in that sense. But I fail to understand
why, if you are doing all of this right that you would want to abandon it. I think it does have an effect, I think it is positive , I don't
know that-but what other types of incentives do we have? What
other alternatives?

1977.
Mr. VENTO. And Ms. Bessant.

55
Ms. BESSANT. I think we need to be clear about what safe harbor
really means, and, you know, when you start your morning with
chants of, " No safe harbor," it is easy to think that it means something terrible.

Ms. BESSANT. Right.

56
My concern is , of course, that all of this is elemental because I
think that in terms-Madam Chairwoman, I just want to mention
that-in terms of the CRA, I think the lack of a common understanding and a solid benchmark in which to plant your transit is
the concern here, and I mean as we start to build on it or use it
in more meaningful ways, even a safe harbor-my concern is that
the data collection ought to go on, that the whole process ought not
to be that acrimonious.

nounceChairwoman ROUKEMA. I can pronounce it, can't I?

57
and cognizant of color themselves, and we ain't there by a long
shot.

Mr. Barrett.
Mr. BARRETT. My question is to Mr. Niskanen as well, and
maybe I'll take a different tack from Mr. Watt, although I agree
with what he said.

58
think it should be done. Otherwise, just then to be equally honest
and say we are ready to let it decay.

COMMUNITY REINVESTMENT ACT

THURSDAY, MARCH 9, 1995

HOUSE OF REPRESENTATIVES ,

COMMITTEE ON BANKING AND FINANCIAL SERVICES,

88-882-95 - 3

60
tions that were issued, and after hearing the comments from all
groups involved they decided to go back and try it over again, as
you well know.

come you.

61
You all have excellent credentials and we appreciate your time
and the effort to be here.

62
They seem to be able to deal with it, so I appreciate reading your
statements , the comments and concerns that you have but I think
behind it is not just CRA but I see it as examination, I see it as
capital, I see it as FDICIA and FIRREA requirements which we
have prescriptively written.

63
nity including low and moderate income neighborhoods . I am in
complete agreement with this goal, as are virtually all bankers .
Any banker who does not understand that the future of his bank
rests squarely on the economic health of his community won't last
long in the business of banking.

64
Second, the data collected is not necessary to assess whether a
bank is meeting its CRA obligations.

i

Thank you.
[ The prepared statement of Mr. James Culberson can be found
in the appendix . ]
Tony Abbate, please.
STATEMENT OF TONY ABBATE, ON BEHALF OF THE
INDEPENDENT BANKERS ASSOCIATION

streamlined, tiered system for thousands of community banks.

65
This streamlined and tiered examination system will only be as
good as the examination guidelines implementing them. We have
written to the regulators about this and asked that their response
be included in the record.

66
to CRA examinations , while the community bank across the street
would. This is patently unfair and would create a serious competitive imbalance. This imbalance would be intensified if the walls between banking and commerce are breached .

Thank you again.
[ The prepared statement of Mr. Tony Abbate can be found in the
appendix. ]

Mr. Milligan.
STATEMENT OF MARK MILLIGAN, ON BEHALF OF AMERICA'S
COMMUNITY BANKERS.

67
business for ACB members. We believe it is good business that can
be done in a safe and a sound manner.

68
Finally, we believe that CRA should be applied to geographybased, community-chartered credit unions and to credit unions
serving multiple employer groups from one metropolitan area.

Mr. Culberson?.
Mr. CULBERSON. Madam Chairwoman, certainly exemptions are
important to all of us. The difficulty is that we've got different
sized communities in different locations.

I
Chairwoman ROUKEMA. Yes. You are not looking for outright
repeal?

69
Mr. ABBATE. And the point that my colleague was making is very
valid . I think there is an alternative that has to be looked at.

Mr. ABBATE. Right.

70
Now, just in general, would you please get back to the issue that
was so apparent yesterday, and a couple of you referenced it here
today, and that is the question of race and gender reporting.

I

I mean, it makes no sense.
Chairwoman ROUKEMA. That is a very interesting and very explicit example. Thank you very much.
Mr. Abbate.
Mr. ABBATE. Well, I think the problem is, first of all, race and
gender coding is a fair lending issue and it doesn't belong on the
CRA.
data could stand the legal challenge under Regulation B, which

71
would be the Equal Credit Opportunity Act. It is unclear as to how
this data is going to be used and what it will be compared to to
judge compliance.

Same type of a problem.
Chairwoman ROUKEMA. Thank you very much . My time is up . I
have other questions, but I will defer now to my ranking Member.
Mr. VENTO. Thank you, Madam Chair.

Mr. MILLIGAN . I'm sorry?
Mr. VENTO . That is a proposal to rescind the money for the Community Development Financial Institutions Act.

72
As we do this , I think that it is important that we begin to recognize that franchise, and how we are going to have financial services
at our local communities.

I
I remember the discussion under HMDA and how people resent
when you ask them their race ; they get defensive . I can understand
that. There is a problem there. I admit there is a problem, and I
expect that you know, we could spend a lot of time talking about
that today.

73
That is what we are after in these instances . There is ample opportunity at the time we have the examination for any group to
make any comment where they are invited to make those comments, and we get approved, and then we get estopped for very little reason, just because someone doesn't like us . It is very costly
and expensive .

Mr. ABBATE . No , not at all.
Mr. VENTO. But that actually brings it to that point when someone gets ready to branch .

74
mediate sized banks. I mean, I think it is relevant in Madison and
is relevant in SaddleMr. ABBATE. May I?
Mr. ABBATE. I think the problem is that it opens up a whole difficult set of circumstances because if we are trying to operate a
business-for example, in a personal instance where we filed an
application, I suddenly received a letter that said, by the way, we
noticed you made this application ; we would like to see your public
CRA statement as reported by the examiners ; we would like to
know what your rating is; and we would like to see your HMDA
data. And by the way, we are going to teach you how to make loans
into low-income area without having any basis for that.

Mr. Bono.
Mr. BONO. Thank you very much. Don't let my new necktie bother you. It will just bother me.

75
I think your goal is to promote commerce period, for society period. I have never seen industry try not to cooperate , to help people
or give people a leg up. It fascinates me to see that when government does try to make some balances they don't go to that very industry itself to say how is the best way to do this; it is let us tell
you how the best way to do this is . Invariably, it is a mess.

person .

76
I really think that CRA was a necessity years ago because there
were many banks who lent cross-border, who lent overseas and
were not following the spirit of their original charter.

Mr. CULBERSON. I think both .
Mr. ABBATE. I agree. To use an expression, unless the examiners
change the categories that give you outstanding or satisfactory, you
almost have to stand on your head to get an outstanding rating,
so I think satisfactory, the amount of effort that goes into getting
a satisfactory rating is enormous .
Mr. BARRETT. Mr. Milligan.
Mr. MILLIGAN. We might recognize a distinction here between
outright safe harbor and expedited treatment, for example, and
that could manifest itself on the distinction between " outstanding"
and " satisfactory. "

exam .
Mr. BARRETT. So it would be CRA's exam. And that is an unannounced examination , is it not?

77
I think under the new plan, the regulators new plan , that they
are going to ask the bank to go ahead and do that and they will
do it as well, go right to the community groups.

Mr. BARRETT. Mr. Abbate.
Mr. ABBATE. There are two aspects to the examination. One is
CRA and the other one is compliance. The compliance is compliance with consumer laws and regulations.

your

For example, we know that well over 90 percent, according to the
last examination, of the loans that we made were within our market areas , and that is considered well within the criteria of what
an examiner is looking for.

78
Mr. MILLIGAN. If I might. My reaction is, no. I frankly can't
imagine that one could gain an " outstanding" rating and have the
donut phenomenon at the same time.

Mr. BARRETT. Thank you.

)

79
a continuous pattern of substantial non-compliance, for example,
that there is an institution there that needs to be held accountable.
We do not want our industry position's to be set by the performance of our worst performers . We want to have the worst performers improve, so we will not be about defending folks who continuously submit records of substantial non-compliance.

some sort.
Mr. NEY. Picking up on that point, isn't there some educational
items and programs that you have done as an industry, whether
it is Community Bankers or the American Bankers Association . I
believe you had to police your own attitude over the years , haven't
you?

80
Mr. NEY. So in conclusion , the bottom line is it would be a better
trend, I assume, for this government to not look at the content of
the statistic in the sense of how it is compiled , but to work with
the industry to see where there might be some problem areas or
how we can work together for some agreements .

Mr. NEY . Thank you.
Chairwoman ROUKEMA. Thank you. Mr. Wynn.

Mr. CULBERSON. No, I don't.
Mr. WYNN. Do you have evidence that any of these loans resulted
in a pattern of higher defaults than other loans that might be in
the portfolios of the banks?

Mr. CULBERSON . That's right.
Mr. WYNN. Yesterday the bank regulators were before us and we
specifically focused on this question of credit allocation. Based on
the answers you've given , I am finding it difficult to find any actual
credit allocation in these regs. In other words, any situation in
which the regulations themselves require the granting of credit.

Mr. CULBERSON. No.
Mr. WYNN. The other issue had to do with the collection of data.
Mr. Abbate, I believe it isMr. ABBATE . Abbate.
Mr. WYNN. Mr. Abbate, I'm sorry. Talked on a couple of occasions
about the use of HMDA data to evaluate performance, HMDA data,
of course, focusing on home mortgage lending.

81
Mr. ABBATE. No. I think what you are looking at in the HMDA
data makes sense because you have such a mass of credit applicants, because the preponderance of lending in banks is to consumers. It is a very useful exercise for the examiner to know where you
are lending.

82
But I want to assure you that the minority community is not
going to continue making deposits with institutions that don't serve
our credit needs specifically in the small business arena.

Mr. WYNN. Fine.
Mr. ABBATE. And I think what you are talking about goes more
to the heart of fair lending than it does CRA.

Mr. WYNN. Madam ChairwomanChairwoman ROUKEMA. Actually, you precipitated the line of
questioning that I was going to ask for a different purpose.
Go ahead, Mr. Wynn.

83
Mr. MILLIGAN. As I understand it, the legislation that was actually introduced in the previous session would give CRA credit for
participation in lending consortia anywhere in the state in which
that lender would be located .

84
appropriate or relevant period when public comment could be made
in the process?

Mr. CULBERSON. I'm sure there's some legitimate causes that
happen. The pattern has been that it has been last minute. Most
of them have not been held up by the regulators and they go forward with the merger or whatever the purpose was, and it is just
very costly and time-consuming.

Mr. Vento .
Mr. VENTO. Madam Chairwoman-

85
or the endorsement of that by a regulator, so I mean obviously as
long as this stands, has the same standing as other actions and
other proposals , I mean I think that is the dilemma that exists
here.

86
" doing the thing right," and I don't think today is about anyone's
spin on doing the right thing.

process.
Mr. VENTO. I understand but I think that most of you know the
integrity, the validity and reliability of that examination process is
not necessarily something that you would welcome the non-professional and the political into , frankly.

87
And I had always thought wouldn't it be nice if in regulations
you could respond to regulators and in turn have your day as well
to say this doesn't make any sense and can this regulation be reviewed and what reason is it imposed on us and does it make any
sense.
So my question to you is do you have any recourse when regulations are imposed on you? I heard you say that if you had a thick
file you did well. That was the standard for doing very well- so I
would have slipped in some blank paper in some of those files, but
other than having a thick file, did you have any way of getting
your message back this way or did you just have to take it?

Mr. CULBERSON . Yes.
Mr. BONO. I found that extremely frustrating in my business ,
that I just absolutely had no way of responding to some of the regulations, and I would urge that we have a process where you have
a voice as well .

88
Mr. VENTO. Well, I mean I think the issue is of course that when
an application comes in then I guess the presumption is that that
is a significant change in terms of what the institution is going to
do , that they have obviously at that point you have a different circumstance in terms of looking at if there's a substantial change.

89
Mr. BARRETT. We have gone back and forth as to whether this
is a growing problem. I would think that it would be easy to find
out exactly how many protests there have been.
I think if we had the hard dataMr. BARRETT. We could better examine how to deal with the solution. I don't know if I should be asking the ABA or I should be
asking the subcommittee but I would think the first thing we want
to do if there is a problem is to find out the extent of the problem
so we can find out how to address it.

90
Chairwoman ROUKEMA. This session of the subcommittee will
come to order and I thank everyone for being here today and being
so orderly.

91
before this subcommittee or any other subcommittee and so I certainly support the response yesterday in terms of the disruption of
the hearing and the closing of the panels in terms of consideration ,
especially based on the conduct of the officials that were leading
that group .
Vento.
I think we'll provide the maximum amount of time for our panelists . Hopefully we will not be interrupted with too many votes, but
we'll get right to work here so that you can clearly lay out, make
your presentations .

Gale ChincottaChairwoman ROUKEMA. Cincotta. Ms. Cincotta is the Chairperson of National People's Action , which is a national coalition of
approximately 300 grass roots organizations. That organization has
been working on neighborhood redevelopment issues since 1971. I
think you qualify. That, by the way, precedes, long precedes CRA.
Michelle Meier-Ms . Meier is counsel for Government Affairs of
Consumers Union . Consumers Union is a nonprofit organization
chartered in 1936. We know of, we are very familiar with the activities across the country for information , education and advice on
issues that range from health care to consumer services and financial services.

[ Recess . ]

88-882 - 95 - 4

92
Chairwoman ROUKEMA. I think we are ready to commence ,
begin, start-if we have Mr. Taylor. That's life on the fast track
here. That's all I can say.

STATEMENT OF JOHN TAYLOR ON BEHALF OF THE NATIONAL
COMMUNITY REINVESTMENT COALITION

93
These regulations will let community people, Congress people,
Mayors, Governors and just plain citizens know the real story of
who is lending in our neighborhoods and who is not.

94
like to submit in written form, we can do that as well if it is submitted within a 10-day period.
Thank you, and Reverend Stith .
Mr. Taylor, do you have to leave now? Do you want us to advance questions to you now?

Mr. TAYLOR. Yes.
Chairwoman ROUKEMA. Mr. Taylor, I've got to say that others
have testified and raised a number of troubling questions, particularly the bankers. By the way, I think you know that none of them
called for repeal. They did call for streamlining and expedited procedures and they expressed themselves on safe harbor.

95
Much to the concern of community groups , frankly, we think that
the second rule was bent with very much the lender's concerns
about costs and streamlining and reporting in mind and less with
our interests in mind.

Mr. Vento?
Mr. VENTO . If Mr. Taylor has to leave he may want to respond
in writing to some of the questions we were referring to earlier. I'm
sure that he may-were you present at this morning's hearing?
Mr. TAYLOR. No , I wasn't, sir.

tics.
One of the issues that has come out, and I just want to call my
chairwoman's attention to it and others that are students of this ,
and that is with regards to mortgages, the demonstration of whether or not mortgages were being made on an equal basis was actually done on a reverse basis. They said, well , look at the defaults ;
the defaults are higher among these particular groups and therefore that indicates that we are making mortgages to the extent because the default rate is at least as high or higher for Asians or
for Indians or Chinese or African Americans . You are familiar with
that.

96
many loans aren't business loans; they end up being consumer
loans , but if we look at loans generally, I haven't heard an answer
or a response to whether we look at these other loans in the reverse basis to make that determination .

Mr. TAYLOR. That is correct.
Mr. VENTO. So I think that those studies and those particular
specifics are very important, I think, to the subcommittee and to
understand how the regulators are going to actually format this
and how the information is going to be used, I think, is important.
I don't want to hold you, Mr. Taylor. I mean, there are other
questions that need to be addressed.

97
of the institutions in my area which have a lot of branches . They
are big, but they are over seven and eight States.

Mr. TAYLOR. Right.
Mr. VENTO. Anyway, Mr. Taylor , thanks for listening to me, and
please respond in writing if you have any ideas that can help us.
I think we really need that input in terms of streamlining to answer some of the paperwork problems .

Mr. TAYLOR. Thank you.
Mr. VENTO. Thank you. Thank you, Madam Chairwoman.

We will be right back.
[ Recess.]
Chairwoman ROUKEMA. The subcommittee will come to order.
Reverend Stith, you have our attention .
STATEMENT OF REV. CHARLES R. STITH, ON BEHALF OF THE
ORGANIZATION FOR A NEW EQUALITY

98
It is also clear that the kind of progress that has been made directly correlates with the disclosure requirements in 1989, which is
the segue to the third point that I want to make . And that is, if
we are going to see similar sorts of success stories as it relates to
small business lending, I am absolutely convinced that it is going
to take the same kind of disclosure requirements that we have
around HMDA data in order to affect the kind of change that we
want to see .

Thank you, Madam Chair.
[ The prepared statement of the Reverend Charles Stith can be
found in the appendix . ]

Mr. Fishbein .
STATEMENT OF ALLEN J. FISHBEIN, ON BEHALF OF THE
CENTER FOR COMMUNITY CHANGE

99
dependence, does not expand bureaucracies or budget deficits and
does not hurt business or the economy and it is called the Community Reinvestment Act.

100
communities that could be very severely affected by these expansions that are occurring.

Ms. Cincotta.
STATEMENT OF GALE CINCOTTA, ON BEHALF OF NATIONAL
PEOPLE'S UNION

101
I have a letter with me from Mr. Moskow of the Federal Reserve
Bank in Chicago that, after they talked to a majority of the banks
that have been disclosing all these years, there has never been a
question of confidentiality that has been raised . I have included
that in what I have submitted.

102
We would like a common sense approach but the banks will complain to you and they will wait to the next hearing before they do
anything about it. And we have said, come along with us , we don't
want you overly burdened, we would like conforming regulations
also. So that I would ask them next time, how many times have
you visited the regulators in between these hearings worrying
about paper. I think it wouldn't be that hard if we could work as
a team to do it.

Thank you.
[ The prepared statement of Ms. Gale Cincotta can be found in
the appendix . ]
Ms. Meier.
STATEMENT OF MICHELLE MEIER, ON BEHALF OF
CONSUMERS UNION

103
theme is, let's be constructive . Since the November election , we
have read in the trade press, read in the popular press and heard
bankers, some bankers, verbally licking their lips about how the
election was going to allow them to wipe out key consumer protection laws. We don't believe that. We think that consumer protection
is broadly supported by Americans of all political persuasions and
that consumer protection should be and hopefully is a goal of this
Congress's leadership.

Thank you.
[ The prepared statement of Ms. Michelle Meier can be found in
the appendix . ]
Mr. Roberts.
STATEMENT OF BENSON F. ROBERTS, ON BEHALF OF LOCAL
INITIATIVES SUPPORT CORP .

104
been around for about 15 years now. It is our job to work with both
banks and other private sector organizations as well as with community groups. We are an intermediary.

105
business lending, which is crucial within neighborhoods, with the
more customized kinds of community development lending that is
equally important. They use a wide range of measures of performance.
We think that is anything but credit allocation, especially when
you put it in the broader context of banking regulation where because of depository insurance and safety and soundness concerns ,
there is a very, very heavy governmental intervention in our banking system from cradle to grave that makes it hard for banks to
enter the system, watches them very carefully and steers them toward some investments and away from other activities in the name
of safety and soundness, and then works really very hard to keep
banks from failing and leaving the system if you will.

Mr. WYNN. Madam Chairwoman?
Mr. WYNN. Before we go , I ask unanimous consent to enter into
the record the remarks of Edward D. Miller, President of Chemical
Bank Corporation. This is the comment that Mr. Ludwig referred
to yesterday on this subject of the data gathering on small business
loans.

[ Recess .]
Chairwoman ROUKEMA. Thank you. Thank you for your patience
and Congressman Ney is going to be the first one to question.
Mr. NEY. Thank you, Madam Chairwoman.

106
The one point made today was about an example of how if a person goes in to buy an automobile and they could use their home
equity, though I don't want to consider that a good example but,
in other words, maybe they wouldn't go through the whole process
of the statistical gathering and maybe they don't want to give the
information or for whatever reason this was raised today by one of
the panelists and so they turn to some other type of format to get
the loan, whether it is through the automobile company or whatever the process may be.

107
As far as my organization's position and the views of other organizations as well, we would like to see that expanded to nonbanking institutions as well in the small business lending area. I
have no problem promoting that reporting requirement for nonbank lenders . But the reality is the banks are the primary lenders
to small business and so getting it from them is extremely important.
Mr. NEY. Because I am running out of time, I want to get the
last question in quick to Mr. Roberts .

Mr. NEY. Thank you .
Chairwoman ROUKEMA. Our ranking Member , Mr. Vento.
Mr. VENTO . Thank you.

108
supply information . Normally, they don't even mention the particular bank whose record they are examining when they do that.

area.
Mr. VENTO. Reverend Stith, I think was-were you going to mention something with regard to this? I think it is a very important
point because I mean I think the issue is, of course, that they
talked about time delay and I asked for and they said that for the
record that they are going to, if they have any information, they
have 10 days to get me documentation of delays that have occurred
in the application process specifically because of CRA comments . Of

109
course, they talked about the bad publicity and some of the other
aspects of it too which I don't know that we-whether we can do
something about that or not.

Reverend Stith?
Mr. STITH. Allen actually did , I think, a very eloquent job of laying out the issues.

110
Part of the problem, I might say further, is that this is a rather
new process. I mean, during the 1980's really this law was in quiescence. It was not doing what it was intended to do. So it has only
been the 1990's that this has really come around and I think it
started out on sort of a bad foot in the sense of disclosure and a
lot of banks, frankly, have not been up to speed in terms of actually
dealing with this, these issues, in addressing these concerns.
Thank you .
Maybe Michelle hadChairwoman ROUKEMA. I would like to call on Mr. Barrett, our
Congressman from Wisconsin but I have a problem here now. I
have postponed a meeting for more than half an hour, a New Jersey delegation meeting, in my office and this is the second time I
have changed the meeting today.

Mr. Barrett.
Mr. BARRETT. Thank you , Madam Chairwoman. If you have to
leave, I understand that. We will just make believe we are the majority again. [ Laughter.]

111
again, I apologize, you may have been asked these questions but
I think it is important to have a meeting of the minds.

112
Now, we have to have the right to protest is what I am saying.
Because we didn't have that right because they couldn't ask for
anything, we got nothing until we had that right.
Did that answer?
Chairwoman ROUKEMA. Do we have someone else who wishes to
speak?
Ms. MEIER. I have two points to make in response to that concern raised by the bankers .
Yes?
Ms. MEIER. One is , studies have shown that applications for acquisitions that have a CRA challenge associated with them have
not resulted in longer decisionmaking periods on the applications.
Mr. BARRETT. If you could get that to me in writing, that would
be very appreciated.
Ms. MEIER. All right.
The second point is one Allen raised in his statement, which I
think is really important. We are moving toward a nation with
interstate branching and interstate banking and we are going to
have a lot of large banks, perhaps many more than we see today.
These banks are going to have branches throughout the country.

Mr. BARRETT. OK.
Mr. ROBERTS. A couple points . First, with respect to paper, during the Bush Administration , OMB conducted a study of the paperwork burden on banks under a wide range of regulatory requirements. CRA came in dead last, that is to say the least burdensome
paper requirement among all the banking requirements, all the
compliance rules.

113

Mr. BARRETT. Thank you.
Mr. VENTO. If the gentleman would yield to me, I think Mr. Ney
is coming down, obviously, to close out the hearing. The issue I
think, if you would yield to me?
Mr. BARRETT. Sure.
Mr. VENTO. Michelle Meier had raised the issue, said that there
is data available that does not show any appreciable difference in
terms of issues where there are questions or concerns raised by
consumer groups or others at the time of application due to these
agreements. It is a time, obviously, when agreements or activities
do take place and Ms. Cincotta mentioned that she herself was involved in an agreement that took place with a bank in Illinois ,
three banks .

114
anywhere from 95 percent to 97 percent positive rating under
existing system, that would be tantamount to an automatic
order on people's right to comment on CRA-related issues for
tually any bank in the United States.
Mr. BARRETT. May I interject?
When you say 95 to 97 percent, can you break that down
tween satisfactory and outstanding?

the
gag
vir-

be-

Ms. MEIER. Yes .
Mr. FISHBEIN. I think everyone here today testified that they
think the regs would represent improvement over the existing regs
and the time has come to adopt them and get them issued.

115
One of the issues that has come up with the regs, of course, is
this Regulation 40 and the suggestion that there is- Regulation B,
pardon me. Regulation B and that there is an inherent conflict between that and some of the rulemaking that is going on with regard to statistics based on race and other factors.

Ms. CINCOTTA. I know.
Mr. STITH. That has been a much-discussed issue, Congressman.
And one point is the reality that Regulation B does not, in fact,
preclude the voluntary collection of race-based data.

[ No response . ]
Mr. NEY. Thank you very much . I appreciate your testimony and
the members' participation .
You may be adjourned .
[ Whereupon, at 4:28 p.m. , the hearing was adjourned . ]

117

APPENDIX

March

8,

1995

118

Congresswoman

Marge Roukema
Fifth District - New Jersey

Release:
March 8, 1995

Contact:
J. Craig Shearman
( 202) 225-4465
Roukema Statement on CRA

Following is the opening statement of Subcommittee on Financial Institutions Chairwoman
Marge Roukema, R-N.J.-5th , at today's hearing on proposed changes in Community
Reinvestment Act regulations.

--MORE--

119

purpose of ensuring that banks and thrifts are meeting the credit needs of their communities including
low- and moderate-income neighborhoods? If not, I want to know what can be done about improving
the situation.
I am also concerned that the law conflicts or
overlaps with other existing fair housing and equal credit laws, such as the Equal Credit Opportunity
Act and the Fair Housing Act.

--30--

120

OPENING STATEMENT OF CONGRESSMAN BRUCE F. VENTO
AT HEARINGS ON COMMUNITY REINVESTMENT ACT
MARCH 8 AND 9, 1995

MADAM CHAIRPERSON, THANK YOU FOR INITIATING
HEARINGS ON THE STATUS OF THE REGULATIONS GOVERNING
THE COMMUNITY REINVESTMENT ACT.
MANY ARE AWARE THAT THE REGULATORS BEFORE US
THIS MORNING HAVE BEEN LABORING ON REVISED
REGULATIONS TO IMPLEMENT THE COMMUNITY

THE EFFORT TO REVISE THE CRA REGULATIONS HAS BEEN
BY TRIAL AND ERROR. IN THE MAIN, THE REGULATORS HAVE
ATTEMPTED TO MOVE TOWARD STREAMLINING, CLARIFYING
AND IMPROVING THE IMPLEMENTATION OF CRA TO BETTER
SERVE COMMUNITIES AND TO REDUCE COMPLIANCE
COMPLICATIONS FOR FINANCIAL INSTITUTIONS MOVING FROM
PAPERWORK TO PERFORMANCE.
AS LEGISLATORS , WE MUST
EXAMINE AND EVALUATE THIS PERFORMANCE , WHICH IS A
REQUISITE ASPECT OF PUBLIC TRUST IMPLICIT IN THE
FINANCIAL INSTITUTIONS FRANCHISE. THE SAFETY AND
SOUNDNESS OF SUCH PERFORMANCE IS AT LEAST RELEVANT
TO THE DEPOSIT INSURANCE RESPONSIBILITY.
WITHOUT ANY FURTHER DELAY OR PROCRASTINATION
IT IS TIME TO ISSUE THE CRA REGULATIONS FOLLOWING THIS

121

SET OF HOUSE HEARINGS . IT IS OF PARAMOUNT IMPORTANCE
THAT THE REGULATORS MAKE A DECISION IN ACCORDANCE
WITH THE MARCH 31ST GOAL PUBLICLY UNDERSCORED BY VICE
PRESIDENT GORE.

THE THREADS OF THE COMMUNITY REINVESTMENT ACT
ARE WOVEN INTO THE WHOLE CLOTH OF CONSUMER
FINANCIAL SERVICES . SUCH THREADS ARE WOVEN TOGETHER
WITH OTHERS LIKE THE THREADS OF GSE REGULATIONS ,
AFFORDABLE HOUSING PROGRAMS, AND THE FEDERAL HOME
LOAN BANKS;, THE ACTIVITIES AND YARN OF THE
NEIGHBORHOOD REINVESTMENT CORPORATION ALONG WITH
FAIR LENDING, FAIR HOUSING AND OTHERS . ON THE WHOLE
AND ON AN INDIVIDUAL BASIS , THIS IS A COLLECTIVE CLOTH
AND MAKES A GOOD SUIT TO FIT OUR COMMUNITIES WHICH
SERVES AS POSITIVE CONTRIBUTIONS FOR FINANCIAL

122

INSTITUTIONS.
MADAM CHAIR, FOR THE RECORD, I WOULD LIKE TO
INCLUDE A TWO-PAGE EXCERPT FROM A DOCUMENT PUT
TOGETHER BY THE FEDERAL RESERVE BANK OF PHILADELPHIA
ENTITLED COMMUNITY REINVESTMENT ADVOCATES, THAT
SPEAKS TO THE SUCCESS , BOTH FINANCIAL AND OTHERWISE,
OF CRA AND COMMUNITY INITIATIVES.
I LOOK FORWARD TO LEARNING FROM OUR PANELS
TODAY AND TOMORROW AS WE FINALLY MOVE FORWARD
WITH THE NEW AND IMPROVED CRA REGULATIONS.

88-882 - 95 - 5

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125

JOSEPH P. KENNEDY II
8TH DISTRICT, MASSACHUSETTS
COMMITTEE
ON SERVICES
BANKING AND
FINANCIAL
SUBCOMMITTEES:
HOUSINGANDCOMMUNITYOPPORTUNITY,
RANKING MINORITYMEMBER
DOMESTICAND
INTERNATIONAL
MONETARYPOLICY
COMMITTEE ON VETERANS' AFFAIRS
SUBCOMMITTEE:
HOSPITALS AND
HEALTHINSURANCE
CARE
COMPENSATION,
PENSION,
ANDMEMORIAL
AFFAIRS

2242 RAYBURN BUILDING
WASHINGTON, DC 20515-2108
( 202) 225-5111
( 617) 242-0200
801( A) TREMONT STREET
ROXBURY, MA02118

Congress of the United States

Testimony of Rep. Joe Kennedy
Financial Institutions Subcommittee
I want to thank Chairwoman Roukema and the members of the Subcommittee for the
opportunity to testify today on the important issue of CRA, the Community Reinvestment Act.
Madame Chairwoman, we live in a capitalist country where the most talented people,
the people with the most know-how, the most creative ideas, the most energy will succeed if
they are given a fair shot. That is what is meant when we talk about creating an " opportunity
society" in America.
I have myself benefited from the openness of our market system -- before I came to
the Congress I started 7 small businesses that successfully competed against some ofthe
biggest corporations in the world.
But this kind of success requires access to credit -- credit is the grease that keeps the
wheels of commerce turning.
Unfortunately, the evidence is clear that credit is just not available on an equal basis to
all people in all communities in America. And that means that the ability to take part in the
American dream, to participate in the economic mainstream by building a small business or
buying a home, is not open to all Americans.
The HMDA data makes that clear. Minorities, low and moderate income people, and
people that live in certain areas are denied access to credit at significantly higher rates, taking
into account income and other factors affecting creditworthiness, on the basis of completely
non-economic factors.
CRA is the law that deals with this problem. It is fundamentally a conservative law
because it is designed to make markets work for everybody in the society. Too often, we talk
about CRA in terms of charity. That is a false characterization. CRA is, above all, good
business.
The Federal Reserve Bank of Philadelphia recently published a pamphlet summarizing
the community lending activities of bank after bank and numerous community financial
institutions whose CRA portfolios perform as well or better than other loans.

THISSTATIONERYPRINTED ON PAPER MADE OF RECYCLED FIBERS

126

For example, Wells Fargo Bank, PNC Bank, South Shore Bank, U.S. Bank of Oregon,
United Jersey Banks, Indiana National Bank and others all report CRA portfolios that do as
well, and oftentimes better, than their conventional loan portfolios. I met with Terry Murray,
the CEO of Fleet yesterday, and he told me the same story.
Nationally, community loan funds have made $ 120 million in loans with losses of less
than 1%. The Enterprise Foundation and LISC have lent over $ 150 million to CDCs with
deliquency rates of 1% to 3%, again, comparable to conventional loan default rates.
Despite this success, many bankers have complained about CRA requiring too much
paperwork. I agree with these concerns. There is no doubt that everyone's interests are
served -- community groups and bankers alike -- by reducing the paperwork burden and
increasing the amount of loans getting out into the community.
This Congress has made many efforts to cut back on regulatory red tape this year.
The pending CRA regulations are consistent with this effort. They make CRA more efficient
-- that is, require less paperwork; and they will make CRA more effective -- in other words,
provide more credit. The GAO will release a report shortly that specifically says that the
proposed CRA regulations will reduce the paperwork burden of the existing regulations.
A couple of controversies about the new CRA, regs remain,
First, the proposed regulations published in July would require race and gender
reporting for small business and small farm loans. I support this proposal strongly. The only
way to measure the actual performance of lending institutions around the country is to collect
and publish this data. Remember, the regulators collected the HMDA data showing racial
disparities in home lending for years but never took any action until the data were published.
Public reporting of race and gender data is the only way to know ifthe credit markets are
adequately serving all segments of the small business universe.

Second, I support reporting of this loan data by census tract. The proposal to make
information available on an aggregate basis will not help the public know if small businesses
throughout an area are getting adequate access to bank credit.
The regulators will be collecting this data anyway; I believe the public has a right to
know. As in the case of race and gender, it is the public, that is likely to be the best enforcer.
Finally, let me close by saying that, rather than talking about gutting CRA, as some on
this Committee have suggested, if we really believe in the rhetoric of equal opportunity, if we
really want to see fewer families on welfare, if we are really commited to economic growth,
we should be talking about expanding CRA to mortgage bankers and large credit unions.
Study after study shows that these institutions do a much poorer job of serving low
income communities, inner city areas, and minorities than do banks and thrifts. I will be

127

introducing legislation later this year to make sure CRA applies to these institutions.
In conclusion, I want to emphasize that CRA is good business and good policy; that
the pending regulations are consistent with the goal of cutting red tape; and that aggressively
enforced community lending laws are the best way to replace a welfare society with an
opportunity society.

128

TESTIMONY OF

RICKI TIGERT HELFER
CHAIRMAN

ON

INTERAGENCY EFFORTS TO REVISE REGULATIONS
IMPLEMENTING THE COMMUNITY REINVESTMENT ACT

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
COMMITTEE ON BANKING AND FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES

MARCH 8 , 1995
ROOM 2128 RAYBURN HOUSE OFFICE BUILDING

129

INTRODUCTION

Madam Chairwoman and Members of the Subcommittee ,

I

appreciate and welcome this opportunity to testify before you
today on the Community Reinvestment Act ( CRA)

and the interagency

proposal to reform implementation of the Act .
Deposit Insurance Corporation ( FDIC)

The Federal

is strongly committed to

carrying out its responsibilities under the CRA .

The regulatory

agencies on this panel have spent the last 21 months in an
extensive effort to reform CRA regulations .

This effort has

included a series of seven public hearings across the country
where hundreds of witnesses addressed some of the same issues and
concerns addressed in your letter of invitation .

While I am

relatively new to the process , I want to commend my colleagues on
this panel for their intensive efforts to make the CRA
regulations less burdensome and more effective .

Federally- insured financial institutions perform a vital
intermediary role in the communities in which they operate :

In

making loans with the money that depositors leave with them, they
fuel economic growth .

The CRA was enacted to encourage banks to

make the oppportunity for economic growth available to

130

2
the " convenience and needs "

criteria that regulators have long

used in weighing charter and branch applications to cover credit .

The record shows that the CRA has improved access to credit
in communities across the country .

The regulations implementing

the CRA have encouraged many institutions to make substantial
commitments to increase lending and services to all income
levels .

I support the goals of the CRA , and I subscribe to efforts
to focus attention on meaningful performance by banks and thrifts
instead of on building unproductive paper trails .

LEGISLATIVE HISTORY

In introducing the Community Reinvestment Act 18 years ago ,
former-Senate Banking Committee Chairman William Proxmire said
that it was : " intended to establish a system of regulatory
incentives to encourage banks and savings institutions to more
effectively meet the credit needs of the localities they are
chartered to serve , consistent with sound lending practices . "
somewhat less formal language at hearings on the legislation
three months later , he said :

" What this bill would do would be

to try to make the banks more sensitive than they have been in
the past to their responsibilities to provide for local community

needs . "

These needs , he had noted when introducing the bill ,

131

3
included " domestic economic development , housing , and community

revitalization . "

The built- in latitude in the CRA -- the legislative
directive to " encourage "

but not " require "

specificity on how to go about it

and the lack of

prompted regulators to hold

public hearings around the country in 1978 for guidance prior to
drafting implementing regulations .

The legislative history is clear, however , that the CRA was
not intended to force banks to make unprofitable loans .

The law

specifically states , " In connection with its examination of a
financial institution , the appropriate Federal financial
supervisory agency shall assess the institutions's record of
meeting the credit needs of its entire community , including lowand moderate - income neighborhoods , consistent with the safe and
sound operation of such institution . "

The banking agencies have found the CRA a difficult law to
administer , in large part because it was intended to change the
attitudes of lenders -- not simply draw distinctions between
legal and illegal behavior

and thereby increase lending for

community development , a broadly defined target .

132

4
OVERVIEW

This testimony addresses the effectiveness of the CRA in
fulfilling its purpose of meeting the credit needs of the
communities in which financial institutions operate .

It

discusses the problems that lenders and community representatives
see with the current system for evaluating CRA compliance , and it
describes how the proposal of the federal banking agencies
addresses these problems .

The testimony also discusses concerns

about credit allocation and addresses how the CRA relates to
equal credit and fair housing laws .

Finally , it comments on

recently introduced legislation affording certain institutions a
" safe harbor "

protection against denial of applications .

As

agreed by the Subcommittee , the agencies are submitting a
separate , joint interagency statement , which discusses in detail
the history of the CRA and the efforts underway to reform the
regulations implementing the CRA .

THE EFFECTIVENESS OF THE CRA

Concern about redlining , in large part , motivated enactment
of the CRA in 1977.

As mentioned earlier , access to credit is

essential to the financial viability of every community ; this
viability is threatened to the extent that artificial limits
based on geographic location , demographic composition , or
personal attributes not relevant to lending risk are imposed by

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lenders .

The CRA is a statute that promotes community

development by stipulating that financial institutions should
serve the credit needs of their entire communities .

It

complements , but is different than federal fair lending laws ,
such as the Fair Housing Act ( FHA)

and the Equal Credit

Opportunity Act ( ECOA) , which specifically prohibit
discrimination by all lenders , not just insured financial
institutions , in a broader range of housing and credit
transactions .

The CRA does not require that institutions make specific
types or amounts of loans and does not allocate loans to
particular persons or geographic areas .

Consequently , there are

no hard data to quantify how much lending and investment is
directly attributable to the CRA .

There is , nevertheless ,

evidence that suggests the CRA has focused attention on lending
opportunities that otherwise might have been overlooked .

Since

the passage of the CRA , FDIC compliance examiners report that
lenders have demonstrated a willingness to offer new lending
products and services that benefit low- income households .
Financial institutions have expanded their marketing , often
advertising through the use of media targeted to specific
underserved neighborhoods and in some cases in languages other
than English .

Many FDIC- supervised institutions identify lending

opportunities by working closely with community groups and state
and local governments , often participating in special programs in

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6

conjunction with these groups .

The FDIC has 24 Community Affairs

Officers in eight regional offices that try to be catalysts for
encouraging this interaction .

The banking industry has acknowledged that CRA has helped to
put billions of dollars into low- and moderate - income
communities , as indicated by the Consumer Bankers Association
( CBA)

in its 1993 testimony at interagency public hearings .

addition , CBA stated that , the CRA has allowed many financial
institutions to recognize that there is a market in the
revitalization of their communities and has led to creative ways
to address the needs of underserved neighborhoods .

Despite positive results , the CRA examination process has
long been the subject of criticism from both the banking industry
and community organizations .

Bankers repeatedly have claimed

that guidance from the agencies is unclear , examination standards
are applied inconsistently , and the current evaluation system is
burdensome and emphasizes paperwork rather than a bank's record
of making loans .

Community organizations have complained that

the current evaluation system is inconsistent and focuses too
much on paperwork rather than performance .

Overall , almost all

of the comments called for change , although there was much
disagreement about the specifics of how change should be

accomplished .

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7
ADDRESSING THE PROBLEMS WITH THE CURRENT SYSTEM

In July , 1993 , these concerns gave rise to a letter from the
President to banking and thrift regulators that called for reform
of CRA regulations .

In response to that letter and to widespread

criticism , the regulators have put substantial effort into
reforming CRA regulations .
of public hearings around the nation in order to understand the
criticisms and concerns of interested parties , including
representatives from financial institutions , the business
community , consumer and community groups , and state and local
government officials .

Following the hearings the banking agencies in December ,
1993 , issued a proposed rule ( the " 1993 proposal " )

that

substituted a more performance -based evaluation system for the
twelve assessment factors in the existing CRA regulations .

Under

the 1993 proposal , the agencies would evaluate an institution
based on the results of actual lending , service , and investment
performance rather than the method or process used to determine
credit needs as is too often the case under the existing

letters .

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8
On October 7 , 1994 , the agencies published a revised

-- 7,100 by the agencies

altogether , 2,059 by the FDIC alone -- are discussed in detail in
the agencies ' joint statement .

I would like to highlight a few

elements of the current proposal .

Like the 1993 proposal , the 1994 proposal would replace the
existing twelve factors for assessing CRA performance , which
focus largely on process and paperwork, with performance
standards based on results .

The proposal would eliminate the

requirement that institutions prepare CRA statements , review them
annually and document them in the minutes of the board of
directors ' meetings .

Further , the agencies would no longer

require institutions to justify the basis for community
delineations or to document efforts in marketing or in
ascertaining community credit needs .

Resources formerly devoted

to such procedural requirements -- time , money , and personnel

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9
would be available for making loans and investments and providing
services in the community .

Both the 1993 and the 1994 proposals contain a streamlined
examination procedure for small institutions .

Both proposals

define a small institution as an independent institution with
total assets of less than $ 250 million or an affiliate of a
holding company with total bank and thrift assets of less than
$ 250 million .

The current proposal would evaluate a small

institution under a streamlined assessment method to answer the
question :

Are its loan-to-deposit ratio and lending record

reasonable relative to the institution's size , financial
condition , and management expertise , and to the credit needs of

its community?

In addition , to provide institutions flexibility in meeting
their CRA obligation , the proposals would give all institutions
the option of being evaluated on the basis of a Strategic Plan
rather than on the lending , service and investment tests , or
under the small institution assessment standards , discussed
above .

An institution's plan would have to specify measurable

goals for helping to meet the credit needs of its service area ,
particularly the needs of low- and moderate- income individuals .
The proposal requires giving the public 30 days to comment on the
plan , lets the institution take account of the comments , and then
provides for agency approval of the completed plan .

Thereafter ,

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10
the institution's CRA evaluation and rating would be based on how
well the institution meets or exceeds the goals it has
established for itself .

The 1994 proposal requires large insured depository

Nearly every financial institutions that commented on the
mandatory collection and reporting , of race and gender data
opposed it .

A limited number of institutions did , however ,

express interest in having the option to collect such data for
their own assessments of compliance with fair lending laws .

Many

institutions commented that fair lending enforcement should be
handled under the ECOA and the FHA and proposed amending
Regulation B , the Federal Reserve's regulation implementing the
ECOA, to allow, but not require , institutions to collect or
report the data .

Regulation B prohibits discrimination on the irrevelant ,
prohibited grounds of sex, race , color , religion , national
origin , marital status , age , receipt of public assistance or the
exercise in good faith of rights granted under the Consumer
Credit Protection Act .

Regulation B also currently prohibits a

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11
creditor from collecting information on the prohibited bases on
any loan , except housing -related loans covered by the statutory
requirements for data collection in the Home Mortgage Disclosure
Act ( HMDA) , or unless otherwise required by statute , regulation ,
or an order issued by a court or a federal or state enforcement
agency .

Comments from community organizations were overwhelmingly in
favor of the collection and reporting of data on loans to small
businesses and small farms owned by women and minorities .

They

contended that the data are necessary to assess adequately an
institution's performance in meeting the credit needs of its
community .

The collection of race and gender data on small business and
farm borrowers could be used to support elements of the fair
lending component of the CRA assessment , one of several factors
used to evaluate whether an institution is helping to meet the
credit needs of its " entire community . "

gender .

Concerns have been

The four agencies are giving serious consideration to

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12
the arguments both for and against collection of this data before
deciding how to deal with the issue in the final regulation .

EXAMINATION AND SUPERVISION

The FDIC is the primary federal supervisor of approximately
7,100 insured financial institutions .

Between 1990 and 1994 , the

FDIC conducted an average of 3,200 examinations per year for
compliance with the CRA .

Last year the FDIC strengthened its examination and
supervision efforts in the compliance area through the creation
of the Division of Compliance and Consumer Affairs .

The new

division consolidates the compliance examination and enforcement
responsibilities previously carried out by the Division of
Supervision with the community outreach , consumer protection and
civil rights oversight functions of the former Office of Consumer
Affairs .

The FDIC has sought to assure that bankers receive

examinations .

Efforts are being made to increase the percentage

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13
of concurrent examinations to reduce the burden on financial
institutions of multiple examinations and to increase the
coordination and consistency among compliance and safety and
soundness examiners .

Going forward , in an effort to ensure consistency among the
regulatory agencies , we will issue joint examination guidelines
on the new CRA regulation , and provide interagency training to
examiners under the auspices of the Federal Financial
Institutions Examination Council .

Further , the FDIC is

CONCERNS ABOUT CREDIT ALLOCATION

The 1993 proposal would have required an assessment of an
institution's market share in low- and moderate - income

The 1994 proposal eliminated this market share component
from the lending test .

The lending test would continue to give

significant weight to the geographic distribution of an

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14
institution's lending within the community it seeks to serve .

It

does not , however , require examiners to use a ratio to measure
market share , nor does it mandate that a financial institution
must make loans to every neighborhood in the area it serves .
Rather , examiners would be required to evaluate a bank's efforts
to provide credit and service to low- and moderate - income members
of its community and to look at geographic dispersion of lending
to determine that low- and moderate - income areas are not
specifically excluded .

THE CRA'S RELATIONSHIP TO FAIR LENDING LAWS

The focus of the CRA is on community development through
access to bank credit and services .

The CRA applies to

federally- insured banks and savings associations .

The fair

lending laws , which include the Equal Credit Opportunity Act
( ECOA) , the Fair Housing Act ( FHA ) , and the Home Mortgage
Disclosure Act ( HMDA) , were enacted to address specific concerns .
The ECOA contains absolute prohibitions against lending
decisions , as outlined above , with respect to any aspect of a
credit transaction .

The FHA prohibits discrimination on similar

grounds as the ECOA in any aspect of the sale or rental of
housing , including the financing of housing .

Both the ECOA and

the FHA apply to all lenders and others involved in the extension

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15
of credit , not just depository institutions .

Denial of credit on

the grounds of a personal trait , which in no way relates to
whether a borrower will be able to repay a loan , is not only
repugnant to fair-minded Americans , it calls into question the
soundness of the credit judgments a lender is making .

The FDIC

takes seriously its responsibility to monitor compliance with
fair lending laws .

In the past three years it has referred 26

cases to the Department of Justice under the ECOA and 97 cases to
the Department of Housing and Urban Development ( HUD )

under FHA .

In the HMDA, the Congress imposed specific data collection
requirements with respect to home purchase and home improvement
loans .

The agencies use this data to assist in determining if

institutions are in compliance with the ECOA and the FHA with
respect to home mortgage loans .

In determining compliance with

the CRA , the HMDA data are used to assist in determining whether
financial institutions are serving the housing credit needs of
their communities .

I view effective enforcement of the fair lending laws as
necessary to assure the creditability and fairness of the banking
system.

When we examine an institution for CRA compliance , we

take into account the institution's record with respect to
illegal discriminatory credit practices , particularly where they
suggest a pattern or practice of illegal conduct .

Wholly apart

from our obligations to refer violations of ECOA and FHA to the

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16
Justice Department and to HUD , respectively , the institution's
record in this area is a key factor considered in our

needs of its community .

SAFE HARBOR PROVISIONS IN RECENTLY INTRODUCED LEGISLATION

The Community Reinvestment Improvement Act of 1995
( H.R. 317 ) , introduced by Representative McCollum, creates an
explicit " safe harbor"

for institutions seeking approval of an

application for a deposit facility .

Under the bill , if the

institution receives a Satisfactory or Outstanding CRA rating
from the appropriate federal financial supervisory agency within
the previous 24 months , an institution's application for a
deposit facility cannot be denied on CRA grounds , unless an
institution's CRA compliance has materially deteriorated since
the evaluation .

The Federal Deposit Insurance Act outlines various statutory
factors that must be considered by the FDIC in deciding whether
to approve an application by a state- chartered insured
institution for a deposit facility .

The statutory factors

include , but are not limited to , the financial history and
condition of the institution , the general character and fitness
of the management of the institution , and the convenience and
needs of the community to be served .

Although an institution's

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17
CRA rating is important in this process , particularly in
assessing the degree to which the institution is serving the
convenience and needs of the community , it is not conclusive .
The effect of H.R. 317 would be to protect institutions from
having applications delayed in the case of public protest .
practical matter , such protests are rare at the FDIC .

By way of

illustration , of 2,749 applications on which the FDIC took action
in 1994 , only eight were protested on CRA grounds .

Our experience has shown that the lending strategies and
performance of institutions can change appreciably , for better or
worse , during a 24 -month period .
rating of " Needs to Improve "

An institution receiving a CRA

may thereafter begin to perform

satisfactorily , while the performance of an institution receiving
a rating of " Satisfactory"

may deteriorate .

We find merit in the concept of providing incentives or
rewards to banks for robustly meeting the credit needs of their
communities .

In light of the current efforts to reform CRA

evaluations , however , it may make more sense to see how the
reforms work before including a safe harbor provision .

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18
CONCLUSION

Over the past 21 months , the federal banking agencies have
worked to reduce regulatory burden on banks and to produce
clearer and more objective standards , both to guide institutions
in their CRA compliance and to assess their performance .

My

participation in the process since October has led me to conclude
that the FDIC and the other agencies represented here today are
making a serious effort to wrestle with all the difficult issues
that CRA reform has presented .

We are working to find a way to accomplish an effective and
meaningful evaluation of an institution's CRA performance without
burdensome paperwork and recordkeeping requirements on the one
hand , and without undue reliance on ratios or formulas on the
other .

We must make very clear that the objective of CRA is for
financial institutions to provide credit and service to customers
throughout their communities , not to build a mountain of
paperwork to justify their efforts .

No interest is served if

bankers spend more time filling out forms or printing brochures
than they spend in making sound loans in their communities .

While our examination standards need to be consistently
applied , we must have the flexibility to assess the performance

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19
of an institution based on its capabilities and the needs of the
community it serves .

Each institution 80 like each community --

is unique .

We need to ensure that everyone understands the laws and
standards under which institutions will be evaluated .

To

accomplish this , we must continue to provide our examiners with
the resources and training they need .

Finally , we regulators must keep in mind we have a dual
responsibility :

148

For Release Upon Delivery
March 8 , 1995
10:00 a.m.

TESTIMONY OF
EUGENE A. LUDWIG
COMPTROLLER OF THE CURRENCY
Before the
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND CONSUMER CREDIT

of the
COMMITTEE ON BANKING AND FINANCIAL SERVICES
of the
U.S. HOUSE OF REPRESENTATIVES

MARCH 8, 1995

Statement required by 12 U.S.C. § 250:
The views expressed herein are those of the Office of the Comptroller of the Currency
and do not necessarily represent the views of the President.

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INTRODUCTION
Madam Chairwoman, and members of the Subcommittee, I welcome this
opportunity to discuss the efforts of the Office of the Comptroller of the Currency ( OCC) -together with the Office of Thrift Supervision ( OTS) , the Federal Deposit Insurance
Corporation ( FDIC) , and the Board of Governors of the Federal Reserve System ( FRB) -to change fundamentally how we evaluate the performance of banks and thrifts under the
Community Reinvestment Act ( CRA) .
The current effort to reform the CRA regulations is an important part of the
Administration's program to reduce needless regulatory burdens and make government
work as it was intended--in this case, the government's goal is to encourage banks to help
meet the legitimate credit needs of their communities . Upon coming to office, the
Administration found that no other set of bank regulations was so universally criticized
by bankers and customers than these regulations , criticized precisely because they created
needless burdens on the one hand and failed to fulfill the purpose of the Act on the other.
Accordingly, at the request of the President, the bank and thrift regulators
embarked on a fundamental reform of these regulations in the Summer of 1993. Our goal
has been to focus the banking and thrift sector's attention on the substance of what the
Act is intended to achieve--supporting the credit needs of our communities , in particular
the needs of low- and moderate-income areas, small businesses , and farms--rather than
process and meaningless paperwork.
Because the CRA program affects considerable numbers of people, institutions , and
resources, and because the regulations , which have been in effect for so long, have been
so thoroughly criticized , the regulators recognized from the beginning of the reform
initiative that it was essential to go through a meticulous process of evaluation that
involved the public at every stage of development. Accordingly, as my statement will
describe, the reform process began with a series of public hearings , seven in all, held
around the country, in large cities and rural towns. Over 250 witnesses participated at
these hearings and provided thousands of pages of testimony. These hearings represented
the most extensive effort on the part of the agencies to solicit public views on community
reinvestment since the CRA was enacted . Following the hearings , the regulators issued
a proposal that received thousands of public comments and then a further refined proposal
that also received thousands of comments .
I am convinced that this open, transparent, and careful process will result,
ultimately, in a regulation that fulfills the statutory purpose without imposing unnecessary
burdens. I am also confident that this result could not have been achieved without such
a meticulous process.

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-2There are several points I want to emphasize about the CRA itself and about the
reform effort.
First, the CRA is about making good loans . I have learned in the course of our
efforts to reform the CRA that there are numerous opportunities to make sound loans in
all parts of a bank's community, including low- and moderate-income areas . As a result
of CRA, banks and thrifts now serve individuals and neighborhoods that previously had
little access to banking services; in so doing, they have found these markets profitable.
Many financial institutions view these communities as places to expand their profit
opportunities , rather than as places to make charitable investments . Richard Rosenberg,
Chairman and Chief Executive Officer of BankAmerica Corporation, in a speech
delivered last December, stated that " a long-term, sustainable community reinvestment
program does benefit the corporation and its shareholders . " He added, " [ b] usinesses must
view the inner city as a potential market, not an object of philanthropy. "
Those
statements are absolutely correct--CRA is not a hand-out for distressed communities, nor
does it encourage banks and thrifts,to make bad loans.
Second, despite its successes, the CRA has fallen short of realizing its full
potential . Financial institutions and community groups alike maintain that the current
regulation places more emphasis on process and documentation than on performance.
They also maintain that existing CRA performance evaluation standards are vague, and,
some argue, inconsistently applied . As a result of this misplaced and unclear focus ,
banks and thrifts may be dedicating significant resources to documenting their activities
rather than helping to meet the needs of their communities . Financial institution
representatives are particularly aware of the costs associated with the existing system.
In September 1993, Mike Patterson, President and Chief Executive Officer of Triangle
Bank and Trust Company in Raleigh, North Carolina, made a statement to that effect:
" we need to be relieved [ from] having to create a paper trail detailing everything we have
done to meet the twelve assessment factors . We see this as counterproductive because
it takes time away from doing the things which could improve our CRA related loan
programs. " In August 1993, Frank L. Law, Senior Vice President of Clear Lake
National Bank in Houston, Texas, expressed a similar view: " [ i] t is this focus on the
process rather than results that has created a documentation burden that costs banks
thousands of dollars a year to ensure compliance with the Act. "
Third, to address the problems associated with the existing CRA assessment
process, the reform effort is aimed at shifting emphasis to an evaluation of the record of
a bank in helping meet the credit needs of the communities from which it takes deposits .
By making CRA evaluations more objective and performance-based, I believe that we
can make the regulation more effective and also significantly reduce regulatory burden
for the vast majority of banks and thrifts. These changes will enhance financial

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-3institutions' ability to make profitable loans in all areas of their communities .
To address the questions raised in your letter of invitation, my testimony today
includes a background section on the history of the CRA and the concerns that led
President Clinton to initiate the reform process . I also discuss the principles guiding the
federal banking regulatory agencies ' reform effort and the main elements of the two
reform proposals that were issued for public comment . Finally, I summarize the major
issues that appeared in the comment letters we received and describe how the 1993 and
1994 reform proposals respond to concerns people raised . The agencies are also
submitting a joint statement, which provides greater detail on the history of the CRA and
the reform initiative as well as other issues raised in your letter of invitation . In
particular, that statement includes an extensive discussion of the main elements of the
1993 and 1994 proposed regulations .
BACKGROUND
The CRA was enacted in 1977 to prevent redlining and to ensure that banks and
thrifts help meet the credit needs of all segments of their communities, including low- and
moderate-income neighborhoods . In many respects, the CRA is an extension and
clarification of the long-standing expectation that banks will serve the convenience and
needs of their communities.
The CRA--and the regulations issued under the CRA--require federal regulators
to assess the record of each bank and thrift in helping to meet the credit needs of all
portions of its community , including low- and moderate-income neighborhoods, and to
take that record into account when considering corporate applications for charters or for
approval of mergers, acquisitions, branch openings, or office relocations .
Relationship with Fair Lending Laws. Your letter of invitation asks whether the CRA
overlaps or conflicts with other existing equal credit and fair lending laws . The CRA
differs fundamentally in purpose and substance from fair lending laws--the Equal Credit
Opportunity Act ( ECOA) and the Fair Housing Act ( FH Act) --though there is some
common ground . The fair lending laws apply to all lenders and seek to prevent
discrimination in credit transactions . Specifically, they prohibit covered entities from
refusing to grant credit based on certain customer characteristics or factors. By contrast,
the CRA seeks to encourage banks and thrifts to help meet the credit needs of their entire
communities , including low- and moderate-income neighborhoods. It does not expressly
proscribe particular actions , as do the fair lending laws, nor does it identify prohibited
grounds upon which a lender may not base credit decisions . However, since the CRA's
inception, CRA examinations have included an assessment of fair lending performance
under the principle that a lender that is discriminating is unlikely to be serving its entire

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-4community satisfactorily. In general, discriminatory lending adversely affects a bank's
record of performance under the CRA, but a poor CRA record does not mean that a
lender has discriminated .
Proposal Directly Addresses Problems with Existing CRA Process . The CRA provides
a framework in which depository institutions and community groups can work together
to promote the availability of credit and other banking services to under-served
communities. Under the impetus of the CRA, many banks and thrifts have opened new
branches , provided expanded services, adopted more flexible loan underwriting standards ,
and increased lending to all segments of society.
Despite these positive results , the current CRA process lacks credibility with the
banking industry and with representatives of the communities that the Act is intended to
benefit. Bankers maintain that the current implementation of the CRA results in excessive
burden relative to the benefits that the system produces . At the same time, community
and other groups maintain that many communities are not adequately served because the
CRA evaluation process does not focus enough on actual lending, investments , and
services provided .
It was against this backdrop of broad dissatisfaction with the current approach to
CRA that President Clinton, in July of 1993 , requested that the federal regulators of
banks and thrifts make fundamental changes in the way we administer the CRA. The
President established several broad principles to guide the agencies' reform efforts . He
called for CRA assessment standards that are based on measurable performance, less
burdensome CRA examinations that are more consistent and evenhanded, the elimination
of unnecessary documentation requirements, better public access to information on CRA
evaluations , and tougher actions against institutions with persistently poor CRA
performance .
To ensure that CRA reform addressed those goals, the federal banking agencies
held a series of public hearings in August and September of 1993 at seven locations
around the country. The heads or the designees of the four agencies attended the
hearings; I attended six of the seven hearings myself. As a result, my colleagues and I
developed a great appreciation for the burden the current regulation places on banks and
thrifts , the problems facing underserved low- and moderate-income areas in obtaining
credit, innovative approaches some banks and thrifts have taken to serve their
communities , and the complexity of the issues involved in CRA reform .
The principal goals of our reform effort are to improve the current CRA evaluation
process and minimize regulatory burden on the banking industry by devising a rule that
is performance-based and objective, and transparent. Time and time again, through their

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-5comment letters , both industry and community groups have made clear that they believe
a new, performance-based CRA evaluation system should be based on objective measures
of clearly defined parameters . I agree . A regulation that focusses on subjective or vague
assessment factors--as the existing regulation does--creates at least the perception of
inconsistent evaluations across institutions and leads to wide differences in opinion
between institutions and community groups regarding performance .
MAJOR ASPECTS OF 1993 AND 1994 REFORM PROPOSALS
Following the seven public hearings held in August and September of 1993, the
agencies worked together to craft a proposed regulation, which was published in the
Federal Register on December 21 , 1993. The OCC received 1813 letters commenting
on the proposed regulation. Commenters included representatives of banks and thrifts ,
community groups, Congress, state, and local governments . After careful review and
consideration of the comments received on the first proposal , the agencies published a
second proposed rule in the Federal Register on October 7 , 1994. The OCC received
2219 letters commenting on the second proposal .
Performance Tests . Both proposals would replace the twelve assessment factors in the
existing regulation with three performance-based tests : lending, investment, and service .
The 1994 proposal retained the principles and structure of the 1993 proposal , but made
changes to the details in response to many of the concerns raised in the comments . Most
commenters supported the agencies ' goal of developing more objective , performancebased assessment standards that minimize burden while stimulating improved
performance . Although many interested parties at the public hearings had advocated the
use of objective criteria in evaluating CRA performance , upon reviewing the 1993
proposal, many commenters felt it relied too heavily on the mechanical application of
numerical ratios and, as a result , would not foster fair and appropriate CRA assessments .
In response to these concerns regarding the 1993 proposal , the agencies, in their
1994 proposal, broadened the scope of the lending, investment, and service tests by
including a wider range of quantitative and qualitative criteria . In particular, under the
1994 proposal , the comparison of an institution's market share in low- and moderateincome areas with its market share in other areas would not have the same central weight
in the lending test that many commenters believed it had in the 1993 proposal . The
lending test would continue to give weight to the geographic distribution of an
institution's home mortgage, small business and small farm, and, at the institution's
option, consumer loans , including the number and amount of loans in low- and moderateincome geographies . However, the lending test would also consider the distribution of
loans to borrowers of different incomes and businesses of different sizes, the nature and
extent of community development loans , and the institution's use of flexible or innovative

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-6lending practices . Of course , assessments of geographic distribution would continue to
be made in light of the performance of other similarly situated institutions . However , the
regulation would not mandate that a market share analysis be conducted . Such analysis
could be used by examiners to assist in the geographic distribution assessment , but along
with other analytical tools .
Similarly, in the service test, the percentage of branches accessible to low- and
moderate-income geographies would not play as determinative a role as it appeared that
it would play in the 1993 proposal . Branch location would continue to be an important
element in assessing an institution's performance, but would not be the critical
determinant. Factors such as the availability of other service delivery systems and the
range and responsiveness of services provided would receive more prominence than in
the 1993 proposal.
Options for Reducing Burden. The 1994 proposal would provide special evaluation
options for a certain class of institutions . For instance , it would allow smaller banks and
thrifts to be evaluated under a streamlined assessment method that would not require
reporting of additional lending data. The streamlined method would apply unless an
institution affirmatively requested another assessment method . This method would focus
on the bank's loan-to-deposit ratio , degree of local lending, record of lending to
borrowers and geographies of different income, and record of responding to complaints .
The bank's fair lending record would be taken into account in assigning a final rating.
Also, every institution could choose to be evaluated pursuant to a pre-approved
strategic plan, although this option would not relieve an institution from any reporting
obligations that it otherwise would have. These special evaluation methods would in no
way exempt any institution from the CRA rules.
Improved Examiner Training . Revising the CRA's implementing regulation is only part
of our effort to improve the CRA evaluation process . In an effort to promote interagency consistency and better implementation of CRA policy, the agencies are evaluating
different ways to improve examiner training and to increase interagency coordination in
the implementation of the CRA. In conjunction with a new rule , the agencies would, of
course, issue revamped joint examination procedures , including guidance regarding the
public performance evaluation standards, the frequency of examinations, and the
assignment of ratings . We would also conduct extensive examiner training to ensure the
new rule is well understood and evenly applied.
In moving to a revised regulation with emphasis on performance, much of the
burden associated with the existing rule can be dramatically reduced . For example, under
the proposed rule, examiners would no longer be assessing the involvement of the

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-7institution's board of directors or its efforts to ascertain credit needs , market its products,
and delineate its community. Additionally , the institution would no longer have to
document for its examiners internal or external meetings, advertising programs , or the
methods used to delineate its community. Because assessment standards would be more
straightforward, extra documentation arising out of uncertainty about what will be of
interest to the CRA examiners should be virtually eliminated . As proposed, all
institutions would realize these benefits. However, there would be additional data
collection and reporting for approximately the largest 20 percent of banks and thrifts-those with more than $ 250 million in assets . Those data are the necessary concomitant
requirements of a more performance-oriented , fact-based assessment system .
Race and Gender Data Collection . Your letter of invitation asks how the proposed race
and gender reporting requirements on small business and agriculture loans would affect
depository institutions . The requirement that small business and small farm loan data
reported to the agencies include information on the race and gender of small business and
farm borrowers constitutes the one significant new data reporting requirement contained
in the 1994 proposal . These data would be used to facilitate fair lending examinations ,
which, as I previously mentioned , have always been conducted in conjunction with CRA
examinations and whose results can influence the overall CRA rating. Currently, fair
lending assessments show only a partial picture of fair lending compliance, focusing on
home mortgage lending, because that is the only type of lending for which there is
systematic data ( Home Mortgage Disclosure Act data) that can be used to determine
whether applicants with similar credit profiles received comparable treatment . As a
result, it is extremely difficult currently, if not impossible, for either regulators or lenders
to assess fair lending in the small business loan area, that is, to compare loan files to
determine whether people of different races or gender are being treated equally, since
lenders cannot collect the data that reveal which are minority or women-owned businesses
and which are not. In addition to enabling regulators to make a more complete
assessment of an institution's fair lending performance, collecting these additional data
would help banks and thrifts monitor their own fair lending performance.
CRA Is Not Credit Allocation. Your letter of invitation asks whether the revised rule
would result in the allocation of credit. Although we have proposed using more objective
measures to evaluate an institution's performance , the proposal would not lead to the
establishment of implicit quotas or other mandatory credit allocation techniques within a
given market. The 1993 proposal was criticized by some commenters who felt that it
could lead to the allocation of credit; the 1994 proposal eliminated the features that gave
rise to those concerns , such as the market share screen in the lending test. The agencies
also eliminated a provision in the 1993 proposal that a loan-to-deposit ratio of 60 percent
or more would presumptively be considered satisfactory. Although it was never intended
to require small institutions to achieve a 60 percent loan-to-deposit ratio, many

88-882 - 95 - 6

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-8commenters interpreted the proposal that way. To avoid the apparent confusion, the 1994
proposal eliminated reference to any particular loan-to-deposit ratio. Evaluation of the
adequacy of an institution's loan-to-deposit ratio would consider the institution's size,
financial condition, and the credit needs of the institution's service area and would take
into account, as appropriate, other lending-related activities , such as originations for sale
on the secondary market and community development lending and investment.
In developing a final rule, we will not set forth a proposal that would require any
institution, in any community, to make any particular loan, lend to any particular
borrower or class of borrowers, or engage in any lending inconsistent with safe and sound
banking operations . We will not adopt a regulation that allocates credit.
Safe Harbor Legislation . The Subcommittee's letter of invitation asks for our views on
recently introduced legislation that would give qualified small institutions and those with
ratings of at least " Satisfactory " a " safe harbor, " exempting them from protests of their
applications for expansion based on CRA concerns .
In my view, the key to the safe harbor debate is establishing an evaluation system
that is viewed as not merely less burdensome, but fair and objective . Under such a
system--which we are still striving to achieve in the reform effort--a high rating will have
greater weight because it has integrity. Absent such an evaluation system, a safe harbor
will be widely viewed as simply a disguised exemption that undermines the Act.
I do not believe it makes sense to consider a safe harbor until there is a meaningful
evaluation system in place. At this point, the federal banking agencies must focus on
concluding the rulemaking process and implementing the new CRA rule . Financial
institutions and regulatory agencies need an opportunity to adjust to the new rule--and
operate under it for some time--before we can reasonably consider legislation to establish
a safe harbor.
CONCLUSIONS
Over the past year and a half, the agencies have gone to great lengths to gather as
much information as possible on ways to improve the CRA regulation. As I described
earlier, the agencies held public hearings at different locations around the country where
we heard the testimony of hundreds of witnesses who offered their views on the CRA--its
good points and its shortcomings . Additionally, in response to our two reform proposals,
the agencies received many thousands of comment letters from community groups, the
industry, and other members of the public. Through this effort, I have developed a
thorough understanding of both the benefits that result from implementing the CRA and
the principal problems with the existing regulation. I am encouraged by the widespread

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-9support for the goals and direction of the reform effort, and look forward to delivering
a final rule that addresses the shortcomings of the existing rule.
Prompt completion of a new rule would end the atmosphere of uncertainty under
which the industry, community groups, and examiners are operating currently . Once a
new rule is in place, regulated institutions can devote their resources back to the business
of delivering financial services to their communities . Prompt completion of a new rule
would also enable the agencies to turn our attention to other projects , such as working
to conduct examinations as efficiently as possible, minimizing unnecessary compliance
burden, and ensuring consistency and reliability in the rating process . These tasks have
been identified by all involved in the CRA process--industry, community groups , local
governments, and federal banking regulators--as critical to achieving a fairer, more
effective, and less burdensome CRA .
Although I cannot predict at this point exactly what the provisions ofthe final rule
will be--that will be determined by the joint rulemaking process, which I expect will be
completed very soon--I must underscore that our efforts will not produce a panacea.
Reform of CRA regulations and examination procedures cannot solve all the problems of
distressed rural and urban communities, nor answer all the complaints of bankers about
regulatory burden. But I am confident that at the end of the process we can have a CRA
assessment mechanism that is less burdensome for more institutions yet yields better
results for the local communities the law is intended to benefit.

158

T

OFFI

CE

THRIF

PERVISION

EMBARGOED
until March 8, 10 am

1989

Testimony
of
Jonathan L. Fiechter, Acting Director
Office of Thrift Supervision

concerning the
Community Reinvestment Act

before the
Subcommittee on Financial Institutions and Consumer Credit

United States House of Representatives

March 8, 1995

Office of Thrift Supervision
Department ofthe Treasury

202-906-6288

159

TESTIMONY OF JONATHAN L. FIECHTER
ACTING DIRECTOR, OFFICE OF THRIFT SUPERVISION
U.S. DEPARTMENT OF THE TREASURY
Before the
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND
CONSUMER CREDIT

March 8, 1995

Madam Chairwoman and members of the Subcommittee, I welcome your invitation
to appear at today's hearing to discuss the Community Reinvestment Act ( " CRA" ) . We take
meeting the objectives of CRA seriously and consider the CRA to be an important component
of our overall compliance process . The general objectives of the CRA are broad but
sufficiently understood. Translating those objectives into clear and unambiguous standards,
however, to be used as the basis for judging the community reinvestment performance of
thousands of differently situated insured banks and thrifts, is challenging.
As you know, the agencies have been diligently working to reform the CRA
regulations since July 1993. We have put a tremendous amount of time and effort into
revising the basis on which we evaluate an institution's performance in helping to meet the
credit needs of its community. Given the broad and diverse array of interests that have a
stake in the administration of the Act, we anticipated that we would face some difficult
problems in connection with this effort. While I believe we were all surprised at how
complex the undertaking has become, I remain optimistic that we can address the needs of
the industry and the public through the rule-making process.
The agencies have submitted a joint statement outlining the history of the CRA and
discussing the regulations proposed in response to President Clinton's CRA reform initiative.
I would like to use my time this morning to respond to the questions you have presented and
highlight other relevant issues associated with our reform efforts.
The views I express today are those of the Office of Thrift Supervision ( " OTS" ) and
not necessarily those of the Administration.

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2
Fulfilling the Purpose of CRA
Your first question asks whether CRA is fulfilling its original purpose of ensuring that
insured depository institutions are meeting the credit needs of their neighborhoods, and if
not, what steps should be taken to improve compliance. I believe that insured depository
institutions are making significant efforts to help meet the credit needs of the local
communities where they are chartered to do business. For example, a review of Home
Mortgage Disclosure Act ( " HMDA" ) data over the past several years shows that the banking
and thrift industries have significantly increased their share of mortgage loans in low- and
moderate-income areas despite an overall reduction in their share of the mortgage market. It
may be impossible to determine how much of the reinvestment in low and moderate income
communities is due to the CRA, and how much is due to the realization by banks and thrifts
that community development and affordable housing lending can be a profitable market
niche.
I do believe that the CRA has acted as a catalyst to encourage banks and thrifts to
devise new products to serve this niche and may have been the impetus for a major share of
the community reinvestment that has occurred over the past several years.
When evaluating the success of CRA on the basis of whether community credit needs
are being satisfied, however, it must be remembered that the bank and thrift industries
represent a much smaller segment of today's financial system than they did when CRA was
enacted in 1977. Since that time, banks and thrifts have lost a significant amount of the
residential loan market to mortgage banks, credit unions, insurance companies, and other
providers of credit.
Moreover, the nature and depth of the nation's community development problems go
beyond the abilities of banks and thrifts alone to solve. The best way to address the credit
needs of communities is to encourage communities, financial institutions, and the government
to form partnerships to energize economic growth and revitalization by making credit and
financial opportunities available to all people in all communities throughout the nation. No
one party can or should be expected to do this alone. It is only through working together
that meaningful community development will take place.

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3
The OTS encourages thrifts to participate in efforts to promote partnerships. For
example, we have participated with the other federal banking agencies and local community
groups in taking bank and thrift officials on bus tours through inner-city Los Angeles and
Oakland to identify lending opportunities. Tours of other cities are also planned. In
addition, the OTS, through its community liaison function, has sponsored a series of
" Community Speaks " conferences where community groups present information on their
goals, operations, and needs to local thrift officials . Efforts like these to promote
partnerships -- where the government is working hand-in-hand with local community groups
and lenders -- can stimulate economic growth and revitalization.
In fact, CRA is challenging thrifts to be more creative and to form alliances with
others to tackle their communities' problems. We are seeing that many collaborative efforts
at the local level among thrifts, banks, nonprofits, government, and community residents are
producing tangible results. These partnerships -- which include community development
corporations , consortia, or NeighborWorks groups , just to name a few -- are a way of
amassing the resources necessary to address some of this nation's more difficult community
reinvestment challenges. This is a very positive trend and one that I hope will continue on a
much larger scale.
Relationship Between CRA and the Fair Lending Laws
Your second question , which is an excellent and timely one, asks about the
relationship between CRA and the fair lending laws. Recent events have highlighted the
need to understand the similarities and differences between the CRA and the fair lending
laws. Both address important issues of credit access and opportunity, but they involve
different statutes and different principles.
The most significant fair lending laws are the Equal Credit Opportunity Act
( " ECOA" ) and the Fair Housing Act. These statutes make it unlawful for any lender to
discriminate in the granting of credit on a prohibited basis, such as race, sex, religion,
national origin, or marital status. The ECOA applies to any credit transaction, while the Fair
Housing Act covers residential real estate-related activities. These laws provide for both
civil and administrative enforcement. For example, the OTS, as well as the other banking
regulators, can use their formal enforcement authority to issue cease-and-desist orders or
impose penalties against insured financial institutions that fail to comply with these statutes.

162

The CRA's emphasis is different. It has a geographic focus and applies only to
federally insured banks and thrifts. The CRA responds to Congressional findings that
insured depository institutions have an affirmative obligation to help meet the credit needs of
their local communities, including the low- and moderate-income neighborhoods within those
communities, consistent with safe and sound operations. The Act requires the banking
agencies to use their authority to encourage insured depository institutions to meet that
obligation. The agencies, in implementing the CRA, evaluate the records of banks and
thrifts in helping to meet the credit needs of their communities. The enforcement scheme for
the CRA is directly tied to the applications process. In other words, the banking regulators
can deny certain corporate applications for expansion if the applicant's CRA performance
record indicates that its institution is not adequately making its credit services available to its
community.
The fair lending laws are incorporated into the implementation of the CRA. Evidence
of discrimination and other credit practices that are prohibited by the fair lending laws are
considered when formulating an institution's CRA rating. This is because an institution that
is violating the fair lending laws cannot be considered to be helping to meet the credit needs
of its entire community in an acceptable manner.
The CRA and the fair lending laws need not conflict nor overlap. Taken together,
they protect and support access to credit without compromising the safe and sound operation
of insured depository institutions.

Addressing Today's CRA Problems with Better Regulation
You also ask whether the final regulation will address problems with the existing
regulation that are often cited by lenders. In the public hearings we held in the summer of
1993, as well as in both public comment periods following our regulatory proposals , we
heard many complaints about the existing CRA regulation. As your question points out,
three of the most prevalent were the vagueness, subjectivity, and paperwork burden
associated with the existing regulation.
The OTS has been guided by three principles during the rule-making process to
ensure that the final CRA regulation produces a better evaluation system than exists today.

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5
First, the final regulation must both evaluate performance with objective data and
allow for subjective adjustments based on differences in financial institutions and the
communities they serve. CRA will not work with a " cookie-cutter" approach. It is naive for
us to assume that institutions of different sizes and business orientations serving different
local areas with vastly different demographics can be, or should be, expected to fulfill their
CRA responsibilities in the exact same way. The final regulation should encourage creativity
and recognize that there are different ways for institutions to meet local credit needs.
Similarly, examiners charged with the responsibility for developing rational,
supportable, public CRA performance evaluations and ratings must not be held to a rigid,
unyielding, and unrealistic set of bureaucratic rules that frustrate their ability to go about
their jobs. A reasonable degree of flexibility in interpreting objective data, for example, to
construct fair CRA assessments must be paramount.
Second, the final regulation must improve the ability of the industry and the public to
evaluate CRA performance on their own. There should be few surprises as a consequence of
compliance exams. The existing regulation -- which may be overly subjective -- has created
the perception of inconsistent evaluations of similarly situated institutions, and wide
differences in perception among institutions and community groups over performance.
In many ways, this CRA rule-making process has been evolutionary. In response to
the large volume of public criticism we heard about subjective application of the existing
regulation, our first proposal was highly objective in nature. As we discovered in the
ensuing comment period, most industry commenters interpreted that proposal to be too
objective and rigid. The second proposal tried to achieve a better balance of objective
criteria and regulatory flexibility in order to eliminate much of the subjectivity and vagueness
that is present in the existing regulation . It is my hope that the final regulation will strike
the appropriate balance between subjective and objective evaluation factors and will make it
easier for the industry and the public to predict performance levels while avoiding the pitfalls
of a one-shoe-fits-all approach. This will remain our goal in writing the final rule.

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6
Third, the final regulation must combine these first two principles in a clear manner.
In our effort to address myriad conflicting objectives, we may have unwittingly added a
degree of complexity that obscured our message. Clarity in presentation of the regulation
eliminates guesswork and provides the industry, our examiners, and the public with an
understood set of ground rules.
Another comment we heard is that the focus of evaluations should be on performance
rather than documentation of the CRA process. We have been mindful of this comment
throughout this rule-writing exercise. Both proposals eliminate much of the paperwork
burden associated with the existing regulation . For example, institutions would no longer be
required to prepare CRA statements and review them annually, document CRA matters in
minutes of their boards of directors meetings, or document efforts in marketing and
ascertaining the credit needs of their communities. It is important to recognize, however,
that any CRA evaluation system that contains objective performance elements for lending will
necessitate some collection and reporting of data. The agencies are trying to develop a
balanced collection and reporting system that minimizes burden, provides us with necessary
information to develop sound CRA assessments, and offers the public a reasonable basis on
which to measure CRA performance.
Proposed Race and Gender Reporting Requirements
Your invitation letter asks for our comments on the proposed collection of race and
gender data. Under the most recent proposal, the agencies sought comment on whether
independent institutions with assets of $ 250 million or more, and institutions that are
members of holding companies with $ 250 million or more in bank and thrift assets, should
request that a small business or small farm borrower indicate the percentage of the business
or farm owned by men and women, as well as the percentages owned by members of
different ethnic and racial categories. The loan registers filed with the agencies would
indicate whether an individual loan was to a business or farm that was more than 50 percent
women-owned or more than 50 percent minority-owned . In its public file, the institution
would disclose the number and amount of loans to minority- and women-owned small
businesses and farms.

The collection of race and gender data was the most frequently addressed provision of
the October 1994 proposal . The collection of the data was strongly advocated by community

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7
groups and some members of Congress. These commenters were particularly interested in
the collection of the data to enhance the ability to detect discriminatory treatment of
applicants and to support the fair lending component of the CRA assessment. In addition ,
some institutions indicated that the data would be a useful resource in self-assessing their
lending practices and ensuring the nondiscriminatory treatment of loan applicants. The vast
majority of banks and thrifts, however, opposed the provision due to the attendant collection
costs.

The primary purpose of collecting race and gender data is for fair lending analysis. It
is very difficult to determine whether a company's activities and policies are having an illegal
discriminatory effect unless one can compare the treatment extended to one class of
borrowers with that of another. In fact, this data would be a very useful tool for any
institution to collect to ensure that its lending practices are not discriminatory. But today,
with the exception of the residential mortgage loans, institutions are prohibited by federal
regulation ( Regulation B ( 12 CFR § 202) ) from collecting such information.
I believe that the original intent behind this prohibition needs to be revisited . The
general proscription exists to help assure that creditors do not take improper factors into
account in their lending decisions. Under Regulation B, when a creditor is considering a
nonresidential loan, the creditor may not request information on or consider the race or
gender of the applicant. The intent of the regulation is to remove race or gender as a factor
in whether or not to extend credit.

The experience with the HMDA data and analysis, however, suggests that the benefits
of having race and gender data available for analysis may outweigh the risks of such data
being misused. And the ability to identify and address illegal credit discrimination should
not be limited to those institutions covered by the CRA. Consideration might also be given
to removing the prohibition against the collection of race and gender data for any creditor.
Another issue is how any information collected should be used and to what extent it
should be reported to the government and the public. There is a always a risk that the data
will be subject to improper analysis and misinterpretation. Our experience with HMDA data
and the popular misperceptions engendered by that data supports the view of the importance
that the data be properly analyzed . We need to be careful not to discourage financial
institutions from pursuing aggressive outreach and lending campaigns, which frequently

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8
attract an increased number of unqualified applicants whose eventual denials cause skewed
lending patterns. It would be unfortunate if HMDA-like disclosure of these disparities and
the resulting public scrutiny of them caused some institutions to abandon innovative strategies
for marketing to small businesses.

Avoiding Credit Allocation
You ask whether the final regulation will result in credit allocation. A credit
allocation scheme was not the intent of the drafters of the CRA statute, nor is it the intent of
any of the federal banking agencies in our rule-writing efforts. We are working to develop a
final regulation that focuses on actual performance. The use of criteria that take into
consideration factors unique to an individual institution's circumstances will ensure that there
is no one formula for achieving a certain rating.
Public Comments

The Subcommittee expressed an interest in the types of comments we have received
and any efforts we have taken to address concerns. We have not yet reached agreement on
all of the specifics of a final regulation at this time. Generally, the commenters appeared to
prefer the second proposal over the existing regulation. As provided in more detail in our
joint statement, the second proposal would broaden the scope of the lending, investment, and
service tests by including a wider range of quantitative and qualitative criteria. Most
commenters favored the better balance of objective and subjective measures in the second
proposal.
In addition to reviewing comments received since the second proposal was published,
OTS also field-tested the proposed rule through examinations of selected thrift institutions of
various sizes and business strategies to get a better sense of how the second proposal might
be applied in practice.
In the process of implementing any regulation, unforeseen circumstances may arise.
Through these test examinations, we identified several potential implementation problems and
will take steps to address them. For instance, we learned that the investment test described.
in the second proposal would have a negative effect on the overall ratings of thrifts. During
the test examinations, we found that thrifts may be unfairly disadvantaged because of the

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9
limited investment authority provided federal savings associations under the Home Owners'
Loan Act. We are exploring ways to incorporate into our CRA evaluation the limited
investment authority of thrifts.
It also became clear to us that we need to revisit a requirement in the proposal that
placed the primary burden of ascertaining community credit needs on the examiners rather
than the industry. Clearly, institutions are in a better position to ascertain the credit needs of
their communities. Finally, we uncovered various anomalies with the proposed definition of
" service area" that might serve to disadvantage low- and moderate-income neighborhoods in
specific cases.
Safe Harbors
One comment that we received from institutions was the desirability to grant
institutions with a favorable CRA rating a safe harbor from protests on applications. As
noted in our invitation letter, the Congress is considering various regulatory relief measures
that include specific provisions that address aspects of the administration and coverage of the
CRA. For example, H.R. 317 , sponsored by Vice-Chairman McCollum, would provide
institutions with CRA ratings of " satisfactory" or better a safe harbor from having an
application denied on CRA grounds. The bill would permit agencies to remove the safe
harbor if an institution's compliance with the CRA had " materially deteriorated. "
Conceptually, I support the idea of providing meaningful incentives for institutions to
achieve favorable CRA ratings. A safe harbor, as described in your question, is one
frequently cited example of such an incentive. I would like to offer two observations about
this particular safe harbor provision.
First, I am concerned that a safe harbor that includes institutions with satisfactory
CRA ratings may not sufficiently encourage institutions to be aggressive and innovative in
designing programs to serve their community. Pegging the applicability of the incentive at
the satisfactory level may not encourage institutions to aspire to an outstanding level of
performance. To truly encourage outstanding behavior from institutions, the Subcommittee
might want to consider limiting the applicability of the safe harbor to institutions that receive
an outstanding CRA rating.

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10
Second, during the public hearings we held as part of this reform effort, the safe
harbor concept was raised repeatedly by industry representatives and consistently criticized
by community group representatives. The general expression of criticism was grounded in
widespread public belief that the CRA ratings assigned to institutions by the regulators do not
accurately reflect performance. It, therefore, may make sense to revisit the issue of safe
harbors after we have gained experience under the new performance-driven CRA assessment
structure and have achieved a greater comfort level with assigned CRA ratings.
Conclusions
In conclusion, the final product of this rule-making effort should emphasize
performance in lending, investments, and services and provide for the correct balance
between qualitative and quantitative criteria. The final regulation must provide the public
and the industry with a more credible and accurate vehicle for evaluating whether the
purpose of the CRA -- to ensure that insured depository institutions are helping to meet the
credit needs of their communities -- is being satisfied.
Several of your questions concern the need for CRA. I believe that CRA has acted as
a catalyst in encouraging institutions to seek ways to alleviate the credit needs of poorer
communities. It is equally clear, however, that CRA is not a panacea for solving the
problems of this nation's communities. The better method for satisfying the credit needs of
disadvantaged and underserved communities is to encourage community organizations,
financial institutions, and the government to form partnerships and to work together. As
mentioned earlier, only by such partnerships will meaningful community development occur.
Again, I would like to thank you, Madam Chairwoman, for your invitation and your
interest in our reform efforts. I will be pleased to respond to any questions you may have.
##########

169

ORAL STATEMENT OF JONATHAN L. FIECHTER
ACTING DIRECTOR, OFFICE OF THRIFT SUPERVISION
U.S. DEPARTMENT OF THE TREASURY
Before the
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND
CONSUMER CREDIT

March 8, 1995

Madam Chairwoman and members of the Subcommittee , I
appreciate your invitation to appear at today's hearing . My written
testimony seeks to respond to your questions . In my remarks this
morning, I would like to discuss one of the fundamental concerns of
our CRA reform initiative : will the reform effort produce a regulation
that addresses the problems with the existing regulation?

As you know, the four banking agencies have been striving to
develop a revised CRA rule since the summer of 1993. In the public
hearings we held, as well as in the two public comment periods , we
heard many complaints about the existing CRA regulation and the
manner in which it is administered . As your invitation letter points
out , three of the most prevalent complaints were vagueness ,
subjectivity , and paperwork burden .

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2
The objectives of the CRA, while broad in nature , are generally
understandable. Translating those objectives into clear and

The OTS has been guided by three principles during the rulemaking process in an effort to help ensure that the final CRA
regulation we produce will provide a better evaluation system than
exists today .

A benefit of this country is the variety of different financial
institutions , each responding to local economic conditions . These
institutions can not be expected to fulfill their CRA responsibilities in
exactly the same way. An institution in a small agricultural town
faces a very different set of credit needs compared to an institution
operating in the suburb of a large metropolitan area . The final
regulation must both recognize these differences as well as encourage
innovativeness and creativity. It must recognize that there are
different ways for institutions to help meet local credit needs .

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3
Similarly, examiners charged with the responsibility for
developing public CRA performance evaluations and ratings should
not be held to a rigid and unrealistic set of regulatory provisions that
frustrate their ability to go about their job . Instead , we must retain
for our examiners a reasonable degree of flexibility in interpreting
objective data .

Our second principle is that the final regulation should improve
the ability of the industry and the public to evaluate CRA performance
on their own. There should be few surprises as a consequence of
compliance exams . The existing regulation -- which may be overly
subjective -- created the perception of inconsistent evaluations of
similarly-situated institutions , and wide differences in perception
among institutions and community groups over performance .

This CRA rule-making process has been truly evolutionary .

Our

first proposal was highly objective in nature , in response to the large
volume of public criticism we received over the subjective application
of the existing regulation.

But the solution to this problem , which we

described in our December 93 proposal , was criticized for being too
objective and rigid .

172

Our more recent proposal sought to achieve a better balance of
objective criteria and regulatory flexibility. It is my hope that the
final regulation will strike the appropriate balance between subjective
and objective evaluation factors . We must make it easier for the
industry and the public to predict performance levels while avoiding
the pitfalls of a one-shoe-fits-all approach.

Our third principle is that the final regulation should be
presented in a clear manner. In our initial effort to address a myriad
of conflicting objectives , we may have unwittingly added a degree of
complexity that obscured our message .

Clarity in presentation of the

regulation eliminates guesswork and provides the industry, our
examiners , and the public with an understood set of ground-rules .

The most common complaint with the existing regulation is that
it focuses too heavily on documentation of efforts and too little on
actual performance . The result was that we may have rewarded
institutions that maintained extensively documented files and loose-leaf
notebooks , while not giving sufficient credit to institutions with
creative and successful lending programs.

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5
We have been mindful of this throughout our rule-writing
process . Both proposals eliminate much of the paperwork burden
associated with the existing regulation . For example , institutions
would no longer be required to prepare CRA statements and review
them annually , document CRA matters in minutes of their boards of
directors meetings , or document efforts in marketing and ascertaining
the credit needs of their communities .

It is important to recognize , however , that any CRA evaluation
system that contains objective performance elements for lending will
necessitate some collection of data . The agencies are trying to develop
a balanced collection and reporting system that minimizes burden ,
provides us with necessary information to develop sound CRA
assessments , and offers the public a reasonable basis on which to
measure CRA performance .

To help ensure that the final regulation addresses the problems in
the existing regulation , the OTS has conducted test examinations of
selected thrift institutions . These test exams were conducted on thrifts
of various sizes and business strategies to obtain a better sense of how
the second proposal might be applied in practice .

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6
Through these test exams , we identified several potential
implementation problems and are taking steps to address them. For
example , we discovered that thrifts may be unfairly disadvantaged
under the investment test because of the limited investment authority
provided federal savings associations under the Home Owners ' Loan
Act.

Questions were also raised about the proposal to shift the

While I believe we can develop a regulation that will produce a
performance -based system , any final regulation will not be , and
should not be, viewed as a panacea for solving the problems of the
nation's communities . I believe CRA has served as a catalyst by
encouraging institutions to pursue methods for alleviating the credit
needs of poorer communities .

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7
The nature and depth of the nation's community development
problems , however, go beyond the abilities of banks and thrifts to
solve on their own. A better way to address the credit needs of
communities is to encourage partnerships of communities , financial
institutions , and the government. No one party -- or industry -- can
energize economic growth and the revitalization of our neighborhoods
on their own.

Our rules must support such cooperative efforts .

Again, Madam Chairwoman, I would like to thank your for your
invitation and your interest in our reform efforts . I will be pleased to
respond to any questions you may have .

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For release on delivery
10:00 am EST

Statement by
Lawrence B. Lindsey
Member , Board of Governors of the Federal Reserve System
before the
Subcommittee on Financial Institutions and Consumer Credit
of the
Committee on Banking and Financial Services
U.S. House of Representatives

March 8 , 1995

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Madam Chairwoman , I appreciate the opportunity to

First , let me say that the Federal Reserve Board fully
supports this effort to reform our CRA regulations .

It is , as a

rule , advisable to take a close look at regulations periodically
and CRA was overdue for such a look , even absent the President's
prompting of July 15 , 1993.

During the past 20 months , I have

been the Board's representative in the interagency process .

This

has involved not only formal meetings and hearings , but also
informal trips around the country to see how CRA is actually
working in practice .

Our efforts to date have been an exhaustive

and at times exhausting -- process of finding an appropriate
balance among the sometimes conflicting objectives of CRA .
It is no secret that CRA reform has involved a longer
process than any of us wanted .

But I believe that the issue

before us is too important to rush .

The nature of the law itself

and the resulting plethora of tough issues that confront the
agencies have posed many challenges -- some foreseen , others
not .

I believe that the time we have spent on this project will ,

in the long run , prove to be time well spent .

We do no one any

favors if we institute a set of regulations which are unworkable

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in the field or produce bizarre anomalies as they are applied to
the many and diverse markets with which we are dealing .

Further ,

we will not be aiding the process of extending credit in
traditionally underserved markets if we adopt regulations that
cannot stand the test of time and do not have broad support and
acceptance by those involved in the process .

In particular , we

CRA Difficulties
Some of the central issues with which the agencies are
now dealing , in fact , have been well known from the beginning .
In part , that's because those issues derive from the unusual
content and structure of the law itself , and have plagued the CRA
implementation process in varying degrees ever since the act was
passed in 1977.

There are , in short , inherent , unavoidable

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contradictions in any scheme to administer CRA .

In the absence of very much legislative direction , the

agencies have been asked to :

develop clearer , more objective criteria or standards
for measuring CRA performance , but without forcing
institutions to engage in governmentally mandated or
sanctioned credit allocation activity or compromise the
safety and soundness of insured institutions .
assemble sufficient information about the needs of
communities and bank activities to enable the agencies
and the public to determine whether performance
standards have been met , while minimizing compliance
burden on the institutions , and protecting the
confidentiality of the financial situation of the
bank's customers .
ensure consistency in CRA evaluations while maintaining
enough flexibility and judgement to consider fairly

business strategies , and product mix , and the diversity
of communities in terms of their size , economic
condition , programs and resources .

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These goals are often contradictory .

contradictory nature of these objectives .
objectivity are laudable goals .

All of these core

Consistency and

But , to be implemented in a

regulatory scheme , they require both a set of statistical data
and a formulaic basis for evaluating those data .

The more rigid

the formulas which are applied , the greater the consistency , but
the lower the variety of outcomes and allowance for local
circumstances which is permitted .

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counterproductive in aiding traditionally underserved
populations .

Nature of the Law
As our joint statement indicates , CRA is indeed a
highly unusual law .

At first glance , CRA's mandate to us as a

regulatory agency appears fairly simple .

Under CRA , we have four

primary duties : to encourage banks to help meet the credit needs
of their communities , including low- and moderate - income areas ;
to assess bank records of performance through examinations ; to
produce publicly available evaluations of bank CRA performance ;
and to take their records of performance under CRA into account
when evaluating proposals for expansion .

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Note that all of these requirements are for regulatory
action .

Although CRA says that we are to encourage banks to help

meet community credit needs , the act does not require any
specific bank actions .

The CRA reminds banks and thrifts about

their charter obligations , but does not specifically define them
in a way that would provide guidance on reinvestment questions .
The act also says that banks should " help "

meet community credit

needs , but does not specify what kind of help , or how much help ,
is necessary or appropriate .

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In the absence of guidance on principles , standards , or
definitions in the CRA , the agencies have been forced to attempt
to add much more substance through regulation than is usual for
the agencies , to an extent that may be unique for financial
regulators .

And as this committee knows , the public policy

process requires consideration of highly divergent views and
interests in an attempt to strike a compromise acceptable to
affected parties .

This is not a comfortable role for the

agencies .

reform process .
complicated the task .

Public Scrutiny and Involvement
Although it is extremely vague , CRA is unusual in quite
another way .

Virtually every other banking law and regulation

involves two primary parties --the agency and the bank .

The CRA,

however , compels the agencies to look beyond the bank itself and
assess the role the bank plays in its community .

While

supervision of the safety and soundness of financial institutions
involves us in a primarily two-way conversation with the bank
about its policies , practices , and financial condition , CRA

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brings a third- party to the table --the bank's community or the
public at large .
As the members of this Committee are well aware , the
" public "

is a large and amorphous group of diverse interests .

Often , the voice of the public is interpreted as belonging to the
individual or group that can marshall the greatest communication
skills .

Thus , even a theoretical three-way conversation about

CRA among the agencies , banks , and the public , is in practice
hard to hold , and often can be quite contentious .
One of the reasons for the increasingly contentious
nature of the discussion is that CRA has become much more
prominent and important to the involved parties .

Public

disclosure of CRA evaluations , which began a few years ago as a
result of amendments to the Act , has focused greater attention on
this issue .

More than ever , the CRA performance of financial

institutions is being discussed in the press and media , and
virtually every group or association with a constituency focused
on housing and community development has demonstrated some
interest in CRA over the last few years .

On the local level ,

elected officials , trade unions , church groups , and civil rights
groups have become active in CRA protests .

In those instances

where governmental dollars for economic development have
dwindled , communities have often turned attention to the private
sector and the prospect that CRA will be a strong encouragement

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Much of this public interest is based on a realistic
understanding of what CRA says and how private financial

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Evolving Views
Some may think that the current reform effort is simply
directed at correcting the administration of the law to return to
what it should have been from the inception of CRA in 1977.
this may be too limited a view .

But

In fact , given the increasing

intensity of interest in CRA over the years from all sides , the
expectations about the CRA performance of banks have evolved
considerably .

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with CRA are much more aggressive than they were ten or fifteen

years ago .

CRA Complaints
Not surprisingly , along with these rising expectations ,
many in the banking community have come to view agency CRA
efforts as increasingly burdensome and unfair .

These views have

intensified even as the agencies have taken explicit steps to
reduce burden , especially for small banks .

And

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have the appropriate CRA procedures and paperwork , than actual
lending programs in their communities .

extent I believe many are based on misunderstandings .

First , I

want to note here that the Board is not particularly disturbed by
the ratings distribution for state member banks which are
virtually identical to those of other regulators .
percent do pass .

Yes , over 90

But CRA ratings are not , and frankly for

several reasons should not be , as some have suggested , the result
of " grading on a curve . "
I do not mean to say that the Board or the other
agencies have been infallible in assigning ratings .

But at the

Board , we have put tremendous resources behind intensive examiner
training on CRA , fair lending , and other related issues .

A great

deal of time and effort also have been spent , especially over the
last three years , in reviewing CRA evaluations to ensure that
they reflect what we believe are fair outcomes and are as
comprehensive and consistent as we can make them .

conferences , seminars and workshops for bankers and others on CRA
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and the types of community development lending and investment
programs available to help them respond to community credit
needs .

We believe these programs --attended by thousands of

bankers -- have had a positive effect .

CRA

The regulatory burden of CRA may have been overstated
somewhat by the industry .

Most of the more vigorous complaints

about regulatory burden come from community bankers who

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effects of all of the consumer laws and regulations passed over
the last 25 years in addition to CRA .

Cumulatively , these

regulations have been costly to all institutions , and certainly
have fallen disproportionately on smaller banks .

Given CRA's

vague prescriptions and the uncertainty of the examination
process , CRA may have become a stalking horse for frustration
with regulatory costs in general .

CRA'S Impact
Despite CRA's lack of clarity and the criticisms of CRA
from all quarters , I believe that CRA has had a significant
impact on the availability of credit in low- and moderate - income
areas .

In fact , I fear that the focus on the imperfections of

CRA --many of them probably unavoidable -- has misdirected the
public debate .

Far too much emphasis has probably been placed on

the problems of CRA , rather than its strengths .

Here is a

government program that has entailed little bureaucracy , great
local autonomy , and virtually no federal tax dollars to
administer .

Yet its impact on communities can probably be

measured in billions of dollars in community and economic
development activity , benefitting the most distressed parts of
communities .

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CRA has helped stimulate loans for home mortgages ,

Federal Reserve Principles for CRA Reform

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On balance , we believe that the law is worthy of being
maintained , provided it is administered in a sensible fashion .
Second , one of the major risks in the reform process is
that changes we may make to CRA's regulations could result in
unintended and unwarranted credit allocation .

I want to

emphasize that the Board is very concerned about this prospect .
Let me assure this committee that the Federal Reserve has no wish
to produce a regulatory scheme that would result in governmentally imposed credit allocation driven from Washington .
despite our best intentions , this is an undeniable risk .

But
One of

the strengths of CRA that we should take special care to preserve
is its flexibility and responsiveness to local conditions .

Under

any scheme , banks should still be able to determine how best to
serve the needs of their communities .

We must not substitute the

judgment of the agencies for the judgement of the banks .

I do

not believe that any other alternative would be acceptable to the
Board , and we will not endorse any reform approach--no matter how
well intentioned -- that violates this principle .

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experimentation due to a fear of increased risk .

Wholesale or

radical change invariably ends up as counterproductive .
Underserved markets do not need alternating periods of extreme
policy activism followed by extreme neglect .

They require

steady , moderate , predictable , and workable efforts .

has been the correct one .
Fourth , any pursuit of more objectivity in the rating
scheme must be tempered with a recognition of the potential
adverse consequences of any mechanical system that doesn't allow
considerable agency judgment .

I think that was brought home

clearly in the responses by many in the banking industry to the
first reform proposal , which proposed a formulaic market share
test as the primary element in a rating system .
too many unforeseen problems with the concept .

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There were just

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Sixth , any increased data reporting must be justified .

Finally , we believe it especially important that the
commitment to safety and soundness be maintained .

Community

reinvestment must be economically sound and ultimately engender
adequate rates of

profitability , if it is to be sustained .

If

CRA is to work over the long term , economic sense , not shifting
views about CRA obligations , must be the driving force .

Giving

money away is not what CRA is or should be about , and while some
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flexibility in loan terms may at times be appropriate , we do not
support anything other than safe , sound and profitable lending .

Conclusion
The CRA reform process has been very arduous and
difficult , and certainly has taken longer than desired .

But I

believe that the Board , along with the other agencies , has made a
good faith effort to adhere to the President's request .

The

Board has devoted a tremendous amount of time and energy , as have
the Reserve Banks , to the reform process .

consequences .

I can assure you of the Federal Reserve's

commitment to this goal .

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196

REPEAL the Community Reinvestment Act !

Testimony

by
William A. Niskanen
Chairman
The Cato Institute

Subcommittee on Financial Institutions and Consumer Credit
House Committee on Banking and Financial Services
8 March 1995

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Madam chairwomen and members of the subcommittee :
The Community Reinvestment Act should be repealed -- not

proposed regulation :
The CRA does not provide statutory authority for a
loan- to - deposit test .

have reallocated loans from communities with a high

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demand for loans to communities with a lower demand-misallocating credit over space and reducing the safety
of the banking system .

are even worse .

Let me count the ways :

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December 1993 had included statements that banks are
not expected to make loans that are expected to result
in losses , to expand their branching network , or to
operate facilities at a loss .

These protections are

not included in the proposed new regulations .

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banking and state restrictions on intrastate branching severely
restricted bank competition in local markets and the potential
for geographic diversity of loan portfolios .

These restrictions

have been substantially reduced , promising a more competitive
banking system that is more responsive to the interests of both
depositors and borrowers and less vulnerable to adverse economic
conditions in specific regions .

Another effect of considerable

importance : competition among banks is also the best discipline
on discrimination among loan applicants on any basis other than
credit risk .

be done .

Thank you .

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Testimony of

Lucy H. Griffin

on the

Community Reinvestment Act

before the

Subcommittee on Financial Institutions
and Consumer Credit

of the
House Committee on Banking
and Financial Services

Lucy Griffin
Compliance Management Services
P.O. Box 7313
Falls Church, VA 22040-7313

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Testimony of
Lucy H. Griffin
before the
Subcommittee on Financial Institutions and Consumer Credit
of the
House Committee on Banking and Financial Services
March 8 , 1995

The Community Reinvestment Act has imposed an unintended and
massive burden on the banking industry .
The extent of CRA
compliance burden varies based on the size , location , and effort
level of the institution .
However ,
certain factors are

Consistency of interpretation is a persistent problem. Banks
and thrifts cope with inconsistent interpretations and actions
between agencies , between regional offices of the same agency , and
between examiners . There is no certainty for banks facing a CRA
examination or filing an application . A bank's carefully developed
business plan for growth or expansion can disappear in the time it
takes to file a protest .
Second, inconsistencies in the skill level of examiners
contribute to the inconsistency of interpretation . As examiners
struggle with applying CRA in examinations , they create new
interpretations and new requirements which spread to other
examiners , other offices , and from agency to agency .
Third, banks must maintain a fine balance to manage the
constant tension between CRA and safety and soundness . Many banks
have committed high levels of time and resources to develop skills
needed to run an effective CRA program and to make " CRA loans . "
Safety and soundness examiners may criticize these loans because
they deviate from standard and familiar underwriting practices .
Documentation , originally introduced as a technique for
measuring and proving success , has grown to be the largest
component of the CRA regulatory burden .
Enforcement of fair lending laws , now being interpreted in
conjunction with CRA, is driving banks to identify and compete for
new markets among groups that have never had any banking
relationship .
The unfamiliarity of these customers with banking
practices and financial terminology often results in confusion .
Banks find it necessary to provide counseling and education for
these new customers . They also need to maintain documentation , not
only for self-protection but to ensure that the customer's requests
are recorded and understood .

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In the effort to increase services to low- and moderate - income
communities , banks are increasingly affected by criticism for
services provided to high income customers unless they can
demonstrate some quantifiable balance with efforts to serve lowand moderate - income customers .
Concerns about fair lending
interpretations and enforcement have complicated this .
In addition to the inconsistencies in examinations
produce burden , there are aspects of CRA examinations that result
in misleading comparisons between banks .
First , the agencies do
not have the capacity to examine the CRA performance of large banks
in every community in which they are located .
However , each
independent bank is examined for CRA .
The result is that a
community bank in a small community is looked at differently and
held to a different standard than the branch office -- located
across the street -- of a large regional bank . In fact , the branch
office of the larger bank may not be examined for CRA at all .
Second , in the interstate banking context , small banks are
held to a higher standard -- in their local community -- while the
competing branch of a regional bank is not held to any CRA standard
by itself .
Many community banks fear that these branches of
interstate banks may actually take money out of the community to
support CRA efforts in locations which are examined . The resulting
disinvestment would leave the community bank bearing the full
burden of supporting its community's economy .
The current CRA
examination system would not identify and prevent this activity .
Finally , banks do business in different markets .
In some
cases , they use specialization to target and compete effectively in
certain aspects of overlapping markets . Imposing a rule that tries
to compare a bank that does business in cities A and B with a bank
that does business in cities B and C cannot have clear results . In
fact , the comparison may be totally inappropriate .
Efforts to develop techniques to compare banks may have the
unfortunate result of causing all banks to be the same . CRA is at
its best when it is a forward - looking , flexible and dynamic
process . Unfortunately , the " enforcement " process has forced many
banks to commit resources to non-productive and burdensome proof of
compliance . In effect , it forces the bank to concentrate on form
rather than substance -- making loans .
CRA can stagnate in the
process . Some of the solutions to these problems may be found by
looking to the original purpose of CRA .

Testimony of Lucy H. Griffin

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1.

Is CRA fulfilling its original purpose of ensuring that banks
and thrifts are meeting the credit needs of their entire
community including low- and moderate-income neighborhoods?
If not, what steps need to be taken to improve compliance?

CRA requires each bank to help meet the credit needs of its
community .
To do this , the bank must be familiar with its
community , identify credit needs that the bank can support , and
tailor services and products to its particular community .
In order to evaluate the success of a bank in carrying out
this process , the evaluator must take into account not only the
actions of the bank but also put them in the context of the bank's
This process by its very nature defies
unique community .
standardization , but standardization is the key tool for regulatory
examinations .

Standardization , whether it is a list of performance
expectations and approved activities , or the steps and criteria
used to measure compliance , defeats the purpose of CRA .
Standardization , by definition , fails to take into account the very
differences that CRA is intended to promote .
Standardization
involves an assumption of sameness .
Standardization is also a significant source of burden . Much
of the compliance burden is the result of having to do something in
a specific way and having to do so correctly , with attention to the
smallest detail . This is true not only for CRA, but for compliance
requirements such as Truth in Lending , Truth in Savings , and Real
Estate Settlement Procedures .
It is an irony of CRA that standardization actually creates
confusion .
Often a standard rule or procedure doesn't work in
different settings .
For example , CRA enforcement focuses on the amount of lending
that takes place in " low income geographies . "
A whole science of
" geoanalysis " has been developed -- and continues to develop -- to
measure the extent to which banks are lending in low income and
moderate income census tracts .
However , there are many communities , primarily non-urban and
rural , that do not have economically segregated living patterns .
The low- and moderate- income residents of these communities live
Geoanalysis ,
side by side with the higher income residents .
designed for urban settings , simply doesn't work in these
communities .
It doesn't find the low- and moderate income
residents .
In fact , they tend to disappear in the statistics .
However , banks and thrifts doing business in these communities must
conduct geoanalysis simply to satisfy the regulatory standard .
Simply put , the process is a waste of resources .
Testimony of Lucy H. Griffin

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Standardization is the only readily available tool for the
regulatory agencies to use for CRA evaluations under the current
system of examinations .
Solutions to this may lie in either
increased skills for examiners , or a return to the original use of
CRA : taking into account a bank's performance when considering an
application .
CRA was originally meant to " encourage " banks and thrifts to
help meet the credit needs in their community and thus provide an
essential component to a healthy local economy .
However , as
carried out , many banks and thrifts find that the supervisory
review of CRA has become focused on enforcement .
This should
hardly be an unexpected result : the procedures and techniques
available to the bank regulatory agencies are specifically designed
for enforcement , not for encouragement .

CRA also contemplated a process involving three key
participants : the bank or thrift , the regulatory agency , and the
community . The process requires the regulatory agency to take into
account the bank's or thrift's record of helping to meet community
credit needs .
In conducting examinations and in considering the
application , the regulatory agency considers input from the
community itself as a means of ensuring that the bank has
effectively and correctly identified community credit needs .
The
Community input is central to the CRA process .
regulations specify several points at which banks and thrifts
should seek , accept , and respond to community input .
They are
required to initiate contacts with community organizations and
individuals , to take and respond to requests or suggestions for
community investment products and services , and to respond to any
complaints filed with the institution .
The adequacy of these
responses is reviewed in each examination .
In addition to this ongoing input , members of the community
may protest an application and raise concerns about the
institution's actual practice of helping to meet community credit
needs and responding to requests and suggestions from the
community .
In theory , the protest should be an effort of last
resort by the community organization . In reality , few protests are
the culmination of any documented effort to work with the bank or
thrift . The protest is often the first contact initiated by the
community group .
The act ensures that groups have the ability to protest
applications , but does not impose any obligation to attempt to
raise their concerns with a bank before an application is filed .
Because of this , there is no procedural protection for banks and
thrifts that have worked actively to identify and meet community
credit needs . When a bank files an application , it cannot rely on
its rating to predict whether the application will be delayed by
CRA considerations .
Testimony of Lucy H. Griffin

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To remedy this , the regulatory agencies should be authorized
to take into account the efforts made by any protesting group to
work with the bank prior to the application . The agencies should
be directed to consider negatively the fact that a group has not
previously made efforts to bring concerns to the attention of the
bank .

2.

Does the CRA overlap or conflict with other existing equal
credit and fair housing laws?

Each separate piece of compliance legislation and its related
regulations are adopted in a specific context to resolve a specific
concern or set of concerns . Legislation is usually considered a
context that is isolated from related practices and concerns . As
a result , compliance requirements do not always work effectively as
an integrated whole . The result can be " duelling regulations . "
For example , the Home Mortgage Disclosure Act ( HMDA) and its
implementing Regulation C require reporting of all applications
together with characteristics of the applicant , the location of the
subject property , and the disposition of the application .
Many of the lenders subject to HMDA initiate applications and
submit them to secondary market purchasers for approval .
To
prevent double reporting , the regulation provides that in this
situation , the secondary market purchaser making the decision
should report both the approvals and the denials .
To support the goals of fair lending and CRA, many of these
institutions bring back the applications denied by the secondary
market and review them to determine whether they can make the loan
and retain it in the bank's portfolio . Typically , for every 100 of
these second reviews , the bank will be able to make a loan to only
three or four of the applicants .
However , because the bank is considering this application in
a new context , the bank must now report its decision on each of the
applications reviewed in this manner .
It cannot report only the
approvals .
The resulting denial rates reported under HMDA are
staggering. Banks and thrifts need to decide whether to take this
risk of exposure under HMDA, or cancel the review program for these
loans .
The result is a report of denials that , as a practical matter ,
is artificially inflated . The fact is that the applicant asked for
credit only once at that lender's office . However , because of the
second review procedure and the reporting rules for loans that are
sold , the application gets counted twice .

Testimony of Lucy H. Griffin

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Regulation B , creditors are required to notify each applicant of
the action taken . When the creditor gives a second review to this
already denied application , it may need to give a second adverse
action notice to the applicant .
Regulation B also sets constraints on the type of credit help ,
such as counselling , that banks and thrifts can offer to
applicants . Regulation B requires the creditor to make a decision
and send a notification within 30 days of receiving an application .
It also requires creditors to act promptly on applications it
receives . To comply with the timing and notification rules , credit
counseling must be offered outside the context of applications .
Both ECOA and the Fair Housing Act prohibit prescreening on a
prohibited basis .
Credit counseling can look very similar to
prescreening , particularly when an individual being counseled has
a great deal to do before qualifying for credit . Examiners tend to
scrutinize credit counseling programs closely because of the
possibilities of prescreening .
For banks and thrifts , the
consequences of failing this scrutiny are substantial . Findings of
a possible pattern and practice of discrimination must be referred
to the Department of Justice and are also reflected in the
institution's CRA rating .
Another example of " duelling regulations " occurs under the
Real Estate Settlement Procedures Act ( RESPA) . RESPA prohibits the
payment of fees and kickbacks in certain real estate transactions .
HUD's Regulation X makes clear that under RESPA , a referral by
itself has no value . Fees may only be charged and paid at a fair
market value for actual services performed .
However , to carry out CRA lending obligations , banks and
thrifts need to be able to develop avenues for finding borrowers
and attracting those borrowers to the bank . Some community groups
have offered to refer applicants to the institutions , but would
impose a fee --for example , $ 500.00
for the referral itself .
These fees would violate RESPA .
As a result , the potential for
improving activities under CRA is cut off by another law.
Small banks doing business in small communities find that the
restrictions on lending to insiders can also restrict the ability
the
bank to develop and carry out programs .
For example ,
of
directors of the bank may be among the few people qualified to
develop affordable housing projects and to deal with obstacles to
development projects such as zoning laws . However , to the extent
that the director would need financing for the project , the bank
may be limited by restrictions on lending to insiders .
In addition , the bank's relationship with the director would
be a controlled business relationship under RESPA .
Thus , the
director could be prohibited from referring purchasers to the very
bank that inspired the project .
Testimony of Lucy H. Griffin

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The agencies should be authorized to identify these regulatory
conflicts and create exemptions that support the purposes of the
laws involved .
Fair lending enforcement complicates the CRA process . As a
result of recent actions by the Department of Justice , banks and
thrifts must consider the community-wide impact of each product ,
each advertisement , and each expansion or acquisition decision .
Its CRA program must look not only at income levels and related
credit needs , but then analyze the impact of the program on
different groups .
This necessary analysis adds to the already
cumbersome documentation generated by CRA.
3.

Would the revised proposal address the problems lenders see
with the current system which they believe is vague and
subjective and imposes undue paperwork? Specifically, how
would the proposed race and gender reporting requirements on
small business and agriculture loans affect depository
institutions .

The proposal involves at least as much paperwork as the
present rule .
Moreover , the rule falls short of providing the
predictability that banks and thrifts need . The principal factor
in the uncertainty of examination results is that different
examiners , with different skill levels and different ideas , will
come to different conclusions .
Much of the demand for documentation comes from examiners who
are unskilled at CRA . Their requests for documentation amount to
seeking hard evidence .
Examiners , particularly when aware that
their report and rating will be a public document , are reluctant to
conclusions
without
draw
" proof" to rely on .
The existing system requires banks to be able to prove to an
examiner the level and extent of the bank's CRA program.
Such
proof cannot be provided without paperwork .
Each request for
additional documentation becomes a new bottom line for CRA, adding
to the burden .
There is nothing in the new proposal that will
prevent this from continuing to happen .
Documentation , although burdensome , has the attractiveness of
providing a familiar tool to both banks and examiners .
difficult aspect of CRA is that it involves the assessment of
actions that are not tangible :
interacted with members of its
the appropriateness of who the
results of those contacts .
This type of assessment is distinct from the skills used by
examiners for other regulations . Examiners measure and quantify .
Testimony of Lucy H. Griffin

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209

equipped to make the social , economic , and political judgments
called for in CRA evaluations .
What is needed is a core of skilled and experienced examiners
who have the knowledge and CRA experience needed to conduct
thorough and fair examinations .
Also , examiners should support
their evaluations with their own documentation-- the materials
they reviewed and the people they interviewed .
Banks and thrifts need some assessment of what they are doing
right .
They need guidance and support in these efforts .
The
agencies presently have CRA specialists in both headquarters and
regional offices .
These specialists have acted as technical
support for banks and have not been heavily involved in
examinations . However , they are generally the best qualified staff
in the regulatory agencies to make the evaluations called for in
the CRA examination .
Many CRA efforts have involved non- lending activities .
In
order to bring qualified applicants into the bank , and to ensure
that applicants have access to affordable housing , banks and
thrifts have found it necessary to undertake nonlending activities
to support these needs .
These activities include education
programs , counselling programs , and financing and technical support
These activities have often gone
for development projects .
unrecognized in examinations . The CRA specialists understand the
value of these efforts and their relationship to results .
The proposed data collection for small business and
agriculture loans is modeled on HMDA . It is useful , therefore , to
look at the track record of HMDA . Two concerns stand out . First ,
HMDA is proving to be riddled with errors and omissions . Most of
the errors , made in good faith , result from the complexities of the
rule . Bank staff preparing the loan application register need to
correctly interpret and apply the rule to a wide variety of
In addition , there are numerous
situations that arise .
opportunities for error with data entries , the bank's software , and
the interaction of the bank's software with that of the agencies .
Second , in providing answers about lending discrimination ,
HMDA is a disappointment . HMDA is useful for raising questions but
it is not useful for drawing conclusions .
The reports do not
contain enough information to explain and understand the reports .
For example , the data itself do not make clear whether a high
minority denial rate is result of successful outreach effort or
illegal discrimination . The data do not show whether the credit
demand was " effective " or whether applicants were unprepared . The
reports do not show whether the bank or thrift provided or referred
denied applicants to credit and homeownership counseling .
actions have everything to do with a successful CRA program but are
invisible on HMDA reports .
Testimony of Lucy H. Griffin

Page 8

210

Given the problems with accuracy levels in HMDA reports and
the established limitations of HMDA data , there is no justification
for the significant additional burden that the proposed data
collection would impose .

4.

Since the original intent of the CRA was to meet community
credit needs, and not result in credit allocation, would the
revised rules meet that original goal?

The revised rules only change the process by which banks and
thrifts would be evaluated . They do not alter the process of CRA .
The existing rule provides guidance on how to achieve a result .
such, it is a model affirmative action plan .
Under the present
rule , banks are measured on process . The proposed rule would look
only at the results . However , banks will not achieve the results
unless they continue their work on process . Looked at this way,
the rules change little or nothing .
However , by omitting a review of process and looking only at
results , the rules take a clear step toward allocating credit .
Banks and thrifts would be measured by their lending in numbers and
dollars by location .
Although the proposal would take into account the market
context of the bank , there will inevitably be standards developed
on a national basis that will be a starting point for assessing the
lending performance . Experience shows us that these standards will
quickly build into requirements
and those requirements will
amount to credit allocation .

5.

What are your views on recently introduced legislation that
would give qualified small institutions and those with ratings
of at least " Satisfactory" a " safe harbor" protecting them
from having an application denied on CRA grounds?

The Community Reinvestment Act should encourage community
groups to work constructively early in the process rather than only
during a protest . A modified safe harbor would encourage this to
happen .
Providing recognition of a rating achievement should
support this process by motivating community groups to participate
in the bank's efforts before applications are filed .
A safe harbor proposal should take into account two different
situations . First , an institution that is presently chartered to
do business in the community and seeks to expand by branching or by
acquiring another institution should have access to a safe harbor
for its rating achievements in that community . If the institution
has been present in the community , there has clearly been
opportunity for community groups to work with that institution and
Testimony of Lucy H. Griffin

Page 9

211

the examination process reviews the institution's responses to
community input . The absence of any effort to provide input and
work with an institution that has committed the effort to earn a
good rating should not enable a community group to later protest
that institution .
However , a bank applying to enter a community by opening a
branch or acquiring an existing institution presents a different
situation . In this example , there has been no opportunity for the
community group to work with the bank . Restricting the input of a
community group by providing a safe harbor may not be appropriate
when the bank's application is for the purpose of moving to the
community for the first time .
A safe harbor would also support the original CRA goals of
encouraging banks to help meet community credit needs by providing
motivation to earn a good rating .
At present , only low ratings
provide certainty .
The intense and usually expensive efforts
needed to earn a " Satisfactory"
or " Outstanding "
provide no
guarantees for a bank's future . It only enables the bank to stay
in the arena .
The incentives actually offered are negative .
Instead , they should be positive .

Testimony of Lucy H. Griffin

Page 10

212

TESTIMONY BY
CATHERINE P. BESSANT
SENIOR VICE PRESIDENT
COMMUNITY INVESTMENT EXECUTIVE
NATIONSBANK CORPORATION

BEFORE THE
SUBCOMMITTEE ON
FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

OF THE
COMMITTEE ON BANKING AND FINANCIAL SERVICES
UNITED STATES HOUSE OF REPRESENTATIVES

MARCH 8, 1995

213

Chairwoman Roukema, Mr. Vento, and Committee Members, my name is
Cathy Bessant , and I am the Community Investment Executive for
NationsBank. I appreciate the opportunity to be here today to present my
company's view of the Community Reinvestment Act.
NationsBank is America's fourth largest banking company, with almost 2000
branches, serving more than 650 communities . We are vitally interested in
each of those communities. We operate our company with the belief that
NationsBank can grow only if the communities we serve are economically
strong. For us, community development is far more than some nebulous
concept of the " right thing to do" ; we believe it is absolutely critical to the
success of our company and our communities.
Of course, many are skeptical--and with good reason--about the sincerity of
the banking industry on this issue. And some believe that banks intend to
use the current political environment to minimize their responsibilities. Of
course I cannot speak for other banks, but I am here to tell you that
NationsBank is putting enormous effort behind its goal of being the best
community development lender in the United States.
My objective today does not include a detailed recap of our success towards
meeting this goal . Additional information in this regard is contained in my
written statement. Suffice it to say our efforts have been diverse and that
they have been extensive . We have long gone beyond rhetoric and are
generating results. We could not be more serious about getting the business
of community development right.
So, if anyone expected me to advocate doing away with the CRA, look out.
NationsBank has long advocated a more effective, results oriented
Community Reinvestment Act. My purpose before you is to advance that
objective.
To that end, I would like to begin with some observations about the state of
the community development industry.
First, the Community Reinvestment Act has played a critical role in the
advancement of community development. Quantitative estimates begin by
asserting that community reinvestment programs prompt some $ 4-6 Billion
of lending per year. Our experience suggests that this figure is conservative.
Whatever the correct number, it is clear that the CRA has been a major
contributor to financial investment in underserved areas.

214

Testimony of Catherine P. Bessant
NationsBank

Second, this financial investment must be made to be sustainable. This
means, essentially, removing impediments, ---including regulatory
disincentives---to effective community development and supporting
mechanisms ---including rational regulation and incentives---which enhance
the safety and profitability of this lending. Reforming the Community
Reinvestment Act can--and must--be accomplished in a way that does both.
Third, the critical question is whether the CRA in its present form would
continue to advance community development. I believe it would not.
Conceptually the CRA is sound; however the evolution of the regulatory
process has resulted in a system that detracts from community development
and actually risks the sustainability of these activities.

The process remains very burdensome. The emphasis on paperwork
over performance is substantial. It is costly, distracts resources and energy
from community development, and prohibits effective management of
community development lending as a business . With all respect to the
progress the regulators have attempted to make in this area, one only needs
to read the rating guidelines to understand the importance of this issue.
Second, inconsistency and subjectivity are significant problems. The
current regulatory standards of measurement are wholly subjective.
Performance is measured and defined by regulatory guidelines using vague
terms like--and I quote--" significant" , " ongoing" , " sound" or " adequate" . This
measurement system guarantees a subjective outcome. Intra-agency and
inter-agency inconsistency remains problematic in the examination process ,
application of performance standards, and over time. When regulatory
applications, public perception, and business development often hinge on
community reinvestment performance, the stakes are far too high for
inconsistency and subjectivity to persist.
The single most important issue for NationsBank in the CRA reform effort is
achieving objective--and consistent--standards for performance
measurement.

215

Testimony of Catherine P. Bessant
NationsBank

Objective standards of measurement, however, do not mean that one size has
to fit all. The success of any measurement system depends on its
applicability to diverse sets of circumstances. Objectivity, consistency, and
diverse applicability are NOT mutually exclusive . We must not let the
debate over standard-setting prompt us to retreat to an ill-defined subjective
system .
Third, the current regulatory and judicial frenzy over CRA and Fair
Lending should be unacceptable. There are few regulators who are not
claiming jurisdiction over CRA and Fair Lending. In this area, NationsBank
is answerable not only to our primary regulator, the OCC , but also to the
Federal Reserve , HUD, the Department of Justice, and several state
agencies. Virtually every element of regulation varies in its interpretation
among the various agencies and these interpretations are often inconsistent
if not down right contradictory. CRA and Fair Lending are important and
sensitive but role clarification and rationalization must be undertaken.
Finally, the application approval process is in need of considerable
improvement. Simply put, even banks with outstanding CRA ratings are
subject to uncertainty, cost, and delays due to the treatment of public
comments received as part of the application process. Public input is
important. However, the performance rating and application processes must
be engineered to prevent unnecessary cost and delay.
The proposed regulatory changes to the CRA are a significant step in the
right direction . In pursuing these changes, the regulators have been diligent,
participative, and thoughtful and should thus be commended. It is clear that
the proposed regulations " raise the bar" in terms of performance standards.
At the same time, and importantly, the proposal eliminates considerable
unnecessary paperwork and distracting documentation requirements.
In order for this effort to be successful, however, there remains some
necessary reworking of the current proposal. The needed changes and
additions are detailed in my written submission . Most importantly,
additional work is needed to make measurement standards truly objective,
gross volume and market share emphasis must be eliminated, and critical
elements --- including specifically examiner training and an interagency
appeals process --- must be addressed.

216

Testimony of Catherine P. Bessant
NationsBank
March 8, 1995
Page 4 of6

I am often asked whether this reform should be " scrapped" . Absolutely not .
The present system is damaging to community development efforts . But the
reform effort is not complete. The accomplishment of important revision is
critical to the workability of, and the ability of NationsBank to support, the
proposed reforms.
The issue of race and gender reporting on small business lending could not be
more timely nor more controversial. Yes, it will be costly. Quite costly. Yes ,
it will be subject to much misinterpretation. Gathering this information,
however, is perhaps the only way to begin to understand the extent of credit
availability for small businesses.
The effect of public disclosure of home mortgage lending cannot be ignored in
this debate. Awareness of lending patterns has prompted product
innovation, marketing advancement, and in short has changed significantly
the availability of credit for many Americans. The only way to prompt
similar innovation and advancement in the area of business lending is to
have and to analyze race and gender data .
NationsBank supports the collection and reporting of information on the
gender and race of small business borrowers . Equally important, however, is
maintaining equity in imposed cost and reporting structure among competing
institutions and ensuring that the data will be meaningful. Collection of race
and gender information through the Community Reinvestment Act actually
distorts the context of business lending data and ensures a competitive
disadvantage for financial institutions subject to the CRA.
In many areas, non-bank lenders dominate the small business lending
market. Additionally, the exemption of small institutions ensures that 75%
of the institutions engaged in lending to small businesses will not be
reporting. There is no hope for gathering relevant data when the bulk of the
lending community will not be reporting. This eliminates the possibility for
HMDA-like advancement in small business lending.

217

Testimony of Catherine P. Bessant
NationsBank

An alternative and superior approach would be to collect such information
under the Equal Credit Opportunity Act ( Reg B) . Collecting in this manner
ensures cost and burden equity, and would mean that virtually all small
business lenders would be reporting, thus making the data meaningful .
Collecting race and gender information will produce important advancement,
but doing it under the CRA is unfair and can only result in inaccurate data .

In short: if we are going to collect the data, lets collect it from everyone
engaged in small business lending.
One area where the reform effort does not go far enough is in improving the
regulatory application process. The issue is simple: why have a rating and
examination system if these ratings are not used in handling regulatory
applications? The term " safe harbor" has many negative connotations and
the concept is resisted by community advocates. This resistance is, in my
opinion, unwarranted. Public sentiment should be sought regularly, and the
proposed regulations provide for this . To add to the cost, time, uncertainty,
and generally cumbersome nature of regulatory applications when we have
an ongoing performance rating process is at best counterproductive.
" Safe harbor" merely maintains the integrity of the examination rating
process and is very important to strengthening the CRA. I urge you to give
meaningful value to CRA--incent institutions to strive for the high ratings-not just because they want to or have to, but because there is real, tangible
benefit for living up to high standards.
In this vein, I also would like to address the issue of credit allocation. Cries
of " credit allocation" clearly are being mounted in resistance to the proposed
reforms. This debate, to me, ignores the fact that the present system of
regulation is effectively de facto credit allocation. The " study of the week" by
community groups or academicians sets standards for how performance
" should" look. The process the regulators go through now to determine what
levels of lending are " reasonable" require an assessment of what is " enough" .
What is missing is an objective, consistent, and PUBLIC definition of what is
reasonable, what performance should look like, or what is " enough" . The
" super secret" form of credit allocation that operates now can only be
improved by fair and accurate articulation of expectations.

218

Testimony of Catherine P. Bessant
NationsBank

In closing, I challenge you to support and encourage aggressive regulatory
reform in the area of Community Reinvestment. Setting standards and
evaluating performance consistently--in conjunction ofcourse with removing
costly and burdensome paperwork -- will do much to benefit our

219

NationsBank Corporation

NationsBank
Community Investment Program
Fact Sheet

Description:

The NationsBank Community Investment Program ( CIP) is a
collection of special products and services developed for lowand moderate-income individuals and for small businesses.

Program
Mission:

NationsBank is committed to being the community investment
leader in the financial services industry throughthe
development and delivery of effective programs, products and
services that generate lending and investment in underserved
markets in a manner that benefits NationsBank communities
and shareholders.

Background:

NationsBank established its Community Investment Program in
1988, and since then has set a high standard for aggressive,
proactive community-focused lending and support. The
NationsBank Community Investment Group is staffed by 140
professionals who work full time to develop innovative
programs and services for economic and community
development.

Commitment:

In 1992, NationsBank made a 10-year, $ 10 billion commitment
to community development lending. Targets include:
• consumers in low- and moderate-income areas or those with

•

incomes below 80 percent ofthe market median;
small businesses and businesses in low- and moderateincome areas;
real estate projects that use low-income housing tax credits
or benefit low-income consumers;

·

-more-

USA
Sponsor
Official
9941996

88-882-95 - 8

220

NationsBank CIP Fact Sheet
Page 2

Results:

In 1992,the first year ofthe $ 10 billion commitment,
NationsBank loaned $ 2.2 billion to consumers in low- and
moderate-income areas for mortgages, home improvements,
education, auto financing and debt consolidation and to small
businesses to help them expand. In 1993, $ 2.9 billion was
loaned in these markets.

Areas of
Emphasis:

Consumer and Small Business Education
Affordable Housing

Initiatives:

Education and Technical Assistance- NationsBank established
the Education and Technical Assistance unit in 1992 to develop
consumer education curricula and work with community-based
organizations to deliver credit education and technical
assistance to consumers and small businesses in traditionally
underserved neighborhoods. Bythe end of 1993,
NationsBank had teamed with more than 200 community
partners to facilitate free Home Buyer, Banking Basics and
CommunitySmall Business education programs that nearly
10,000 participants have attended.
Product Development - NationsBank develops and delivers
products and services to meet identified community needs.
Products vary depending on the needs ofthe community. Most
banking centers offer special checking accounts with reduced
rates, residential mortgage programs with flexible financing
requirements, and small business loans for operating services.
Public/Private Partnerships- NationsBank seeks opportunities
to create and implement partnerships with the public and
private sectors to promote community development. Examples
include working with the NAACP to create Community
Development Resource Centers and partnering with the
National Urban League to establish Community Loan Review
Boards.

-more-

221

NationsBank CIP Fact Sheet
Page 3

Initiatives:
( cont.)

Community and Economic Development- NationsBank
emphasizes affordable housing and technical assistance to
small businesses in underserved areas. Services include
mortgage and home improvement loans, small business
operating assistance, small business loans, student loans and
education programs.

Community
Development
Equity Group:

The Community Development Equity Group ( CDE) includes
the Community Development Corporation ( CDC) , a
subsidiary of NationsBank that is dedicated to revitalizing lowincome neighborhoods. Established in 1978, the CDC
provides real estate development services and creative
financing for residential and commercial developments in innercity areas. CDE also includes the Small Business Investment
Corp. ( SBIC) , which makes equity investments in economically
disadvantaged small businesses and businesses located in
historically underserved areas. In 1993, CDE created Nations
Housing Fund to invest $ 100 million in affordable rental
housing developments that qualify for low-income housing tax
credits.

Community
Investment
Executive:

Catherine P. Bessant

Community
Investment
Regional
Managers:

Barry Smith
Florida, Georgia,
Tennessee, Kentucky

Sally Barley
Maryland,Virginia,
Washington, D.C.
410/547-4094

Carlton Tolbert
Texas

Monica McDaniel

-more-

222

NationsBank CIP Fact Sheet
Page 4

NationsBank
Background:

NationsBank Corporation is a financial services company
that provides products and services nationally and
internationally to individuals, businesses, corporations,
institutional investors and government agencies. NationsBank
has a retail banking franchise in 10 states and the District of
Columbia and consumer finance offices in 33 states.
5/94

223

NationsBank Corporation

NationsBank
1993 National Community Investment Highlights

Initiatives
Made more than 35,000 calls on small and minority-owned businesses
to solicit new banking relationships and to expand existing ones.
In partnership with the National Urban League, NationsBank
established Community Loan Review Boards in 18 NationsBank cities.
The purpose ofthe Community Loan Review Board is to provide any
NationsBank applicant who has been denied a home mortgage
orhome improvement loan the opportunity for additional review. The
Community Loan Review Board also offers free credit counseling.
Institutedthe NationsBank Neighborhood Program, whereby
NationsBank associates, community leaders and residents work
together to address the needs of underserved inner-city
neighborhoods. NationsBank Neighborhood targets inner-city
communities that have inadequte social services, little or no new
economic development and that have traditionally been underserved
byfinancial institutions.
Developed an extensive network with more than 200 community
partners to facilitate consumer credit education and small business
technical assistance. Provided more than 500 credit education
seminars including Home Buyer Education classes and Banking Basics
classesto more than 10,000 participants.
Established a partnership with the Enterprise Social Investment
Corporation to create the $ 100 million Nations Housing Fund. The
partnership provides the largest investment in affordable housing tax
credit properties in the United States.
Implemented Community Loan Days in 33 cities, bringing lenders and
other NationsBank associates to the community to take loan
applications, provide technical assistance and conduct a variety of
credit education workshops.

USA
Official Sponsor
1994,1996

224

1993 National Community Investment Highlights
Page 2
Initiatives ( cont.)
Throughthe NationsBank Small Business Lending Unit, committed or
invested in various specialized programs to provide equity and loan
financing to small businesses in low-and moderate-income areas.
Continued participation in the Child Care Development Loan Fund to
provide long-term funding to child-care facilities with loan guarantees
provided bythe U.S. Small Business Administration.
Supported educational initiatives including Adopt-A-School, Adopt-ARole-Model, Kids Bank, Junior Achievement and Partners in Education.
Continued implementation ofthe minority and women-owned vendor
policy calling for 10% of NationsBank outside purchases to be with
minority suppliers. This corporate goal was exceeded in 1993.
Results

Loaned more than $ 463.2 million in mortgage and home improvement
loans to families in low- and moderate-income areas.
Conducted more than 23,000 meetings with community leaders to
discuss the credit needs ofthe community and to identify possible
solutions.
Participated in more than 1,600 outreach programs that provided
credit education and increased awareness of NationsBank products
and services to small businesses and limited-income consumers.
Continued an aggressive advertising campaign targeted to low- and
moderate-income consumers and small and minority-owned businesses
throughout the NationsBank franchise to promote the Bank's image,
credit products and education services.
Conducted training sessions for NationsBank associates on new
communityinvestment programs and market development strategies.

225

NationsBank Corporation

NationsBank

Making a Difference: NationsBank Lends $ 5.1 Billion In
Low- and Moderate-Income Neighborhoods
$ 10 BILLION COMMUNITY INVESTMENT LOAN COMMITMENT
NationsBank committed to make a minimum of $ 10 billion in community investment
loans over a ten year period. Since the first year of the commitment, NationsBank has
loaned more than $ 5.1 billion in low- and moderate-income areas, $ 2.2 billion in 1992
and $ 2.9 billion in 1993. To date, 36% of the loans were made to consumers and
64%to businesses.
COMMUNITY INVESTMENT CONSUMER LENDING

1993 Consumer Lending
( Mortgage Corp., Secured by Real Estate and Other Consumer)

COMMUNITY INVESTMENT COMMERCIAL LENDING

1993 Business Lending
National: Made 5,487 business loans totaling $ 1,015,884,000 in low- and moderateincome areas, a 12% decrease in loans from 1992.
1993 Commercial Real Estate Loans
National: Made 2,805 commercial real estate loans totaling $ 838,970,000 for
programs in low- and moderate-income areas, a 62% increase in dollars from 1992.
1993 Agricultural Lending
National: Made 680 agricultural loans totaling $ 36,537,000 in low- and moderateincome areas, a 22% decrease in loans from 1992.
COMMUNITY INVESTMENT LENDING HIGHLIGHTS
1993 Small Business Lending
National: Made 36,362 loans in amounts of less than $ 500,000 each to businesses,
totaling $ 2,485,975,000 , a 9% increase in loans from 1992.

USA
Officia Sponsor

226

1993 Community Investment Results
Page 2

COMMUNITY INVESTMENT LENDING HIGHLIGHTS( CONTINUED)
1993 Housing Related Lending by Census Tract
National: Made 10,515 home mortgage and home improvement loans totaling
$ 463,270,000 in low- and moderate-income census tracts, a 24% increase in loans
from 1992.
1993 Housing Related Lending to Minorities
National: Made 11,183 home mortgage and home improvement loans totaling
$ 608,480,000 to minority applicants, a 29% increase in loans from 1992.
1993 U.S. Small Business Administration ( SBA) Lending

1993 Child Care Development Fund Lending

For more information about the NationsBank Community Investment Program, please
contact Patti Escudero at ( 214) 508-2239.
5/94

NATIONSBANK
gment
Results
Lendin
Commit
Billion
1
$ 0
AL
ATION
N
-Areas
ncome te
-I
Modera
and
Lowin
)$i( n
Thousands

1992
$

#

Lending
Commercial
Business
Lending
Estate
Real
Commercial
Agricultural
Commercial
Total
Lending
of
%
Total
LENDING
TOTAL

5/94

3,373
59,070
69,468
88
%

6,258
2,725
869
12
%

99,265
3$7,025
85,785
391,829
$876,879
%
38

878,438
515,598
35,935
19,852
$ ,429,971
%
62
279,320
$ ,306,850

%
88

680
%
12

TOTAL
$

#

%
88

$669,206
4$ 65,621
7113,328
$ 49,460
1138,346
$ ,884,287
36
%

1,015,884
5,487
838,970
2,805
36,537
18,972
$ ,891,391
%
12
%
65
2$ ,898,799
77,850

111,745
$ ,894,322
15,530
$ ,354,568
$71,549
2,472
$ ,321,362
318,824
%
64
5157,170
$ ,205,649

2$ 3,978
69,941
379,836
10,642
357,631
54,258
168,878
$ ,007,408
%
35

11,003
14,015

227

Lending
Consumer
Lending
Corp
Mortgage
Estate
Real
by
Secured
Consumer
Other
Consumer
Total
of
Lending
Total
%

1993
$

#

NATIONSBANK
HIGHLIGHTS
LENDING
INVESTMENT
COMMUNITY
1993

NATIONAL

1992
$

LENDING
OTHER
#

Small
Business
Lending
$5Under
0,000
00,000
15to
$ 0,001
50,000
2to
$100,001
00,000
52to
$ 50,001
$500,000
Under
Total

23,057
4,841
3,543

33,592

1993
$

#

TOTAL
$

#

53,748
4$ 23,941
54,802
4$ 5,891
94,414
6$4,218
83,014
$82,312
2,485,978

46,998
10,732

8$ 81,779
8$ 28,692
17,761
$ ,296,629
14,463
$ ,697,326
469,954
$ ,704,426

3
,025
7$ 99,265

41$ 63,271
0,515

17,540

8$ 62,536

37$ 87,241
,543

08,480
6
1$ 1,183

18,726

9$ 95,721

5$ 10,795
88

6$25,31
50 1

438

1$ 16,106

4$ ,092

44

1$ 0,266

$18,295

11

$18,295

4$ 28,031
3$ 73,890
$602,215
14,312
8$ 2,151
2,218,448

36,362

228

Lending
Related
Housing
Geography
By
ncome
-( owimoderate
and
L)tracts
Lending
Related
Housing
Minorities
To
Lending
SBA
Development
Care
Child

6$ $2,174
3

Fund
Lending

Invest
Equityments

04/94

이

$0

2
$ 1
11

NationsBank
Lending
Related
Housing
Loans
Refinanced
Excluding

MARKET
SEGMENT

TOTAL

:1C%992-1993
HANGE
DENIAL
NUMBER
OF
APPLICATIONSRATES

APPLICATIONS
1993

1992

1992

DENIAL
RATES
+#Applications
Deniale
1993

84,511

$ ( 000)
5$ ,979,876

%
14.6

%
-7.1

17.0
%

%
15.8

$476,934
$124,597
3$ 52,337
4$ ,275,342

16,295
4,790
11,505
68,216

$705,279
$169,419
$535,861
$5,274,597

%
23.2
21.2
%
%
24.0
%
12.7

%
-9.7
-6.7
%
%
-10.6
%
-7.3

%
25.7
%
28.3
%
24.5
%
15.1

%
23.2
26.4
%
%
21.9
14.0
%

10,066
63,696

$346,699
$4,405,576

12,418
1.
72,093

6$ 59,721
5$ ,320,155

%23.4
%
13.2

-11.1
%
-6.7
%

29.6
%
15.0
%

%
26.3
%
14.0

14,286
8,324
4,062
1,900
59,476

5$ 97,266
3$ 23,566
$145,149
$128,551
4$ ,155,010

18,398
11,061
5,058
2,279
66,113

$889,718
5$ 28,747
$181,591
$179,380
5$ ,090,157

%
28.8
%
32.9
24.5
%
%
19.9
%
11.2

%
-4.9
%
-2.6
%
-10.2
-10.9
%
%
-11.3

%
28.7
31.0
%
%
28.5
%
19.2
14.2
%

%
27.3
%
30.2
%
25.6
17.1
%
12.6
%

$438,589
$174,833
$263,756
3$ ,854,265
$459,421

18,224
9,224
9,000
65,778
509

$600,583
$241,626
3$ 58,957
4$ ,993,767
3$ 85,526

14.5
%
11.9
%
17.4
%
%
15.7
%
-48.6

%
-8.3
%
-8.5
-6.4
%
%
-6.4
%
13.4

%
27.8
%
31.7
%
23.5
%
14.0
%
18.7

%
25.5
%
29.0
%
22.0
%
13.1
%
21.2
.of
and
income
median
estimates
1993
on
based
are
classifications
minority
and
3)( ncome
Irace
.base
income
median
f
%o80
applicant
or-tIncome
ract
Low
.base
income
median
fnd
o80
%>8or-tract
aIncome
0
applicant
.base
Income
median
MSA
%o>orf0 Moderate
8applicant
➡tract
Upper
.,aoState
appropriate
Income
household
median
County
rsBA
Mincome
Base
CIGMIS

73,762

$ ( 000)
$4,752,276

13,231
3,951
9,280
60,531

TRACT
BY
CENSUS
Low
&Moderate
Tracts
Income
Tracts
Income
Low
Moderate
Income
Tracts
Tracts
Income
Upper

RACE
APPLICANT
BY
Minority
Total
African
-American
Hispanic
Other
Minority
M-Total
Non
inority

BY
INCOME
APPLICANT
Low
&Moderate
Income
15,910
8,241
Income
Low
7,669
Income
Moderate
56,862
Income
Upper
provided
not
data
Income
990
Improvement
Home
and
1)( ortgage
MLoans
.franchise
all
NationsBank
in2)( eflecte
activity
Rstates
yeare
activity
orboth
a.inone
no
was
there
,•Nsot
applicable
EJM
V:5
04/28/94

1
Page

229

Tracts
Minority
Predominantly
-Minority
Non
Tracts

NationsBank
1
Lending
Related
Housing
Loans
Refinanced
Excluding

MARKET
SEGMENT

)(0$ 00
TOTAL

C992-1993
:1%
HANGE
DENIAL
OF
NUMBER
1 ORIGINATIONSRATES

ORIGINATIONS
1993

1992

1992

DENIAL
RATES
A@Denials
+pplicatione
1993

53,693

$3,818,040

61,320

$ ( 000)
$4,505,275

8,506
2,419
6,087
45,187

3$ 32,624
$84,994
$247,630
$3,485,416

10,515
2,946
7,569
50,805

$463,270
1$ 10,707
3$ 52,563
$4,042,005

23.6
%
21.8
%
24.3
%
%
12.4

%
-9.7
%-6.7
%
-10.6
%
-7.3

25.7
%
%
28.3
%
24.5
%
15.1

%
23.2
26.4
%
21.9
%
%
14.0

5,962
47,731

$235,165
3$ ,582,875

7,519
53,801

$336,006
$4,169,269

%
26.1
%
12.7

%
-11.1
-6.7
%

29.6
%
%
15.0

26.3
%
%
14.0

8,670
4,990
2,398
1,282
45,023

$416,758
$215,902
$103,814
$97,042
3$ ,401,281

11,183
6,594
3,013
1,576
50,137

6$ 08,480
$349,424
$127,038
$132,018
$3,896,795

%
29.0
%
32.1
25.6
%
%
22.9
%
11.4

%
-4.9
%-2.6
%
-10.2
-10.9
%
%
-11.3

28.7
%
%
31.0
%
28.5
19.2
%
%
14.2

27.3
%
%
30.2
%
25.6
%
17.1
12.6
%

3$ 05,485
$113,041
$192,444
$3,123,162
3$ 89,393

11,653
5,602
6,051
49,349
318

4$ 13,623
$153,716
$259,907
$3,879,552
$212,101

%
15.5
%
13.1
17.9
%
%
14.6
%
-43.1

%
-8.3
-8.5
%
%
-6.4
%
-6.4
%
13.4

%
27.8
%
31.7
%
23.5
%
14.0
%
18.7

25.5
%
%
29.0
%
22.0
%
13.1
21.2
%
.and
race
income
median
ofon
estimates
1993
based
are
classifications
minority
3)I( ncome
.income
median
f
%oorIncome
base
80
applicant
tLow
-ract
.base
Income
fnd
o80
median
0
%a>8applicant
income
or-tract
Moderate
.base
median
MBA
f0
%o>8Income
income
orapplicant
➡tract
Upper
.Income
appropriate
,amedian
household
County
MrsSA
oState
Base
/MIS
CIG

%
14.2

%
-7.1

%
17.0

15.8
%

TRACT⚫
CENSUS
BY
&Moderate
Low
Tracts
Income
Income
Tracts
Low
Tracts
Income
Moderate
Tracts
Income
Upper

·

BY
APPLICANT
RACE
Total
Minority
-American
African
Hispanic
Other
Minority
MTotal
inority
-Non

INCOME
BY
APPLICANT
Income
Low
&Moderate
10,086
4,952
Low
Income
5,134
Income
Moderate
43,048
Upper
Income
not
provided
data
Income
559
Improvement
Home
Loans
and
(1)Mortgage .
states
franchise
Bank
Nation
inall
activity
2)R( eflecte
.there
yeare
no
was
orboth
inone
activity
Not
,as
applicable
EJM
V:6
04/29/94

2
Page

230

Predominantly
Tracts
Minority

-Minority
Non
Tracts

NationsBank
¹
Lending
Related
Housing
Loans
Refinanced
Including

TOTAL

1C:%992-1993
HANGE
DENIAL
NUMBER
OF
1
APPLICATIONSRATES

APPLICATIONS
1993

1992

MARKET
SEGMENT

1992

RATES
DENIAL
A#Deniale
#+pplications
1993

$ ( 000)
%
1$ 3,957,088 36.7

-10.5
%

%
14.3

%
12.8

47.6
%
%
41.1
50.1
%
%
34.8

-13.6
%
-10.9
%
%
-14.7
%
-10.2

23.6
%
%
26.6
%
22.5
%
12.7

%
20.4
23.7
%
%
19.2
11.4
%

20,323
157,670

%
$1,125,972 42.4
%
$12,831,117 36.0

%
-11.7
%
-10.2

%27.4
12.7
%

%
24.2
%
11.4

1$ ,070,166
$574,727
2$ 38,284
2$ 57,154
$8,932,055

30,638
18,417
7,408
4,813
147,355

$1,760,882
9$ 76,043
3$ 54,477
$430,362
1$ 2,196,206

%
49.2
%
50.7
42.9
%
%
53.6
%
34.4

%-6.4
%
-3.0
%
-10.2
%
-19.9
%
-14.2

%
26.6
29.7
%
%
25.5
16.6
%
%
12.0

%
24.9
%
28.8
22.9
%
%
13.3
10.3
%

$694,231
2$ 65,483
4$ 28,748
8$ ,744,586
5$ 63,403

29,741
14,333
15,408
145,377
2,875

%
1$ ,084,757 35.4
%
33.6
4$ 30,300
%
37.2
$654,457
%
1$ 2,287,023 36.9
%
42.5
5$ 85,309

%
-11.3
%
-12.1
%
-9.6
%
-7.7
%
-60.5

%
26.6
%
31.4
%
21.9
11.7
%
%
16.2

23.6
%
%
27.6
%
19.8
%
10.8
%
6.4
.and
race
income
median
of
estimates
1983
on
based
are
classifications
minority
3)I( ncome
.%
income
base
f
oor-tIncome
s80
applicant
median
ract
Low
.base
income
median
f0nd
o80
%a>8ort-ract
applicant
Income
Moderate
.Upper
median
base
f
o%>8orapplicant
MSA
0
income
ract
tIncome
- appropriate
.,aoMState
Income
household
median
County
rsSA
income
Base
CIGMIS

130,186

$ ( 000)
1$ 0,002,221

177,993

19,701
5,363
14,338
110,485

8$ 69,107
2$ 05,182
$663,924
9$ ,133,114

29,082
7,565
21,517
148,911

1$ ,400,324
$314,439
1$ ,085,885
$12,556,765

14,269
115,917

$608,517
9$ ,393,704

20,535
12,218
5,184
3,133
109,651

BY
TRACT
CENSUS

Tracts
Income
& oderate
MLow
Low
Income
Tracts
Moderate
Tracts
Income
Tracts
Income
Upper

RACE
APPLICANT
BY
Total
Minority
-American
African
Hispanic
Minority
Other
MTotal
-inority
Non

BY
INCOME
APPLICANT
21,958
Low
&Moderate
Income
10,729
Low
Income
11,229
Income
Moderate
106,211
Upper
Income
provided
not
data
Income
2,017
Improvement
Loans
Home
and
(1)Mortgage
.inall
franchise
NationsBank
activity
2)( ellects
Rstates
activity
inone
.there
yeare
orboth
Not
,as
applicable
no
was
V:6
04/20/94
EJM

1
Page

231

Tracts
Minority
Predominantly
Tracts
Non
-Minority

NationsBank
Lending
1Related
Housing
Loans
Refinanced
Including

MARKET
SEGMENT

ORIGINATIONS
1993

1992

)$(000
TOTAL

1%
C: 992-1993
HANGE
OF
DENIAL
NUMBER
1
ORIGINATIONSRATES

1992

DENIAL
RATES
A#Deniale
#+pplications
1993

98,526

$ ( 000)
$8,142,862

137,447

%
$11,258,581 39.5

%
-10.5

%
14.3

%
12.8

13,049
3,384
9,665
85,477

$631,228
$143,242
$487,986
$7,511,635

19,888
4,944
14,944
117,559

%
52.4
$995,528
%
46.1
$221,204
54.6
%
$774,324
%
$10,263,052 37.5

%
-13.6
%
-10.9
%
-14.7
%
-10.2

%
23.6
%
26.6
%
22.5
%
12.7

%20.4
23.7
%
%
19.2
%
11.4

8,766
89,760

$421,749
$7,721,114

12,920
124,527

$674,322
1$ 0,584,258

47.4
%
%
38.7

-11.7
%
%
-10.2

%
27.4
%
12.7

24.2
%
11.4
%

12,841
7,391
3,217
2,233
85,685

7$ 58,175
$382,463
$176,753
1$ 98,959
$7,384,687

19,603
11,335
4,660
3,608
117,844

$1,259,863
6$ 60,605
$259,014
3$ 40,245
$9,998,717

%
52.7
%
53.4
44.9
%
61.6
%
%
37.5

-6.4
%
-3.0
%
%
-10.2
%
-19.9
-14.2
%

26.6
%
29.7
%
%
25.5
%
16.6
%
12.0

24.9
%
%
28.8
%
22.9
%
13.3
10.3
%

$484,457
$169,797
$314,660
$7,206,680
$451,725

19,742
8,928
10,814
115,176
2,529

$763,155
$277,998
4$ 85,156
1$ 0,104,383
$391,043

39.6
%
%
38.2
40.9
%
%
38.5
107.6
%

-11.3
%
-12.1
%
-9.6
%
%
-7.7
%
-60.5

26.6
%
31.4
%
21.9
%
%
11.7
%
16.2

%
23.6
27.6
%
%
19.8
%
10.8
6.4
%
income
.based
race
and
are
median
of
estimates
1993
on
classifications
minority
(3)Income
.Income
income
median
base
%of
s80
orapplicant
Low
➡tract
median
.base
aapplicant
%oincome
80
fnd
>8orIncome
0
Moderate
-tract
income
.median
base
%o>8orIncome
MSA
f0
applicant
tUpper
-ract
appropriate
.income
household
,aCounty
State
oMIncome
median
rsSA
Base
CIGMIS

TRACT
BY
CENSUS
&Moderate
Low
Tracts
Income
Tracts
Income
Low
Tracts
Income
Moderate
Tracts
Income
Upper
Tracts
Predominantly
Minority
BY
RACE
APPLICANT
Total
Minority
AAfrican
- merican
Hispanic
Other
Minority
Total
MNon
- inority

BY
INCOME
APPLICANT
14,137
&Moderate
Low
Income
6,460
Low
Income
Income
-Moderate
7,677
Upper
Income
83,171
provided
not
data
Income
1,218
Loane
Improvement
Home
and
(1)Mortgage
states
franchise
NationsBank
activity
2)( eflects
R.inall
.inone
years
both
orthere
activity
aN,• sot
no
was
applicable
EJM
04/20/94
V:6

2
Page

232

Tracts
-Minority
Non

NATIONSBANK

TRENDS
EMOGRAPHIC
/D
PRODUCTION
LENDING
I
-TNCOME
MODERATE
O
LOW
)STATES
FRANCHISE
( OTAL
T
NATIONAL

1993

1992

#LTM

T%OTAL

#LTM

T%OTAL

PERCENT
CHANGE

Trends
Production

Tract
Census
-tLow
IModerate
oncome
per
Originations
of
Number
Average
Lending
Housing
Related
TOTAL
LENDING

Commitment
Billion
1$ 0
%
23.8
3.7
%

1.82
20.70

1.47
19.97

233

Trend
Product
Related
Housing
Originations
New
Refinance
Originations
TOTAL

8,506
4,543
13,049

%
65.2
%
34.8
%
100.0

10,515
9,373
19,888

52.9
%
%
47.1
%
100.0

23.6
%
106.3
%
%
52.4

3,971

%
36.1

3,760

%
33.1

-5.3
%

Trends
Demographic
as
Classified
Tracts
Census
IModerate
-o
tncome
Low
applicable
Not

EJM
05/06/94

CIGMIS

234

NationsBank Corporation

NationsBank
November 18 , 1994
Communications Division
250 E. Street, S.W.

Mr. William W. Wiles, Secretary

Mr. Robert E. Feldman

RE: Community Reinvestment Act Regulations; Proposed Rule
Dear Sirs:
Thank you for the opportunity to comment on the second draft of the
proposed Community Reinvestment Act Regulations. These regulations, as
proposed, represent significant advancement in the administration of
community reinvestment responsibilities. This advancement will directly
benefit our neighborhoods and communities by focusing attention--and
indeed CRA ratings--on lending performance, service accessibility, and
community development investment.
It is clear that the proposed regulations " raise the bar" in terms of
performance standards. At the same time, and importantly, the proposed
regulations eliminate considerable unnecessary paperwork and distracting
documentation requirements.
It is also clear from the second draft that the thousands of comments received
regarding the first proposal were taken seriously. These comments were
given importance that far exceed the expectations of community advocates,
bankers, and all other interested parties.
USA
Ccal Sponsor

235

November 18, 1994
Page 2 of 9
POSITIVE ASPECTS OF THE PROPOSAL
There are many positive aspects of the new proposal. While the purpose of
this document is to suggest areas of potential improvement, the following
represent the most important positive aspects of the proposal:
Revision of the Market Share Test in favor of a more balanced lending
test approach;

•

Inclusion of community development lending and heightened importance
of community development investment.
•

Refinement of the Strategic Plan Process, making it a more viable option;
Inclusion of alternative delivery systems in the Services Test.
Expansion of the comparative lending analysis beyond geographic
information alone.
Significant progress toward the elimination of emphasis on process and
documentation.
SPECIFIC COMMENTS FOR PROPOSAL ENHANCEMENT
Following are the points of consideration deemed to be most critical:
Assessment Context
It is clear that the proposal attempts to remove the burden of documenting
needs analysis from financial institutions by calling for an assessment
context to be developed by the relevant regulatory body. Removal of this
burden is important, as it comprised one of the most documentation-intense
assessment factors and generated little value compared to effort expended.
In order for the assessment context process to be workable, it must be:
Available early enough to be incorporated into an institution's planning;

•

•

Consistent across regulatory agencies and for all financial institutions
within a given market;
Stable over time.

236

November 18, 1994
Page 3 of9
Assessment Context ( cont.)
The proposal, which calls for a separate context to be developed for each CRA
examination, contains none of these attributes.
Further, there is
considerable room for disagreement between the regulating agency and the
financial institution, requiring that each financial institution independently
create an assessment context in order to support its position regarding any
disagreement. Hence, the burden reduction objective is not accomplished.
As an alternative, a joint regulatory assessment context should be developed
for each MSA by a specified date ( consistent with the initial date for data
collection) for a multi-year period. In order to facilitate lender and
community advocate input, the assessment contexts should be subject to
public comment before they are finalized .
These contexts could be
supplemented by individual institution contexts, completed by the
appropriate regulator, and added at the time of examination.
Establishment of such a context process would: ( 1) ensure consistency within
and among regulatory agencies and within markets; ( 2) help financial
institutions develop their CRA strategies; ( 3) facilitate public input into this
process in a consistent fashion; ( 4) minimize disagreements between
examiners and institutions; and ( 5) preserve the intended documentation
burden reduction.
Service Area Determination
The proposed regulation attempts to clarify the methodology to be used in
establishing service areas. Given the continued likelihood of inconsistency
and disagreement in this important area, NationsBank recommends that the
agencies provide for advance ratification of service areas. This process could
call for the submission of proposed service areas every two years. Service
areas would be deemed to be ratified should the relevant agency not
comment on the submissions within 60 days. This process would replace a
process that generates considerable unproductive discussion in each
examination and which causes undue uncertainty for financial institutions.
Additionally, inclusion of ATM's in service area determination is
inappropriate. Automated teller machines are essentially extensions of
branch networks. ATM's do not initiate customer relationships, often do not
have deposit taking capabilities, and do not have on-site credit extension
capabilities. Taken to the logical next step, inclusion of ATM's suggests that
personal computers and bank-by-telephone programs also should have a

237

November 18, 1994
Page 4 of9
Service Area Determination ( cont.)
bearing on service area determination. Branch locations should be the only
critical determinant in service area.

Failure to exclude ATM's from the determination of service area represents a
significant disincentive to offering this highly popular component of service
delivery.
Technical Compliance/Public File Maintenance
The requirements for branch-based public file availability and information to
be contained within such files have been substantially expanded in the
proposed regulations. Practical experience indicates, however, that branchbased information is rarely accessed by the public. The vast majority of
requests for public-file type information are received over the phone or in
writing. In fact, the volume of requests for such information during full year
1993 made in actual NationsBank branches totaled less than 20---among all
1800 NationsBank branches.
The requirement of maintaining public file information in a large branch
network is incredibly cumbersome, costly, and prone to error. Additionally, it
detracts from energy that could be devoted to more productive activity. It is
clearly not a significant public need. Posted CRA notices could include an
address from which such information could be obtained, substantially easing
this compliance burden without compromising in any way the public
availability of such information.
Services Test
The agencies intend for assessment under the service test to consider the
availability of alternative delivery systems. This consideration is most
appropriate. However, while the regulation specifically addresses the
availability of alternative delivery systems, the service performance ratings
in Appendix C do not specifically reference alternative delivery systems. To
help ensure that examiners are not too narrowly focused when assigning
service performance ratings, the first criterion should reference " service
delivery systems, including alternative delivery systems as well as branches
and ATM's......"

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November 18, 1994
Page 5 of9

Appeals Process
The Lending, Investment, and Service Tests, as contemplated in the second
draft of the proposed regulation, provide for considerable examiner discretion
in the application and assessment of comparative performance measures.
This heightened discretion should allow important flexibility and
accommodation for individual market needs and constraints. At the same
time, however, the opportunity for inconsistency within and among
regulatory agencies also is increased. In fact, it was this concern about
inconsistency that was foremost in much of the testimony from financial
institutions and community advocates in the public hearings conducted at
the initiation of the CRA reform process.
In order to manage this level of discretion, there must be an improved
method of addressing the potential for interagency inconsistency and for
disagreements between financial institutions and their regulators.
A joint agency appeals process should be established. This process could be
administered through the FFIEC or any other joint regulatory body. A
process for timely and thoughtful resolution of issues should be developed.
This process would minimize inconsistent application of discretion and
enhance financial institution confidence in the equity of the ratings process.
Data Collection
There are four critical points to be made regarding data collection:
1. Geocoding Outside of Service Area
It is clear that the intent of the Community Reinvestment Act is to ensure
the equitable availability of lending services and equitable distribution of
lending patterns within the service areas of financial institutions. The
geocoding of lending activity outside of a service area is unnecessary,
irrelevant, costly, and inconsistent with the intent ofthe Act itself.
Elimination of this requirement is critical. Failure to do so will result in a
substantial increase in the burden ofthe Community Reinvestment Act, with
no benefit to the examination/performance assessment process.

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November 18, 1994
Page 6 of 9
2. Race and Gender Data on Small Business Lending
NationsBank supports the collection and reporting of information on the
gender and race of small business borrowers. Whatever the challenges and
opportunities associated with the collection and reporting of HMDA data, it
is clear that the data has led to public, private, and secondary market efforts
that have, simply put, caused hundreds of millions of dollars in home
mortgage loans to be made to low- and moderate-income and minority
Similar advancement--in all sectors public, private, and
borrowers.
secondary market--is crucial in order to fill the gap between the needs of
small/minority owned businesses and the current market reality. This
advancement is not possible without race and gender information.
Equally important, however, is maintaining equity in imposed cost and
reporting structure among competing institutions, and ensuring that the
methodology for collecting such information is not counter to the objectives of
community development. Collection of race and gender data through the
Community Reinvestment Act is counter to community development,
distorts the context of such data, and ensures a competitive disadvantage for
financial institutions subject to the CRA.
In many areas, non-bank lenders dominate the small business lending
market. Additionally , the exemption of small institutions ensures that 75%
of the institutions engaged in lending to small businesses will not be
reporting the race and gender of their small business borrowers. There is no
hope for the gathering of relevant data when the bulk of the lending market
is excused from reporting requirements. This eliminates the possibility for
meaningful advancement in the area of small business lending by distorting
data, and thus is counterproductive to the intent of maximizing lending to
disadvantaged small businesses.
An alternative and superior approach toward the objective of gathering race
and gender data on small business lending is to do so under the Equal Credit
Opportunity Act. Collecting this data under Regulation B would ensure that
information is gathered for the vast majority of small business lenders, would
contribute to a level regulatory environment for all involved in the small
business lending market, and thus provide meaningful, actionable
information for use in expanding the small business lending market.

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November 18, 1994
Page 8 of9

Effective Date ( cont.)
which would be incurred if the changes were accomplished over twelve
months. Given that the value of the data collected for a partial year is
questionable, there is no corresponding benefit to be realized from this
doubling of cost. As such, the requirements for data capture should be
initiated no earlier than one year from the publication of the final CRA
regulations.
Reporting on Outstandings vs. Originations

The intent of data collection is to facilitate analysis of lending activity.
As proposed, the draft regulations call for the reporting of data based
on year-end outstanding balances, with production data ( data
regarding loans originated) to be provided at the option of the financial
institution. Reporting in this manner does not achieve the stated
objective of providing meaningful information for lending analysis
purposes.
The differences between loans outstanding at the end of a period and
loans originated within a given period can be substantial. Loans can
be securitized and sold as part of routine balance sheet management
techniques . Loans can be originated and paid off in the same period.
Lines of credit can be extended to borrowers who may choose to
temporarily pay them down at year end as the customers themselves
engage in balance sheet management. Due to these and many other
factors, the use of outstanding loan balance as a measure of lending
activity is inaccurate and will in all likelihood be anything but
reflective of a financial institutions performance in extending credit.
Additionally, reporting loan outstandings is counter to reporting
requirements under HMDA which call for the reporting of loans
originated. This inconsistency is confusing to the public and makes
data comparison and aggregation very difficult. This inconsistency
also creates a cost problem, as financial institutions must create two
reporting systems.
The relationship between the two methodologies should be reversed.
Data collection that is required should be based on originations, with
the reporting of balances outstanding included at the option of the
individual financial institutions. This will provide valid information
regarding lending activity and provide for consistent reporting

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November 18, 1994
Page 9 of9
Reporting on Outstandings vs. Originations ( cont.)
between HMDA and CRA data reporting. Further, it will be much
more efficient from a systems perspective.

Summary
The preceding recommendations are critical to successful implementation of
the proposed revised Community Reinvestment Act regulations. Questions
regarding these comments should be directed to Catherine P. Bessant,
Principal Community Investment Officer, at ( 202) 624-1018.
Again, thank you for the opportunity to comment on the proposed regulation.

OtherherBessent

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November 18, 1994
Page 7 of 9
3. Small Bank Reporting
The streamlined procedures for small banks ( $ 250 Million in assets or less)
regarding examination procedures and documentation requirements is
necessary and appropriate. Exemption from data reporting, however, is anticompetitive and counterproductive to community development.
In many smaller markets, branches of large banks compete directly with
community banks. Stated alternatively, branch offices of large banks must
be community banks in order to compete effectively in the markets they
serve. Under the proposal, similarly situated competitors in like markets
would be subject to different reporting requirements. This contributes to an
uncompetitive cost structure and reporting differential and therefore a
distinct competitive disadvantage.
Additionally, the exemption of small banks from the data reporting
requirements makes the value of this information minimal at best. It is
widely recognized that small banks, as defined in the proposed regulation,
comprise approximately 75% of the financial institution industry. It is
impossible to ascertain the true working of a market where the information
available from which to draw conclusions comes from only 25% of the market
participants. In order for this data to have true community development
value, the reporting must be comprehensive and capture the vast majority of
the market forces.
As is the case with the collection of information under HMDA, data reporting
requirements should apply to all financial institutions.
4. Additional Concerns
Effective Date
Given that final regulation may not be published until early 1995, the
capture of data beginning July 1 , 1995, is physically impossible and
prohibitively costly. While the implementation of the new reporting
will, of course, necessitate systems changes, the acceleration of these
changes that will be necessary in order to comply with the July 1
effective date will cause significant additional expense.
NationsBank estimates that the expense of implementing the changes
within six months will cause the associated expense to be double that

243

WARREN W. TRAIGER
555 MADISON AVENUE
25TH FLOOR
NEW YORK, N. Y. 10022
TELEPHONE: ( 212 ) 486-0080
FACSIMILE: ( 212 ) 758-9828
TESTIMONY REGARDING THE COMMUNITY REINVESTMENT ACT
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
OF THE
U.S. HOUSE OF REPRESENTATIVES

March 8, 1995
Washington, D.C.

Chairwoman Roukema and Members of the Subcommittee, thank you for
requesting my testimony regarding the Community Reinvestment Act ( " CRA" ) and the
pending inter-agency CRA regulatory reform effort . My office counsels banks on CRArelated issues, and I served as Special Counsel to the New York State Banking
Department during the formulation of its proposed revisions to the rules implementing
the substantially identical state law. This testimony is based upon my experience
advising banks and New York on CRA compliance matters and is not presented on
behalf of any individual institution or the New York Banking Department .
My testimony will summarize the evolution of the CRA and then make the
following points :
•

The CRA has directly resulted in significant community lending and
development activities, but the existing enforcement mechanism is
fundamentally flawed;
•

The inter-agency reform proposal represents a material improvement over
present compliance procedures;
•

A " safe harbor" provision insulating banks with outstanding CRA records
from community protests that unfairly delay the regulatory application
process would serve as a powerful incentive for institutions to implement
superior CRA programs; and
⚫ Institutions that have had their fair lending practices favorably assessed by
their primary regulator should be shielded from Justice Department and HUD
review of the same practices .

244

The Evolution of the CRA
The CRA was enacted by Congress in 1977 in response to allegations that
banking and thrift institutions were engaged in the practice of " redlining . " Senate
Banking Committee Chairman and bill sponsor William Proxmire of Wisconsin broadly
defined " redlining" as the taking of deposits received from customers in lower-income
neighborhoods and investing that money elsewhere . See 123 Cong. Rec. S8958
( June 6, 1977) . Of particular concern was the relationship between the alleged
" redlining" and the deterioration of urban neighborhoods.
The CRA is a broadly worded statute which requires each federally-insured
commercial bank or thrift institution that grants credit to the public in the ordinary
course of business to meet " the credit needs of its entire community, including lowand moderate-income neighborhoods, consistent with the safe and sound operation
of such institution . " 12 U.S.C. $ 2903.
Congress revisited the CRA in 1988 when hearings were conducted by the Senate
Committee on Banking , Housing and Urban Affairs. In his opening statement, Senator
Proxmire expressed his displeasure with the regulators ' enforcement of the CRA:
Regulators seem to think that we're all living in Lake Woebegone . Like
the children of the fictional village, U.S. lenders are all above average.
Almost all get high ratings year after year and almost none is ever held
back.
The committee surveyed CRA rating procedures and found that more
than 97 percent of all lenders passed with flying colors. What's more,
in the Ist 10 years, only 8--that's 8 of 40,000 applications reviewed by
the agencies were denied . I wish we had graders like that when I was
in school . CRA: Hearings Before the Committee on Banking, Housing
and Urban Affairs of the U.S. Senate, 100th Cong. 2d Sess . 7 ( 1988) .
Moreover, community group protests and newspaper reports contemporaneous
with the Senate hearings seemed to provide evidence that lending discrimination and
credit exportation in urban areas continued . See " The Color Of Money," Atlanta
Journal and Constitution ( May 1-4, 1988) .
As a result, Congress amended the CRA rating system to make ratings and
written evaluations public . Effective with examinations beginning on or after July 1,
1990, institutions received one of the following CRA ratings : " outstanding, "
" satisfactory," " needs to improve" or " substantial noncompliance. "
12 U.S.C
$ 2906( b) ( 2) . The rating is contained in a written " CRA Performance Evaluation "
prepared by the regulators , a version of which must be made available to the general
public by the institution.

2

245

In connection with the statutory amendment , regulators issued guidelines on ways
to develop an effective CRA process , with particular emphasis on board of director
and senior management involvement, an expanded CRA statement, and
documentation procedures . 55 Fed . Reg . 18163 et seq . ( May 1 , 1990) .

Enhanced Enforcement/Enhanced Investment
The current era of heightened CRA enforcement has been marked by increased
regulatory vigilance and the unprecedented practice of publicizing bank examination
results . Although it is impossible to measure precisely how much community
investment is a direct result of the heightened enforcement, few would reasonably
contest the regulators ' contention that:
The CRA has come to play an increasingly important role in improving
access to credit among under-served communities-- both rural and urban-across the country. Under the impetus of the CRA, many banks and
thrifts opened new branches, provided expanded services , and made
substantial commitments to increase lending to all segments of society.
59 Fed . Reg. 51233 ( October 7, 1994 ) ( Introduction to the inter-agency
proposal) .
Further, the CRA provides a significant boon to neighborhood - based organizations
that meet community credit needs in ways that traditional lenders cannot. Such
organizations often loan money in smaller amounts than banks can profitably lend and
factor their unique understanding of the community and of loan applicants into their
credit decisions .
In 1994, Neighborhood Housing Services of New York City ( " NHS" ) , an
organization dedicated to creating , preserving and promoting affordable housing , used
private and public money to originate $ 10.25 million in housing loans to credit-starved
neighborhoods and facilitated $ 11.8 million more in direct bank loans . In 1989, prior
to the enhanced emphasis on CRA, NHS originated less than $ 650,000 in loans and
was unable to facilitate any borrowing . NHS, which is supported by over 100 banking
and thrift institutions, attributes this extraordinary growth to banks' increased CRA
concern and awareness .
Heightened enforcement of the CRA has also resulted in the creation of new
investment vehicles intended to serve community development needs . The Global
Resources for Affordable Neighborhood Development program ( " GRAND " ) , a
consortium of foreign and domestic banks, helps finance the construction of low- and
moderate-income housing in New York City through private loans . To date, twentysix institutions, most of them foreign-owned wholesale banks , have committed $ 85

3

246

million to GRAND . Many of these institutions were not involved in CRA in any
meaningful way prior to the era of enhanced enforcement.

Enhanced Enforcement/Enhanced Dissatisfaction
Notwithstanding the increased CRA- related investment, serious problems remain .
Bankers and community activists have expressed dissatisfaction with many of the
elements of heightened CRA enforcement. Their main criticisms involve the subjective
nature of the compliance process, the dependence on onerous paperwork during
evaluations and the resultant ratings, which sometimes seem insufficiently related to
a bank's actual community reinvestment activities . The lack of readily ascertainable
evaluation standards and the examination emphasis on " soft" factors, such as the
volume of community contacts made by a bank or the number of times its board of
directors discusses CRA, are also areas of concern .
The regulatory guidelines have proved, in significant respects, to be unclear or
unhelpful, and bankers have struggled to design and implement CRA compliance
programs with only vague regulatory direction . Particularly disadvantaged are
wholesale banks, institutions subject to the CRA because of their deposit insurance,
but which do not maintain branches and do not draw deposits from or lend to a
community in any conventional sense . Wholesale banks were largely ignored by the
regulators during the first decade of CRA . Their de facto inclusion now forces
regulators to jerry- rig the law's provisions , so that they fit institutions that are not in
the business of extending retail credit in any meaningful way.
Bankers also vigorously object to their regulatory applications being held hostage
to the demands of community groups . Too often , consideration of an application is
delayed, while the regulators re- review the CRA performance a bank that has received
an " outstanding" rating as a result of its regular CRA examination.
Community activists have their particular concerns as well . They maintain that
CRA examinations fail to focus on lending to lower-income neighborhoods, allowing
institutions to receive favorable ratings based solely on lending in higher- income areas .
Community groups also complain about the lack of hard loan data and of a meaningful
enforcement mechanism for institutions with poor CRA records that do not file
regulatory applications .

The Reform Efforts
Hence, the New York Banking Department and then the federal regulators, after
public hearings and comment, have each issued proposed regulations to carry out CRA
reform .

4

247

The New York Proposal
The New York proposal, issued in October 1993 and now in abeyance pending
the outcome of the federal process, illustrates one state's approach to addressing
these concerns . The State CRA, enacted in 1978 and modeled on the federal law,
is similarly applicable to a varied range of institutions : retail and wholesale, foreign and
domestic, urban and rural, money center and community.
The New York proposal is designed to make community reinvestment an ongoing
program , with enforcement emphasis shifted from the regulatory application process
to the annual examination . Its overriding goal is to reduce the unpredictability and
inconsistency of CRA evaluations, by basing an institution's grade primarily on its
aggregate CRA investments . ( A summary of the New York proposal is appended
hereto as " Exhibit A. " )
The plan's centerpiece is a quantitative rating system that employs a numerical
formula to calculate a bank's preliminary CRA rating . The formula is based on the
ratio of dollars an institution invests in CRA activities to the dollar amount of its FDICassessed deposits . Different categories of CRA activities are afforded different
weights. For instance , housing and small business loans in low-income census tracts
are weighted more heavily than the same loans made elsewhere in a bank's
community.
The preliminary rating set by the numerical formula can be adjusted if warranted
by the qualitative aspects of an institution's CRA program . An institution that
discriminates or inadequately serves segments of its community would receive a lower
rating than the formula dictates, while one that aggressively markets in low and
moderate income neighborhoods could have its rating increased .
The quantitative rating system would be coupled with a significant incentive for
institutions to achieve and maintain the highest rating . The New York plan provides
a safe harbor from CRA- based regulatory protests for banks with three consecutive
" outstanding" ratings . This safe harbor is intended to enhance the importance of the
examination process by exempting consistently highly rated banks from CRA protests .
The concept of a safe harbor has consistently been the subject of much
opposition from community organizations , whose representatives contend that any
restriction on their ability to protest would dilute CRA enforcement . They have
particular concern about the accuracy of the examination and rating process that
could lead to a safe harbor.
The New York plan attempts to address this concern with the quantitative- based
rating system , as well as a through a formal community group comment period . The

I

5

248

comment period would provide community organizations with an explicit role in the
Department's evaluation of each institution .

The Federal Proposal
The federal inter-agency proposal also attempts to evaluate banks based on their
actual performance in meeting community credit needs . The proposal rejects the
strict New York quantitative approach , and would instead appraise most banks' CRA
performances by using a five-tier standard to grade them in fourteen lending, service
and investment categories. ( A summary of the federal proposal is appended hereto
as " Exhibit B. " )
The federal proposal is a major improvement over the existing system of CRA
enforcement. It strikes a careful balance between measuring hard lending data and
accounting for variables such as the particular needs and characteristics of a bank's
service area and an institution's own unique abilities and expertise. It also eliminates
the paperwork currently necessary in order for examiners to review records of every
CRA-related phone call and meeting . If, as expected , the proposed small business and
farm loan data collection requirements are dropped from the final inter-agency rule,
CRA compliance will become a much less paper-intensive and much more efficient
process , a result that is critical to the success of CRA reform .
Significantly, the inter-agency proposal also acknowledges that wholesale and
limited purpose institutions require different CRA rules. Instead of subjecting these
banks to examination under the same tests as retail institutions, a special community
development test recognizes that wholesale institutions must comply with the CRA
through nontraditional means, including indirect lending, grants and investments .
The federal proposal is noteworthy for its inclusion of a strategic plan option , the
purpose of which " is to provide more certainty and flexibility for those institutions that
wish to meet their obligation in a fashion that they believe may not be appropriately
assessed bythe standard performance tests . " 59 Fed . Reg . 51243 ( October 7 , 1994)
( Introduction to the inter-agency proposal) . The strategic plan option specifically
responds to the demand for certainty in the examination process by permitting any
institution to design its own CRA program , based upon the specific needs of its
community and the business strategy of the bank. Once designed , a plan is submitted
to the regulator for pre-approval , and the bank is evaluated according to whether the
plan's goals have been met.

Improving the Federal Proposal By Including a Safe Harbor
The inter-agency proposal lacks one important component--a meaningful incentive
for institutions to strive for outstanding CRA performance. If even the highest-rated
6

249

banks are still subject to CRA- protests in connection with certain regulatory
applications, banks may lack motivation to achieve anything more than a satisfactory
rating .
A provision insulating institutions with outstanding CRA records from regulatory
protests would provide a meaningful incentive to attain an outstanding rating .
The absence of a safe harbor under existing regulation has diminished the
significance of on-going compliance by placing enforcement emphasis on the
regulatory application process . As a result, the CRA enforcement process has been
damaged in the following ways:
•

The expectation of community-initiated regulatory protests is an incentive
for banks to defer community investment until the application process , in
order to be perceived as making concessions to the protestor;
•

The reliance on protests is a disincentive for community groups to work with
banks on an ongoing basis;
Protests, which often occur during a time-sensitive merger or acquisition , do
not lend themselves to a rational evaluation of protestor demands; and

•

•

Reliance on protest as the primary enforcement method means that bona
fide community needs may not be addressed unless and until a bank files an
application .

Notwithstanding these problems , deficiencies in the existing examination process
make community group dependence on regulatory protests understandable and
predictable . However, the examination process is about to be replaced with a more
objective, performance- based system that should make safe harbors more palatable .

'The regulators are charged with assessing each institution's record of meeting
community credit needs and are directed to " take such record into account" in their
evaluation of certain applications for regulatory approval . These include applications
for a charter; for deposit insurance; to open a new branch or other deposit taking
facility; to relocate a home or branch office; to merge, consolidate or acquire the
assets or liabilities of another institution ; to form a bank or thrift holding company; or
for a holding company to acquire an institution or merge with another holding
company. The application process includes a public participation period , during which
the public may submit comments on how well an institution has served its
community's credit needs. 12 CFR §25.8 ; 12 CFR §228.8; 12 CFR §345.8; 12 CFR
$ 563e.8

7

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The inter-agency proposal will allow community groups to play a genuine role in
the examination process , by providing them with important CRA- related information .
Groups will have access to a bank's public file, which will include various lending data
and other institution-specific information . In addition , the regulators will begin
publishing planned examination schedules, allowing for timely public comment on an
institution's CRA performance as part of the regular examination.
Increased community investment by the largest number of banks is best
accomplished by linking a safe harbor to an outstanding rating or to consecutive
outstanding ratings . Tying a safe harbor to a satisfactory evaluation , achieved by
approximately 90% of the industry, is unlikely to result in intensified community
investment.
The prospect of a safe harbor will provide substantial incentive to any bank that
anticipates making a CRA-subject application , which, given the expected consolidation
of the banking industry, promises to be a substantial number. In exchange for
outstanding CRA performance, these banks will be able to enter the regulatory
application process with CRA- related peace of mind .

CRA and the Fair Lending Laws
CRA examinations specifically assess an institution's compliance with the Equal
Credit Opportunity Act ( 15 U.S.C. § 1691 ) and the Fair Housing Act ( 42 U.S.C.
§§3601-3619) , and the regulators systematically discuss such compliance in a section
of each bank's CRA Performance Evaluation entitled " Discrimination and Other Illegal
Credit Practices . " The Federal Reserve Board , the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision have all stressed and demonstrated the transcendent importance they
attach to enforcing the fair lending laws.
A bank's primary regulator is best able to evaluate the bank's fair lending
performance, and its determination should , accordingly, be conclusive. Yet, the fair
lending laws are also enforced by the Justice Department ( " DOJ" ) and the Department
of Housing and Urban Development ( " HUD" ) , each of which may conduct its own
independent investigation . The result can be different federal agencies reaching
contradictory conclusions under the same statutes.
An irrational regulatory framework that results in inconsistent findings does
nothing to achieve society's fair lending-related goals. Instead, it engenders
confusion, uncertainty and a sense of helplessness and frustration among banks that
have a genuine desire to engage in non-discriminatory lending practices.

8

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An institution that has had its fair lending practices favorably assessed by its
primary regulator should be shielded from DOJ and HUD review of the same activities .
The banking agencies should be given exclusive jurisdiction over assessment of bank
compliance with the Equal Credit Opportunity and the Fair Housing Acts . Otherwise,
whatever changes are ultimately made to CRA compliance, the goal of establishing
a rational regulatory framework to ensure that banks lend in a non-discriminatory
manner will remain elusive.

Conclusion
The extended reform effort, now in its nineteenth month, risks hampering
community development initiatives at a time when , whatever one's opinion of the
existing scheme, more resources than ever are being devoted to CRA compliance.
This unintended by- product of CRA reform most severely impacts banks that want
or need to do the most: those with fledgling or deficient CRA programs and those
desirous of enhancing their existing efforts . These institutions have postponed
potentially expensive and time-consuming initiatives , because they are uncertain of
the rules that will apply once CRA reform is completed .
The delay affects other institutions as well . Strategic planning , an important
component of most business endeavors and one specifically encouraged by the
regulators for CRA, is acutely hampered by the uncertainty regarding the future legal
framework. Few institutions have the confidence to make long -term commitments in
the face of possibly radical regulatory change .
And if the banks are holding back, it is obviously their communities that suffer.
Potential CRA activities, especially those involving grants and lending through
intermediaries, endeavors which are deemphasized for retail banks under the pending
proposal , are being carefully evaluated in light of anticipated changes . If there's any
doubt as to its future eligibility, an activity is put on hold .
The longer CRA reform takes, the more important it becomes that the process
ends. Put another way, pending reform may be worse than no reform at all .

Thank you .

9

88-882 - 95-9

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( Vol. 61)

651

EXHIBIT " A"
ANALYSIS AND PERSPECTIVE

BNA

PROPOSED CHANGES TO NEW YORK STATE
CRA COMPLIANCE AND ENFORCEMENT PROGRAM
By Warren W. Traiger*
On Oct. 7, 1993, the New York Banking Board
issued for comment a proposal to substantially
revise administration of the state's Community Reinvestment Act. The proposal would repeal the existing rules governing CRA enforcement and substitute a new Part 76 of the General Regulations of the
Banking Board intended to foster ongoing compliance by banks and greater participation by community representatives.

Warren W. Traiger is a New York-based bank regulatory attorney who also serves as special counsel to the
New York State Banking Department for CRA.
10-25-93

This focus often led to CRA protests in which
bank applications were held hostage to demands of
community groups. The protests did not lend themselves to rational evaluation of such demands, and
the emphasis on protests meant that bona fide
community needs were not addressed unless and
until a bank filed an application.
OVERVIEW
Accordingly, the New York Banking Depart
ment's proposal is designed to make community
reinvestment an ongoing program, with enforcement emphasis shifted from the regulatory application process to an enhanced annual examination
process.

SUMMARY OF PROVISIONS
Part 76.1
Statement of Purpose
This section explains the rationale for substantially revising compliance responsibilities and en-

BNA's Banking Report
0891-0634/93/50+$ 1.00

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652

BNA'S BANKING REPORT

( Vol. 61 )

forcement procedures under New York's Commu
nity Reinvestment Act ( Banking Law Section 28-b) .
The revision is intended to encourage continuing
bank compliance and community group participa
tion , rather than the current CRA enforcement
focus on the regulatory application process. Accordingly, the proposal largely measures CRA performance with quantitative data.

• Investments in or loans to financial interme
diaries or consortia that serve and benefit low- and
moderate-income areas and their residents;

Part 76.2

This section contains definitions of the following
terms used in Part 76: " community bank," " community development loan or investment," " farm
loan," " retail bank, " " small business loan," " Total
CRA Activity," and " wholesale bank."
Part 76.3
Certain CRA-Eligible Activities

" Wholesale" and " Retail" banks are defined in the
discussion of Part 76.5 below.

10-25-93

Eligible Pro Bono Activities
• Pro bono financial advice to municipalities that
serve low- and moderate-income areas;
Copyright © 1993 by The Bureau of National Affairs, Inc. , Washington, D.C.
0891-0634/93/$ 0+$ 1.00

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( Vol. 61)

ANALYSIS AND PERSPECTIVE
• Pro bono legal or financial advise to non-profit
day care programs or non -profit organizations that
assist small businesses or provide health care facili
ties or job training programs in low- and moderateincome areas; and

Part 76.4
Requests for Prior Review
This section establishes a pre-clearance process
that allows institutions to seek a prior review bythe
Banking Superintendent regarding the CRA eligi
bility of a proposed activity not listed in Part 76.3
above.

653

ity or offer a particular product or service pursuant
to CRA.
Part 76.6
Annual CRA Assessment
This part sets forth the process by which the
Banking Department will make its annual CRA
assessment and grade each institution. The final
examination result will be published by the depart
ment, which will also make a written summary
available upon public request.

Preliminary rating

Total CRA Activity
CRA Deposit Base

An institution's Total CRA Activity is defined as
the sum of the dollar amount of each eligible CRA
loan, grant, or investment multiplied by a corresponding adjustment or weighting factor ( see
below) .

Part 76.5
Delineation of Service Areas

or
Any other reasonably delineated area that
meets the purposes of CRA.

ADJUSTMENT
FACTOR
( WEIGHT)
Direct Consumer Loans
Generally

1.0
2.0

2.5

'A legally binding commitment to fund a loan will be
weighted as if the loan were funded, but generally only
for the year in which the commitment was issued.
10-25-93

BNA's Banking Report
0891-0634/93/50+$ 1.00

255

654

BNA'S BANKING REPORT

( Vol 61 )

Loans and Investments to Consortia
or Intermediaries
( limited to 50% of a retail bank's total
CRA activity)
General benefit
Specific benefit to low and moderate
income
Benefit to NYS " economic development
zones" or low-income census tracts
Community Development Loans
and Investments
( see footnote 6)
General benefit
Benefit to NYS " economic development
zones" or low-income census tracts
Housing Loans
Mortgages to finance owner-occupied
1 to 4 family homes
Mortgages to finance owner-occupied
1 to 4 family homes in low and
moderate income areas
Mortgages to finance owner-occupied
1 to 4 family homes in areas
designated as NYS " economic
development zones" or low
income census tracts
Construction loans, end loans, or
mortgages to finance multi-family
housing units
Construction loans, end loans, or
mortgages to finance multi-family
housing units in low and moderate
income areas
Construction loans, end loans, or
mortgages to finance multi-family
housing units in areas designated
as NYS " economic development
zones" or low-income census tracts
Small Business and Farm Loans⚫
In service area generally
In low and moderate-income area
In areas designated as NYS " economic
development zones" or low-income
census tracts
Letters of Credit, Guarantees, and Other
Credit Enhancements
Supporting small business lending
Supporting community development
lending programs
Supporting community development
lending programs in areas designated
as NYS " economic development
zones" or low-income census tracts
Miscellaneous
Loans or investments in community
development banks

10
2.0
2.5

3.0
4.0

1.0
20

2.5

Outstanding ( 1)
Satisfactory ( 2)
Needs to Improve ( 3)
Substantial Non -Compliance ( 4)

Retail Bank
Over 30%
30% to 20%
19.9% to 15%
Under 15%

Wholesale Bank
Over 8%
8% to 5%
4.9% to 3%
Under 3%

1.5
2.5

3.0
1.5
2.5
3.5

1.0
3.0
4.0

3.0

⚫A " small business loan" is a commercial loan in an
original amount of $ 1 million or less. A " farm loan" is a
loan secured by farmland or advanced to finance agricul
tural production in an original amount of $ 500,000 or
less.

10-25-93

Grants to non- profit organizations
organized to address the needs of
low and moderate-income persons
( May not exceed 15% of a retail
7.0
bank's total CRA activity)
Purchase for investment of state
or local bonds, which proceeds
are expended for specific benefit
1.0
of low- and moderate-income persons
Purchase for investment of project
finance bonds that advance the
purposes of CRA and which proceeds
are expended in New York but outside
the service arca
1.0
Reasonable and verifiable cost of
pro bono services set forth in
7.0
Part 76.3
The CRA Deposit Base is defined as the average
deposit totals reported for FDIC assessment purposes
since the institution's last CRA assessment.

' A " community bank" is defined as a retail bank with
( 1) assets of $ 150 million or less; ( 2) average aggregate
net loans at least 65 percent of it total average deposits:
and ( 3) at least 65 percent of the average aggregate
amount of its loans within its CRA service area.

Copyright © 1993 by The Bureau
of National Affairs, Inc., Washington, D.C.
0891-0634/93/50+$
1.00

256

ANALYSIS AND PERSPECTIVE

Part76.7
Community Group Participation

Part76.8
Review of Applications
This section enumerates the types of state regulatory application approvals subject to an institution's
CRA performance:

( Vol. 61)

655

It further provides that neither the Banking
Board nor the Superintendent may reject an application on CRA grounds if the applicant has received three consecutive outstanding ratings. This
safe harbor is contingent upon the institution not
having been found to have engaged in discriminatory lending practices under Section 296-a of New
York's Executive Law.

CONCLUSION
The final New York regulations are expected to
be promulgated at approximately the same time
that the federal regulators, at the direction of the
president, are due to issue their own CRA reform
proposal.

257

EXHIBIT " B "

A Brief Guide To Federal CRA Reform - The Revised Proposal

PART ONE: SETTING THE STAGE

I. The service area
How an institution defines its service area ( community) depends on whether it is a retail
bank or a wholesale or limited purpose bank.
A retail bank is in the business of making home mortgage loans, loans to small businesses
or farms or consumer loans . A retail bank must delineate its community to include
equidistant areas around each deposit taking facility that originates such loans or has them
outstanding. A community may not normally extend beyond state or metropolitan statistical
area ( MSA) boundaries.
A wholesale bank is not in the business of extending home mortgage, small business or farm
or consumer loans to retail customers . A limited purpose bank offers only a narrow product
line, like credit cards or car loans, to a national or regional market . A wholesale or limited
purpose bank may delineate its community as an area around its office or as a broader
statewide or regional area that includes the area surrounding its office . An institution must
make a written request to the regulator in order to be considered a wholesale or limited
purpose bank .
No bank's service area may arbitrarily exclude low- or moderate-income areas or reflect
illegal discrimination .

II. Information about the community
Examiners will gather demographic data on income and housing . They will develop
information on community credit needs from sources that include community organizations,
state and local governments and economic development agencies.

From The Law Offices Of Warren Traiger
( 212) 486-0080

Page 1

555 Madison Avenue
New York, New York 10022

258

III. Information about the bank
An institution will collect data on its home mortgage loans ( based on HMDA reports) ; small
business and farm loans ( using call report definitions with supplemental race and gender
information) ; and, at its option , consumer loans ( reports to contain loan amounts outstanding
and the locations and incomes of borrowers) .
The regulator will also factor the following bank-related information into the examination:

•

Product offerings and business strategy;

Anything else deemed relevant.
IV. The assessment method
Unless an institution selects the strategic plan option described below, retail banks will be
assessed according to the lending , investment and service tests outlined in Part Three and
wholesale and limited purpose banks according to the community development test depicted
in Part Four. An institution with under $ 250 million in assets that is not part of a holding
company with $ 250 million or more in assets may choose the small bank assessment option
set forth in Part Five.

PART TWO: THE STRATEGIC PLAN OPTION
Every bank has the option of adopting a plan setting forth its CRA strategy for up to five
years. The bank must formally solicit public comment on its plan in a general circulation
newspaper in its service area for at least 30 days. The plan and any public comment must
be submitted to the regulator for approval at least three months prior to the plan's effective
date.

The Plan must:
• Provide annual measurable goals in each relevant performance category; and

The examiner will evaluate a bank's performance according to whether the plan's goals have
been met or exceeded . Should a bank fail to meet its goals, its CRA performance will be
rated as either needs to improve or substantial noncompliance.

From The Law Offices OfWarren Traiger
( 212) 486-0080

Page 2

555 Madison Avenue
New York, New York 10022

259

PART THREE: RETAIL BANKS

THE LENDING TEST
The lending test is the focus of a retail bank's CRA evaluation . It measures an institution's
record of serving its community through home mortgage loans, small business and farm
loans, community development loans and, at the bank's option, consumer loans. Community
development loans address affordable housing or other community development needs that
benefit low- or moderate- income individuals or small businesses or farms and are not being
met by the private market. A bank may also elect to include its affiliate , consortia and third
party loans as part of its lending test assessment .

LENDING TEST RATINGS

Outstanding

High
Satisfactory

Low
Satisfactory

Needs to
Improve

Substantial
Noncompliance

Excellent

Good

Adequate

Poor

Very Poor

Percentage of Loans
in Service Area

Substantial

High

Adequate

Small

Very Small

Geographic
Distribution of Loans
in Service Area

Excellent

Good

Adequate

Poor

Very Poor

Distribution of Loans
among Income
Levels and Business
Sizes

Excellent

Good

Adequate

Poor

Very Poor

Record of Serving
Credit Needs of
Economically
Disadvantaged

Excellent

Good

Adequate

Poor

Very Poor

Use of Innovative or
Flexible Lending
Practices

Extensive

Uses

Limited

Little

None

Level of Community
Development Loans

Leadership

High

Adequate

Limited

Few, if Any

Responsiveness to
Community Credit
Needs

A bank's performance need not fit every aspect of a rating profile to receive that rating .

From The Law Offices Of Warren Traiger
( 212) 486-0080

Page 3

555 Madison Avenue
New York, New York 10022

260

THE INVESTMENT TEST
The investment test evaluates how well a bank is helping to meet community credit needs
through investments, deposits, membership shares in a credit union or grants that :
Primarily benefit low- or moderate-income individuals or small businesses or farms;
Address affordable housing or other community development needs, unmet by the
private market; or
Involve donating , selling on favorable terms or furnishing rent-free a bank branch in a
minority neighborhood to a minority or women's depository institution .

INVESTMENT TEST RATINGS

Outstanding

High
Satisfactory

Low
Satisfactory

Needs to
Improve

Substantial
Noncompliance

Excellent

Significant

Adequate

Poor

Few, if any

Use of
Innovative or
Complex
Investments

Extensive

Significant

Occasional

Rare

None

Responsiveness
to Community
Needs

Excellent

Good

Adequate

Poor

Very Poor

Level of
Qualified

A bank's performance need not fit every aspect of a rating profile to receive that rating .

THE SERVICE TEST
The service test analyzes the bank's retail service delivery system ( including branches and
other facilities) and its community development services, defined as services that primarily
benefit low- or moderate-income individuals or small businesses or farms and address
affordable housing or other community development needs, unmet by the private market.

From The Law Offices Of Warren Traiger
( 212) 486-0080

Page 4

555 Madison Avenue
New York, New York 10022

261

SERVICE TEST RATINGS
Outstanding

High
Satisfactory

Low
Satisfactory

Needs to
Improve

Substantial
Noncompliance

Service Delivery
System

Readily
Accessible

Accessible

Reasonably
Accessible

Limited
Accessibility

Inaccessible

Record of Retail
Facility
Openings and
Closings

Improved
Access

No Adverse
Affect

Generally
No Adverse
Affect

Adverse
Affect

Convenience of
Service to
Community

Tailored
To
Community

Not
Inconvenient

Not
Inconvenient

Inconvenient

Significant
Inconveniences

Leader

High Level

Adequate

Limited

Few, if Any

Community
Development
Services

Significant
Adverse
Affect

A bank's performance need not fit every aspect of a rating profile to receive that rating .

ASSIGNING A RATING
A retail bank's rating is assigned based on its aggregate point value under the three tests.
COMPONENT TEST RATINGS
Outstanding

High
Satisfactory

Low
Satisfactory

Needs to
Improve

Substantial
Noncompliance

Lending Test

12

9

6

3

0

Service Test

6

4

3

1

0

Investment Test

6

4

3

1

0

AGGREGATE POINTS
18 or more
9 to 17
5 to 8
4 or fewer

RATING
Outstanding
Satisfactory
Needs to Improve
Substantial Noncompliance

From The Law Offices Of Warren Traiger
( 212) 486-0080

Page 5

If an institution's aggregate point
total is more than twice its lending
test score, its total is reduced to
twice that score. A rating may
also be lowered based upon
evidence of lending discrimination
or other illegal credit practices.

555 Madison Avenue
New York, New York 10022

262

PART FOUR: WHOLESALE AND LIMITED PURPOSE BANKS
The community development test evaluates a wholesale or limited purpose bank's record of
investments, lending and services . The bank may elect to include affiliate, consortia or third
party lending in its evaluation and may receive credit for CRA-related activities outside its
service area to the extent that it conducts them within its community. In order to be
assessed under the community development test, an institution must request and receive
confirmation of its status as a wholesale or limited purpose bank from its regulator prior to
an examination.
COMMUNITY DEVELOPMENT TEST RATINGS

Level of Community
Investment, Lending
and Services
Use of Innovative
or Complex
Investments, Loans
and Services
Responsiveness to
Community Needs

Outstanding

Satisfactory

Needs to
Improve

Substantial
Noncompliance

High

Adequate

Poor

Few

Extensive

Occasional

Rare

None

Excellent

Adequate

Poor

Very Poor

A bank's performance need not fit every aspect of a rating profile to receive that rating .

PART FIVE: THE SMALL BANK OPTION
A bank with under $ 250 million in assets that is not part of a holding company with $ 250
million or more in assets may choose this assessment option ( no loan reporting required) .
A small bank will receive a satisfactory rating if it:
•

Has a reasonable loan-to- deposit ratio;

A small bank may receive an outstanding rating if it exceeds satisfactory standards and a
needs to improve or substantial noncompliance rating if it fails to meet those standards.

From The Law Offices Of Warren Traiger
( 212) 486-0080

Page 6

555 Madison Avenue
New York, New York 10022

263

NED BROWN

( 212) 388-0200

Testimony before the Subcommittee on Financial Institutions and
Consumer Credit

Madame Chairwoman, Members of Congress, thank you for the opportunity
to provide testimony on the critical issue of the Community Reinvestment
Act. There will be many people who will appear before this Subcommittee
who will give you their opinions regarding CRA and the direction it should
go. I would like to take a different direction - one that deals with data and
facts .

My company, Financial Modeling Concepts , is a unique software company
that works for banks to help them make profitable loans in low to moderate
income areas and to the individuals that fall within that spectrum. We're in
the business to help banks find credit- worthy customers to whom they can
make good loans . Absent of CRA, the banks might not make the extra effort
to reach this market. Our company is based in New York, Long Island and
Boston. Allow me to explain briefly our mission and how we approach our
business . Most of our employees have extensive experience dealing with
demographic data and developing mathematical models . Two years ago, we
recognized a need to help banks make profitable loans in LMI areas and
increase their penetration . First, we started with the regulators. We've met
with the top compliance people of the regulatory entities that testified earlier
today. We wanted to understand from their perspective where the needs
were in the marketplace, and how to help the banks . The regulators
identified three key areas:

•

Helping the banks to quantify the potential for the major credit
products in LMI areas.

264

Make their marketing effort more efficient by driving down the net
cost on a per loan basis.

•

What does our company do that is unique? We are in the modeling business
as it relates to CRA lending. In other words, we try to predict future needs
based on present and past behavior ( see attached article) . Let me explain.
Banks keep on their data file name, address, loan type and balance
information for each loan. We take that data from our clients and append
available demographics like age, estimated income, marital status, presence
of children, home ownership, etc. If you have thousands or millions of these
individual files as we do, you can begin to develop highly accurate
predictive models. In other words, by looking at individual demographic
data in LMI areas, we can predict with a higher level of confidence whether
this individual is more likely to want and need one of the following credit
products: purchase mortgage, home equity loans, mortgage refinance,
unsecured installment loans or a credit card. Our objective is to help the
banks provide credit in all forms as widely as possible into their
communities.

Having explained what we do, allow me to share with the Subcommittee
what we've learned looking at our clients' files. First, we determined to
whom the banks are lending. On the mortgage side, the principal
beneficiaries of CRA are solidly in the lower end of the middle class.
Regardless of race, whether they are African-American, Hispanic, Asian or
Caucasian, these are fairly typical middle-class Americans - albeit at the
lower end. Nearly half of the mortgage holders in our client bank's data files
make between $ 20,000 to $ 50,000 in total household income.

For installment loans, the principal target is a bit different. Installment loans
are particularly important in LMI areas for auto purchases and major
appliances. The average installment loan balance in our data file is

265

approximately $ 13,000, and it appeals to an entirely different target than that
of purchase mortgages. For installment loans, 57% make below $ 30,000 in
estimated household income - down substantially from the purchase
mortgage base. Demographically, an even greater percentage ( 65%) ofthe
installment loan base are single as opposed to mortgage loans . Further, a
large percentage of people over age 55 carry installment loans according to
our bank loan records . For specific markets, we've also included a bank loan
analysis in LMI areas for Albany, New York and Philadelphia,
Pennsylvania. While we cannot see the actual faces of these individuals, the
information about them tells us a lot. Many of these people are the

Having given you a factual perspective, allow me to answer those questions
the Sub-committee raised that are within our expertise.

Is CRA fulfilling its original purpose of ensuring that banks and thrifts are
meeting the credit needs of their communities? Yes, but only partly. There
is no question that it has been hard to find customers to qualify many of
these loans. But there are two pieces of good news . New technologies like
the ones we use make it easier and more cost-efficient to make CRA loans.
And, much of the profitable lending potential still goes untapped in these
communities . Is this technology successful? Well, I can tell you that we
give every one of our clients a moneyback guarantee on our work. If they
are not satisfied that their lending rate goes up, their net marketing cost per
loan and the rejection rates go down, then we give them back their money.
We haven't had one taker yet. The point is that we are proving day-to-day
that there are people to be served in LMI communities and money to be
made by the banks. It takes a little more " know-how" , but it is very
profitable business .
Who benefits from CRA lending? As was pointed-out earlier, it is
clearly the lower end of the middle-class. And racially, LMI lending
disproportionately benefits Whites because they make-up the majority of
many LMI communities. In the preceding charts, we've analyzed the white

266

composition of LMI communities for several Metropolitan Statistical Areas
( MSAs) . The markets we used are in Maryland, Wisconsin and Florida.

To the issue of " safe harbors" , I have only a sideline view as it pertains to
H.R. 317. While the proposed " safe harbor" for more than ninety percent of
the banks might be too high, there definitely should be greater incentives for
banks who do an excellent job. Some of my bank clients have suggested to
me that those with two consecutive outstanding ratings for CRA should get
two years of " safe harbor" on applications.
Finally, I would encourage you to look at CRA as a large building block in
the foundation of our communities . As Congress continues to move ahead
on legislation that will affect the middle-class, it's important to take a macro
view on the role that Community Reinvestment plays. The availability of
private capital is the cornerstone to economize strength in every urban and
rural community. As the government seeks to reduce entitlement programs
to lower income areas, private capital that is prudently placed becomes the
cheapest form of economic assistance. From that perspective alone, CRA
will play a tremendous role in the years ahead. Thank you very much for
your attention.

Current
Holders
Product
LMI
Database
LMI
Proprietary
FMC

5
2.6

5.7

18-34
AMale
, ges
Single
18-34
AFemale
, ges
Single

2.1

10.1

14.2

:6
7

:
7
4.2
2

1.2
4.9
0.8
6.1

30

10.3

14

5.4
2.7
7.8
5
$ .9
3.9
7.5
0.6
2.6

6+
Cless
,35
or
ge
Ahildren
Parent
Single
<6less
hildren
Cor
,35
ge
AParent
Single
20

267

6<35+
CAMarried
ge
, hildren
6-11
,35+
CMarried
ge
Ahildren
35+
<1,CAhildren
7ge
Married
Children
o
,NAges
35-54
Married
Children
o
,NAges
55-64
Married
o
NAMarried
Children
, ges
65+
55-64
,Ages
Single
65+
ASingle
, ge
6+
CAParent
ge
, hildren
35+
Single

2
0.9
2.3
3.4
0.9
4.5

10

0

4.4
5.3

10.3
17.1
4.1
5.7

0.5
2.6

10

20

Concepts
Financial
Modeling
Copyright
1995

30

Current
Product
LMI
Holders
Database
LMI
Proprietary
FMC

Median
Mortgage
6
=$ 1K

Missing

$15-19.9K

2
$ 0-29.9K
3
$ 0-39.9K
4
$ 0-49.9K
268

$50-74.9K
$75-99.9K

100-124.9K
$125K
+

40
=$6Median
Mortgage
1K
0.7
Median
1Installment
=$ 3K
1.4

30

20
Missing
<$15K
6.2
24.9

14.8

10

0

10.7
25.3
17.3

31
18.3

10
14.4
13.1

20
7.5
7

2.8
2.1

30
1
0.9

40
1100-124.9K
0-39.9K
0-29.9K
0-49.9K
73$+5425-19.9K
5-99.9K
0-74.9K
25K
0.4
0.2

Copyright
1995
Financial
Modeling
Concepts

2

Holders
Product
LMI
Current
MSA
A
lbany
S
chenectady
T
,,- roy

8.3
:
5.6
10
7.2

3.3
2.2

18-34
AMale
, gos
Single

16.7

6.7
1.1
2.2
1.1
4.4
1.1

7,8

:9.4
:
6.1
6.7
8.9

3.3
2.2
7.8
6.7
7.8
5.6

15

3.9
3.9
1.1

6+
,or
C35
less
ge
Ahildren
Parent
Single
<6less
CAParent
,35
ge
orhildren
Single
30

6.1
:

12.2

Children
35+
Single
,A6+
Parent
ge

6.7

20

10

269

<635+
CAMarried
ge
, hildren
6-11
,CAhildren
35+
ge
Married
CMarried
<135+
7ge
,Ahildren
Children
35-54
,NAges
o
Married
55-64
,NAges
Children
o
Married
Childron
o
,Nges
65+
AMarried
55-64
ASingle
, ges

1.1
1.1
0.6
2.8
0.6

0

0.6
2.2

10

20

30

Concepts
Modeling
Financial
1995
Copyright

3

Holders
Product
LMI
Current
MSA
A
lbany
S
chenectady
T
,, roy
Installment
Mortgage
LMI

Missing
1
$< 5K
1
$ 5-19.9K

2
$ 0-29.9K
3
$ 0-39.9K
270

$40-49.9K

5
$ 0-74.9K
7
$ 5-99.9K
100-124.9K

+
1
$ 25K
40

30
Missing <$15K
LMI
Mortgage
10
LMI
Installment
0
O

20
12.2
17.8

10

0

20
14.4

35.6
27.2

10
10
21.1

20
8.9
10

2.2
7.2

30
1.1
2.2

Copyright
Financial
1995
Modeling
Concepts

40
0-39.9K
0-29.9K
100-124.9K
$754+1325-19.9K
5-99.9K
0-74.9K
0-49.9K
25K
0
0

Holders
Product
LMI
Current

3.9
2.1

7

18-34
AMale
, ges
Single

3.4

9.6
7.9

14.3
11.8
0.4

2.6
1.7
5

271

3.5
2.6
0.8
3.2

5.5
<635+
CAMarried
ge
, hildren
6-11
CAMarried
ge
, hildren
35+
Married
,CAhildren
<135+
7ge
35-54
,NAges
Children
o
Married
Married
,NAges
55-64
Children
o
65+
,N,Ages
Children
o
Married
55-64
ASingle
, ges
65+
ASingle
, ge
6+
ASingle
,CParent
35+
ge
, hildren
CParent
<635+
,Ahildren
ge
Single
6+
CSingle
,Ahildren
less
or
35
ge
Parent
<635
CSingle
,,Ahildren
less
or
Parent
ge

0.2
0.4
0.7

10.2

11.5
3.5
4.7

2.1
1.9

13.1

10.1
7.8

20.5

4.6
:
5.7

4.1
5.3

1.3
0.6
2.7

3.6

20
30

10

0

10

20

30

Concepts
Financial
Modeling
Copyright
1995

5

Currrent
Product
LMI
Holders

Missing
1
<$ 5K

$20-29.9K
$30-39.9K
272

4
$ 0-49.9K

5
$ 0-74.9K
$75-99.9K
100-124.9K
+
$125K

30

20
Missing
LMI
Mortgage
0.7
24.9
LMI
Installment
1.4
28.4

10
15
17.5

14.8
17.1

16.2
15.1

20

10

0
15.5
11.9

7
6.2

3.2
1.6

1.1
0.6

30
2$75+143< 0-29.9K
5-19.9K
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Financial
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1995
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277

AMERICAN BANKER

Compliance
9

Big Banks , Software Vendor

Tackle CRA

Compliance Rise
said. " The technology, marketing, and regulatory relations
aspects are all coming together."

By SHANNON HENRY
As Community Reinvestment
Act enforcement gets tougher,
more banks are turning to software vendor Financial Modeling
Concepts - even banks that have
outstanding ratings.

Ned Brown
Managingpartner,
Financial Modeling Concepts

Group, and Chevy Chase Savings
Bank are all customers.

278

REGULATORY

COMPLIANCE
WATCH
.
Y.I
DECEMBER 19, 1994
-F.
NUMBER94-48
1995 Preview

People
Issues
1959
ThisweekRegulatoryCompliance
Watch looksaheadatthepeople
andissuesthatwillhavethegreatesteffectonthe industry in 1995.
Nine People To Watch
Matthew Lee
... new-wave agitator
John Salgado
safe loans to ' risky' folks
Alfonse D'Amato
plans to attack CRA
Richard Shelby

Banks, Agitators Get Savvy
As GOP Takes Congress
1995 is going to be an important those that don'tmake the grade.
yearforbanking compliance and will
beoneinwhichthetonemayshapethe
nature ofbanking foryears to come.
First, 1995 likely will mark when
compliance officers in manybanks fi- Matthew Lee
nallytaketheirlong-deserved place in
bankinghierarchy. Today'ssuccessful
financial institutions more often than
not are those with active compliance
departments.

*
Five Issues To Follow
✓ CRA

More regs? Fewer regs? Tougher
regs?Forthetypicalbank compliance
officer, the answer to all three questions during 1995 mightbe " yes." The
compliance officer's horizon will expandthiscomingyear,astheeliminationofsome old barriers will open up
new business territories and new
compliance challenges. Here are the
RegulatoryCompliance Watch picks for
theissues to watch in '95.

ofthe actthought theyhadthe votesin
theSenate nearly 20years agoto killit
atbirth,butthenthesenatorwhowould
havecast the decidingballot got ill and
themotiontodrownCRAfailedonatie
vote.

CRA Isn't DOA
Winter Break
Regulatory Compliance Watch
willnotbepublished Dec. 26 and
Jan. 2. Publication resumeswith
the issue of Jan. 9.

© 1994 byAmerican Banker Inc. Photocopy permission is available through the Copyright Clearance Center, 27
Congress St.,Salem, MA01970 foranypage herein forthe flat fee of$ 3 percopyperpage. Copying forotherthan
personal useorinternal referencewithoutpermission isprohibitedandsubjecttoliabilityupto$ 100,000perinfringement.
Forbulkreprints, call( 800) 367-3989. Backissues, $ 20 each,through Tyrone Valentine, ( 202) 347-2665, ext. 224.

279

People

tester who uses
technology and a
bank'sownfigures
tosupportclaims
ranging from allegedredliningto
CRA violations.
Asexecutive
director of Inner
City Press/ComLEE
munity on the
Move, he transformed an organization he created in
1987 from agrass roots, self-helpnews
paper forhomelesspeoplewhowanted
to homestead empty buildings into a
group gainingnotoriety nationally for
itssuccessinbringingpowerful banks
to their knees or at least tothe negotiating table.
John Salgado

Banking Committee, Alfonse M.
D'Amato, R-N.Y., has vowed to put
pressure on regulators to reduce their
regulatoryburden
on banking institutions generally,
and the pressure
from the Department ofJustice as
well as regulators
to impose tough
tests for compliance with the
CommunityReinD'AMATO
vestment Act.
That pressure is
expected to be rewarded quickly
through deletion of several provisions
oftheproposed CommunityReinvestment Act regulation.
Provisions likelyto face the ax, perhapsas earlyasthefirstpartofJanuary,
include language mandating that
institution'srecordsonapplications for
small business loans that include data
on race and gender. Also likely to be
imposingsevere
deleted is a provision imposing
severe
penaltiesfornoncompliancewithCRA
nowhandeddown only for violations
of safety and soundness and insider
activities regulations.

legislationpassed thisyearthat reduce
regulatory burden somewhat.
Charles Rice
Charles Rice, chairman and chief
executive of Florida's Barnett Banks
Inc., is intheforefront ofbanks' efforts
to defend themselves against allegations that they discriminate inlending
andprovidefewerservicesinminority
communitiesthantheydoinareasservingwhitesandthosewithhighincomes.

Ned Brown
*
Ned Brownisfounder ofFinancial
ModelingConcepts, a consultingfirm
in New York City that teaches banks
howtomarkettonewcustomers. After
onlybeinginbusiness for oneyear, he
hassignedup25majorbanksasclients.
Heiswhatwethinkofasthenewbreed
of consultant who doesn't instill the
fear ofGod in bankers. Instead ofconsultants offloading work from banks
like an ongoing annuity program,
BrowntoldRegulatoryComplianceWatch
that he believes that banks will use
consultant to help them implement
theirlow- tomoderate-incomelending
programs.

Alfonse D'Anato

2

REGULATORYCOMPLIANCEWATCH

DECEMBER19, 1994

280

New Software Brings HMDA Data to Desktop
Lenders who want to review their computer, then takeyourmouse, click informationonaninstitution's HMDA
1993 lending records-and those of it on what you need," said Daley. " If lending performance into maps. " PCI
their competitors can do so now on you know how to use a VCRyou can began operating a CRA reporting and
mapping service on an outsourcing
personal computers.
use this program."
basis," he said. " Clients would mail or
modem to PCI, CRA and related data,
and would receive in return analysis
reports, presentations and maps illustrating the data." However, this approach meant clients had to waitthree
weeks fortheresults. " Nowbothregulators and institutions can ask nearly
any questions about HMDA data and
have it answered in real time-on site
during an examination."

People

Eugene Ludwig

institutionsandallowbankstodomore
things.
Clinton's move to the right could
makeDeval Patrick, assistantattorney
general for civil rights, the sacrificial
lamb. TheJustice Departmentis under
siege. Eventhoughthe decibel level on
fair lending and compliance is onthe
declineitis notgoingawaycontraryto
whatsomeonCapitolHillhavethreatened orbragged. However, fair lending willnot be the highprofile issue it
hasbeenin1994, atleastnotinthesame
way, PresidentClinton isbeingforced
to move back and reign in Justice. He
increasingly will rely on Ludwig.

and Byrne will most certainly be the
spokesman waving bankers' banners
favoringmore realisticpaperwork. He
continues to be the industry's undisputed point man onBSA.

John Byrne
Forthe secondyear in a row, RegulatoryComplianceWatchhaschosenJohn
Byrne,AmericanBankersAssociation's
seniorcounsel, assomeone towatch. In
1995, he will continue to stand outas a
bankers' advocate in reducing regulatory burdens associated with antimoney laundering regulations. Many
rules are expected to be out nextyear

4

REGULATORYCOMPLIANCEWATCH

DECEMBER 19, 1994

Compliance

BANKER
AMERICAN
1JThursday
, 995
26
anuary

10

Inconsistent
CRA
Confusing
Rules
Banks

olvstad
so
"sTaid
we
,are
Ms.
received
outan
whose
bank
its
last
after
rating
standing

HENRY
SHANNON
By
While
WASHINGTON
Community
Act
Reinvestment
reform
,
here
debated
hotly
is
country
the
around
banks
still
are
under
.examined
law
the
being

reformed
."Othe
CRA
banks
ur
under
the
being
examined
are
not
said
."he
rules
new

.
exam
on
concentrated
exam
That
the
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, tronger
rule
ut
sbalso
had
arent
emphasis
placegeographic
on
,amain
credit
ment
the
of
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said
.,she
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banks
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of
he
"Tmeasurement
isgoing
ball
whole
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."
reg
new
the
AMs.
nd
Barefoot
game
,".said
on
the
you
loans
those
get
can't
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."books

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" xaminers
using
are
the
, s.
."Mrules
said
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ove
under said
life
imagining
to
quickly
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using
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are

Bneed
" anks
prepared
be
to
,"she
share
market
about
talk

281

COR
2010

282

EMBARGOED

JOINT STATEMENT OF THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
OFFICE OF THE COMPTROLLER OF THE CURRENCY,*
U.S.DEPARTMENT OF THE TREASURY
OFFICE OF THRIFT SUPERVISION,*
U.S. DEPARTMENT OF THE TREASURY
Concerning
COMMUNITY REINVESTMENT ACT REGULATORY REFORM
Before the
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND
CONSUMER CREDIT

March 8, 1995

*Statement required by 12 USC 250:
The views expressed herein are those of the Office ofthe Comptroller ofthe Currency and the Office ofThrift
Supervision and do not necessarily reflect the views ofthe President.

283

I.

Introduction

On behalf ofthe Board of Governors ofthe Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office ofthe Comptroller ofthe Currency, and the Office of Thrift
Supervision ( collectively " the agencies" ) , we welcome the opportunity to present this status
report on the Community Reinvestment Act ( " CRA" ) regulatory initiative.
Since its passage in 1977, the CRA has served as a catalyst in encouraging banks and
thrifts to provide improved access to credit among underserved communities -- both urban and
rural -- across this country. Under the impetus of CRA, many banks and thrifts have opened new
branches, provided expanded services, and made substantial commitments to increase lending in
the communities they are chartered to serve.
Despite the successes ofthe bank and thrift industries in responding to CRA's objectives,
community and consumer groups, other public interest organizations, and the industries
themselves, maintain that the full potential of the law has not been realized. In large part, in their
view, this is because government efforts have focused on compliance with process rather than
performance. Community groups complain that many communities are not adequately served
because the CRA evaluation process does not focus enough on actual performance. At the same
time, bankers complain that the current implementation ofthe CRA results in excessive burden
relative to the benefits that the regulation produces and does not provide them with sufficient
guidance.
These concerns have given rise to this joint effort to revise the regulations that implement
the CRA. This joint statement discusses the CRA's background, its evolution, and the interagency
efforts to reform the CRA regulations. This joint statement is intended to supplement the
testimony presented before the Subcommittee by each agency.

II.

Brief History ofthe CRA
A.

Legislative Background

The CRA was enacted as part ofthe Housing and Community Development Act of 1977
during a period ofconsiderable national interest and debate over methods to help revitalize
economically distressed areas, most ofwhich were lower-income areas ofinner cities.
Consequently, the primary focus ofthe CRA is geographic in nature.
Its enactment was in response to concerns that some banks and thrifts were engaging in
" redlining," the arbitrary refusal to consider or make loans in low- and moderate-income
neighborhoods. Proponents ofthe CRA charged that qualified borrowers in low- and moderateincome neighborhoods were being denied credit because of negative perceptions about the
economic and physical conditions of the neighborhoods in which they lived or operated businesses
instead oftheir financial capacity and creditworthiness. Proponents also alleged that financial
institutions were taking deposits from low- and moderate-income neighborhoods, but lending the

88-882 - 95 - 10

284

funds in other areas, a process often referred to as " disinvestment. " Supporters ofthe CRA
concluded that the combined processes of redlining and disinvestment contributed to the
economic and physical decline of low- and moderate-income areas by limiting the availability of
credit for home purchases, rehabilitation ofexisting properties, and for business development and
expansion.
B.

CRA's Provisions

The statute contains legislative findings that insured depository institutions should
affirmatively serve the convenience and needs ofthe local communities in which they are
chartered and that these needs include the need for credit services as well as deposit services,
consistent with the safe and sound operation of such institutions. From these findings emerged
the underlying purpose ofthe CRA: to have the agencies encourage regulated financial
institutions to help meet the credit needs ofthe local communities in which they are chartered
consistent with the safe and sound operations of such institutions. To achieve this purpose, the
CRA directs the agencies to assess by examination the institution's record ofmeeting the credit
needs ofits entire community, including low- and moderate-income neighborhoods, consistent
with the safe and sound operation of such institution and to take such record into account in its
evaluation ofan institution's application to establish a depository facility. An institution's record
would include the affirmative steps taken by regulated financial institutions to help meet the credit
needs oflow- and moderate-income areas.
CRA mandates certain action by the agencies. First, CRA requires the agencies to
encourage each financial institution they supervise to help meet the credit needs of its entire
community, including the credit needs oflow- and moderate-income neighborhoods, consistent
with safe and sound banking practices. In this regard, the statute contemplates that institutions'
activities are consistent with safety and soundness. The statute does not direct institutions to
make loans of any specific type, in any specific amount, or in any specific area. Instead,
institutions are supposed to determine product mix and affirmatively market and provide loans
and services based on the needs ofthe market place and business factors. In addition, the CRA
requires the agencies to assess the performance of financial institutions in helping to meet
community credit needs. We do that primarily through CRA examinations that review the
institution's performance using twelve assessment factors outlined in the agencies' current CRA
regulations. Furthermore, as a result of 1989 and 1991 amendments to the CRA, the agencies are
required to prepare for each institution examined, a public written CRA evaluation that includes
the CRA rating and provides supporting facts and data. Finally, CRA requires the agencies to
consider performance under CRA of each financial institution when reviewing its applications for
expansion ofdepository facilities through branching, mergers, or acquisitions.
C.

Administration ofthe Law

Following passage ofthe CRA, the agencies jointly developed and issued regulations in
1978. The regulations require each covered institution to develop and update a CRA statement

2

285

which delineates its community with a map and describes the credit services offered within that
community. Each institution also must post CRA notices in the lobbies of depository facilities,
alerting the public to the availability ofthe CRA statement, and must maintain a file containing
public comments on its CRA performance ( and the institution's responses) which may be
inspected bythe public and the agencies. Concurrently, the agencies developed uniform
examination procedures.
The regulations described twelve assessment factors that the agencies use in evaluating an
institution's record ofperformance under CRA; these have been grouped into five performance
categories for purposes of arriving at an examination rating. Taken together, the assessment
factors outline actions that the agencies consider essential to good CRA performance. The
assessment factors indicate that an institution's performance will be judged by examiners based on
the degree to which that institution: conducts assessments ofthe credit needs in its communities;
develops products and services designed to help meet those needs; affirmatively markets those
products to ensure that they are available throughout the communities served, including low- and
moderate-income areas; evaluates the effectiveness of its CRA program, including the geographic
distribution of credit extensions; and makes home mortgage, small business, small farm,
community development, and government-related loans.
The CRA was amended in August 1989 to require the public disclosure ofCRA
evaluations and ratings and to mandate a four-tiered rating scale. In response, the agencies jointly
developed and issued " Guidelines for Disclosure ofWritten Evaluations and Revised Assessment
Rating System. " The Guidelines set forth a common evaluation system and format. In addition,
the agencies jointly trained their examiners for this significant change in the way they would do
their jobs.
The agencies have attempted to develop and maintain a common approach to CRA
policies and examination procedures. To provide additional guidance to institutions and
examiners, in 1980, the agencies, acting jointly through the Federal Financial Institutions
Examination Council ( " FFIEC" ) , issued a policy statement that clarified agency expectations
regarding certain aspects ofCRA performance and CRA's role in the applications process. In
response to further questions from the industry, the agencies issued a second policy statement in
April 1989. The statement stressed that effective CRA performance requires ongoing efforts over
time, and further clarified CRA's role in certain aspects ofthe applications process, including
instances where protests are lodged on CRA grounds.
In June 1992 , the FFIEC issued revised, uniform CRA examination procedures designed
to clarify CRA examination policies. The new procedures emphasize the importance of using
numerical data in the public CRA evaluation, to the extent they are used in the assessment process
and support the conclusions reached. To respond to concerns about the burden of paperwork, the
procedures emphasized that institutions should retain for examiners' review only such information
as is useful to the institution's own management needs. In addition, the agencies have instructed

3

286

examiners that CRA documentation would generally be less formal and less extensive in small and
rural institutions than in larger, urban ones.
Over the years, the agencies also have provided examiners with additional training and
better tools to help them conduct CRA assessments. For example, through the FFIEC, a
computerized system was developed to facilitate analysis ofthe expanded data collected under the
Home Mortgage Disclosure Act ( " HMDA" ) . With this system, examiners can more readily
determine the extent to which an institution that makes mortgage loans is making them
throughout its delineated community, including low- and moderate-income neighborhoods.
As previously noted, the CRA mandates that the agencies take into account an institution's
CRA performance when considering applications involving depository facilities, including branch
openings, mergers, and acquisitions. This is the means prescribed by the statute for the agencies
to make adverse findings regarding an institution's record and take specific action to deny or
condition an institution's request for a needed approval. The agencies have stressed that they give
great weight to affected institutions' CRA ratings during the applications review process.
Overthe past several years, the CRA has had a greater impact on the applications filed by
institutions. These have included applications involving institutions with less than satisfactory
CRA ratings ( irrespective of which agency issues the rating) , and applications for which negative
comments ( commonly called CRA protests) have been received from a member ofthe public
about the CRA performance of institutions affected by the application. In response to poor
ratings and protests, the agencies have denied or conditioned on improvement certain
applications. Although not counted by the agencies as denials, the agencies also have found that
some applications are being withdrawn when CRA compliance problems become apparent.
Finally, each year a number of institutions may not file applications in anticipation ofpotential
CRA protests.
Despite CRA's successes and the agencies' efforts over the years to strengthen
implementation, the CRA examination and enforcement system has been criticized. Financial
institutions have complained that policy guidance from the agencies on the CRA is unclear and
that examination standards are applied inconsistently. Financial institutions have also complained
that the CRA examination process encourages them to generate excessive paperwork at the
expense ofproviding loans, services, and investments. In industry-conducted surveys of
compliance costs, the institutions have often asserted that the CRA is among the most
burdensome of consumer protection and community reinvestment statutes.
Community, consumer, and other groups have agreed with the industry that there are
inconsistencies in CRA evaluations and that current examinations overemphasize process and
underemphasize performance. Community and consumer groups have also criticized the agencies
for failing to penalize banks and thrifts aggressively for poor performance.

!

287

III.

Interagency Effort to Reform the Administration of CRA
A.

President's Initiative and Public Hearings

In July 1993, President Clinton called for CRA reform by the agencies. He asked that the
agencies develop more objective, performance-based assessment standards that minimize
compliance burden while improving performance. He asked that these changes be carried out
through regulatory means.
To assist in the drafting of a new CRA regulation, the agencies first held two informal
private meetings, one with industry groups and the other with community groups, to provide
participants an opportunity for a frank discussion of the problems. Next, the agencies held a
series ofpublic meetings around the country to gather further information on how best to rework
the regulation. ' More than 250 witnesses ( including bankers, local government officials,
community and consumer groups, small business owners, and individuals) provided oral or written
statements at the hearings. While numerous issues were raised, some common themes emerged .
Most commenters urged the agencies to adopt a CRA evaluation system that is more
performance-based. Financial institutions expressed great frustration that it is impossible to
know, in advance, what types and amounts ofperformance will produce a particular rating.
Institutions and community representatives faulted the agencies for lack of consistency in the
CRA reviews. Many witnesses, however, rejected the idea that a strict formula should be used on
a national basis. Witnesses believed that such an approach could lead to the establishment of
" ceilings" on lending activities aimed at low- and moderate-income areas, or could result in credit
allocation.
Witnesses also noted that institutions may not be receiving enough consideration in the
CRA examination process for their investment activities, such as investments in other community
development lenders. Wholesale banks, in particular, suggested that such activities by them
should be given great weight, because their unique business strategy and product offerings make it
difficult to comply with CRA through more traditional local retail lending.
Most community organizations and many local government officials pointed to a need to
collect more loan data from institutions, similar to that collected for home mortgage-related loans
under the HMDA. Witnesses noted that lack of data on non-housing loans makes it extremely
difficult for the agencies and the public to evaluate objectively an institution's entire performance.
Community-group witnesses urged the collection of data from institutions on their small business
loans, in particular, arguing the need to show geographic distribution. Some also wanted
information about the race or ethnicity ofthe borrower. Some witnesses believed that data should
be collected on all consumer loans, including automobile, credit card, and personal loans. Other
¹Public meetings were held in Washington, D.C. , San Antonio, Los Angeles, Albuquerque,
New York, Henderson ( North Carolina) , and Chicago between August 10 and September 22, 1993.
5

288

witnesses, particularly those representing small institutions, expressed concern about the burden
ofany new data collection requirements, and questioned whether the benefit ofcollecting the data
would outweigh the costs. In general, small institutions criticized the costs imposed bythe
current law, and urged the agencies to reduce the documentation requirements.
Several witnesses, particularly from the industry, stated that the regulators should provide
incentives for outstanding performance. Witnesses outside the industry, however, were generally
opposed to the creation of a " safe harbor" from CRA protests in the applications process based on
ratings assigned by the agencies. Other witnesses urged the agencies to permit more public input
into the examination process.
A number ofwitnesses believed that institutions should be able to develop " strategic
plans," listing specific goals to meet CRA objectives. Under this approach, agencies would
review plans ofinstitutions and, if the plans were approved, the institution's CRA performance
would later be measured against how well it achieved the goals set out in its own plan.
Overall, almost all the witnesses called for change, although there were differences
regarding the specifics.
B.

Selected Elements ofthe 1993 and 1994 Proposals

In December 1993, the agencies jointly issued proposed regulations that would have
replaced the existing CRA regulations in their entirety ( the " 1993 proposal" ) . Collectively, the
agencies received over 6700 letters commenting on the proposed regulations. Commenters
included representatives ofbanks and thrifts, community groups, Congress, state, and local
governments, and the public at large. After reviewing and considering these comments, the
agencies jointly issued a second proposed regulation on October 7, 1994 ( the " 1994 proposal" ) .
Approximately 7200 comments were received. Below is a brief overview ofthe significant
provisions ofthe proposed regulations along with an explanation oftheir derivation to illustrate
the significant role commenters have played in drafting these proposals.

1.

General

Both proposals would replace the twelve assessment factors in the existing regulation with
three performance-based tests relating to the institution's lending, investments, and services. Most
commenters on the 1993 proposal supported the goal ofdeveloping more objective, performancebased assessment standards that minimize burden while stimulating improved performance.
Although many interested parties at the public hearings had advocated the use of objective criteria
in evaluating CRA performance, upon reviewing the 1993 proposal, many commenters believed
that mechanical application of numerical ratios would not foster fair and appropriate CRA
assessments. In response to those concerns, the 1994 proposal would broaden the scope ofthe
lending, investment, and service tests by including a wider range of quantitative and qualitative
criteria. While these modifications would increase the subjectivity ofthe examination process, the

6

289

agencies believed they also would increase consistency, clarity, and fairness in the examination
process.
The 1994 proposal would reduce regulatory burden associated with CRA by eliminating
various procedural requirements. Institutions would no longer have to prepare CRA statements,
review them annually, or document them in minutes of the board of directors meetings.
Regulators would no longer require institutions to justify the basis for community delineations or
to document efforts in marketing or the ascertainment ofcommunity credit needs. Moreover, the
proposals would eliminate the requirement that an institution document its efforts to ascertain
community credit needs.

2.

Lending Test

The 1993 proposal would have evaluated an institution's direct lending and, at an
institution's option, indirect lending through loan pools, lending consortia, subsidiaries, and
community development lenders in which the institution has made investments. As an initial
screen, the lending test would have compared the institution's market share of loans in low- and
moderate-income areas to its market share in the remainder of its service area. The test also
would have considered the dispersion of an institution's loans throughout its service area and the
number of loans made in low- and moderate-income areas. In addition, the test would have given
" extra credit" to institutions for making complex or innovative loans that serve pressing
community development needs without undermining safety and soundness.
Many industry commenters requested that the " market share" test be eliminated because
such a comparison would overlook loans made by entities without HMDA or CRA reporting
obligations and might promote price wars or other behavior that could lead to unsafe or unsound
lending. However, many community groups were proponents ofthe market share test because
they believed it would provide objective and quantifiable measurements of CRA performance. In
light of these comments, the 1994 proposal eliminated the market share test as a primary element
but provided that comparisons among institutions would be considered in appropriate cases as
one of several means to evaluate the geographic distribution of an institution's lending, and that
examiners would not use any particular ratio as a benchmark.
Industry representatives and community groups commented that the 1993 proposal
underemphasized the importance of community development lending. As a result, the 1994
proposal would treat community development lending as a principal component oflending
performance.
Generally, industry representatives have commented that the 1994 proposal is an
improvement over the 1993 proposal. Most have supported the increased use of qualitative
factors and the deemphasis of objective criteria such as the market share test. Conversely, many
community groups have expressed concern that the 1994 proposal would make the lending test
more subjective, and thus, more susceptible to grade inflation. Community groups also have
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supported the increased emphasis on community development lending, while most industry
commenters have requested that the types of activities considered within the scope of community
development lending be increased.

3.

Investment Test

The investment test in the 1993 proposal provided that an institution would have been
evaluated based on the amount ofassets -- relative to the institution's risk-based capital -- devoted
to qualifying investments. The focus ofthe investment test would have been on the ultimate
impact ofan institution's investment rather than the investment per se. The agencies could have
adjusted an institution's rating under the investment test to take into account investments that
were particularly innovative or that met special needs.
Commenters were concerned about measuring the amount of qualified investments relative
to risk-based capital because it could unfairly penalize well-capitalized institutions. In addition,
industry representatives and community groups pointed out that examiners should consider more
than the ultimate impact of an investment because larger, more complex investments often require
more resources to originate and often do not produce immediate results.
In the 1994 proposal, investment performance would be based on the dollar amount ofan
institution's investments, the innovativeness and complexity of its investments and their
connection to credit needs, and the institution's responsiveness to credit and community economic
development needs. The 1994 proposal clarified what constitutes " qualified investments, " and the
preamble to the regulation provided examples of such investments. For example, the preamble to
the regulation specifically mentioned, among other things, investments and grants in or to
community development financial institutions ( " CDFIs" ) and community development
corporations ( " CDCs" ) that primarily lend to, or facilitate lending in, low- or moderate- income
areas or to low- and moderate-income individuals in order to promote affordable housing and/or
community economic development.

4.

Service Test

In the 1993 proposal, the service test would have focused on whether an institution's
branches are located in, or readily accessible to, low- and moderate-income areas. The agencies
could have favorably adjusted an institution's rating under the service test to take into account
branch service to low- or moderate-income areas or individuals; downward adjustments would
have been made only in exceptional cases.
Industry commenters believed that the 1993 proposal placed too much emphasis on " brick
and mortar branches" and contended that present technology has made the need for branches less
imperative to the provision of banking services. On the other hand, community groups contended
that brick and mortar branches continue to have symbolic and practical relevance to credit

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availability. Finally, a number ofcommenters stressed that the actual services provided by an
institution, however they are delivered, must be considered by the agencies.
In response to these comments, the 1994 proposal would give equal weight to branch
location and the actual services provided to low- and moderate-income areas. When evaluating
services, an examiner would consider the extent to which an institution provides community
development services and the innovativeness and responsiveness of such services, given the needs
and constraints ofthe institution. The 1994 proposal defined community development services
and provided examples of such services. These services would include providing technical
expertise for not-for-profit organizations serving low- and moderate-income housing needs and/or
economic growth and development, and loaning executives to organizations that facilitate
affordable housing construction and rehabilitation and/or development of affordable housing.
Some institutions have commented that the 1994 proposal is still too " branch focused, "
considering that the bank and thrift industries are moving toward nonbranch delivery. Many
community groups have contended that the proposal is not sufficiently " branch focused" and,
specifically, that ATMs should not be considered branches because, among other reasons, they do
not have loan officers and do not provide customers with the opportunity to ask questions.
However, many community groups have supported the increased emphasis on community
development services.
5.

The Community Development Test for Wholesale or Limited Purpose
Institutions

The 1993 proposal provided that wholesale or limited purpose institutions, in order to
appropriately recognize their unique characteristics, would have been evaluated under the
investment test. The agencies would have based their assessments ofthese institutions on the
amount of assets devoted to investments that benefit low- and moderate-income areas or
individuals within the institutions' service areas. Some commenters believed the investment test
was too narrowly focused to assess the CRA performance ofwholesale or limited purpose
institutions and recommended using an assessment method that focused on community
development activities more generally.
The agencies believed these comments had merit and, in the 1994 proposal, substituted a
community development test for the investment test as the assessment method for wholesale or
limited purpose institutions. Under this test, examiners would focus on a wholesale or limited
purpose institution's record in helping to meet the credit needs of its service area through qualified
investments, community development lending, and community development services. The 1994
proposal also clarified the definitions ofwholesale and limited purpose institutions: ( i) wholesale
institutions are institutions that are not in the business of extending home mortgage, small
business, small farm, or consumer loans to retail customers; and ( ii) limited purpose institutions
are institutions that offer only a narrow product line, e.g., credit cards or automobile loans, to a
national or regional market. Industry representatives and community groups have generally

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supported the community development test, although many commenters have sought clarification
ofthe eligibility requirements.
6.

Small Institution Assessment Method

The 1993 proposal would have permitted small institutions to elect to be assessed under a
streamlined examination. A small institution was defined as an independent institution with total
assets under $ 250 million or an institution with total assets under $ 250 million that is a subsidiary
ofa holding company with total banking and thrift assets under $ 250 million. The streamlined
examination would have considered the reasonableness ofan institution's loan-to-deposit ratio ( a
ratio of 60 percent was presumed to be reasonable for all cases, but a lower ratio could have been
found to be reasonable under certain circumstances) , whether most of its loans were made locally,
its loan mix ( including the distribution ofloans across income levels) , its record of handling
community complaints, and substantive compliance with the fair lending laws. Under the
streamlined examination, small institutions would not have been obligated to report data on the
geographic distribution of certain loans.
The vast majority of industry commenters were in favor ofthis option; on the other hand,
most community groups requested that the option be eliminated because they considered it an
exemption for qualifying institutions. Both industry representatives and community groups
commented extensively on the limitation on an institution's qualifying asset size. Most industry
commenters favored raising the threshold, because they believed a higher level would better
distinguish the ability to bear time-consuming and expensive data collection responsibilities.
Community groups favored lowering the threshold because, in their view, a $ 250 million
threshold would subject nearly 75 percent ofinstitutions to a less stringent examination, small
institutions have historically had poorer CRA records than larger institutions, and institutions of
$ 10 million and over have the capacity to report HMDA data.
The agencies do not view the streamlined examination as an exemption from the CRA's
requirements and do not envision a streamlined examination as a mere formality. Therefore, in the
1994 proposal, the streamlined examination approach was maintained, including the exemptions
from any data collection and reporting requirements for small business, small farm, and
community development loans. The $ 250 million threshold was also retained in the belief that this
amount best divides small institutions with limited resources from larger institutions with
sufficient resources to satisfy the data collection requirements. In addition, although a small
institution would still have been required to have a reasonable loan-to-deposit ratio, the 60
percent loan-to-deposit ratio presumption was eliminated. Most industry comments have
supported a separate test for small institutions, particularly if doing so would relieve small
institutions ofpaperwork burden. However, most have favored increasing the threshold, typically
to $ 500 million. Also, many industry commenters found the assessment criteria to be reasonable,
although some were concerned over the degree of subjectivity. Not surprisingly, most community
groups have opposed the retention ofthe streamlined examination, or suggested that the threshold
be reduced to $ 50 million or less.

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7.

Strategic Plan Option

The 1993 proposal offered a strategic plan option to all institutions as an alternative to
being assessed under either the lending, investment, and service tests or, for eligible institutions,
the small institution assessment method. Institutions would not have been required to involve
community groups and other members of the public in the formulation oftheir strategic plan, but
would have been encouraged to do so. Nonetheless, an institution would have been required to
disclose its plan publicly upon the plan's submission for approval to the regulator. The regulator
would have considered public comments in its assessment of a submitted plan. Ifthe regulator
approved the plan, subsequent CRA reviews ofthat institution would have been based on whether
the institution met or exceeded the performance goals specified in the plan. Ifthe institution failed
to meet the preponderance ofthe measurable goals set forth in the plan, its performance would
have been evaluated under the lending, service, and investment tests or the small institution
assessment method, as appropriate. Assessment under an approved plan would not have relieved
an institution from its obligation to report data on the geographic distribution ofits loans.
Community groups commented that community input after the strategic plan was
submitted to the agencies was, in their view, the equivalent of not having an opportunity to
comment. Industry commenters expressed concern over the release of proprietary information
and pressure for specific action from community groups. To address these comments, the 1994
proposal required a public comment period prior to submission ofthe plan to the agencies, as well
as consultation with community groups prior to the formulation ofthe plan and issuance for
public comment. However, a plan released for comment would not be required to include
proprietary information, and confidential information need not be released to the public. Further,
the 1994 proposal made clear that an institution would not be expected to make accommodations
in the proposed plan for all public comments received, but the institution would be expected to
address the comments. Many industry commenters, while believing that the strategic plan option
was attractive, continued to criticize the public disclosure and comment process. The basis for
the criticism was the disclosure of business plans and the potential for community groups to make
unreasonable demands on an institution. Conversely, community groups sought more community
participation in the design ofthe plan, and some believed that institutions should be required to do
more outreach.

8.

Composite Ratings

Under the 1993 proposal, institutions that were not eligible for the small institution
assessment method would have been assigned one offive ratings for its performance under each
ofthe lending, investment, and service tests: outstanding, high satisfactory, low satisfactory,
needs to improve, and substantial noncompliance. These ratings would have been combined into
one of the four composite ratings required by statute: outstanding, satisfactory, needs to improve,
and substantial noncompliance. For retail institutions, an institution's rating under the lending test
would have served as the base rating, whereas for wholesale or limited purpose institutions, an
institution's rating under the investment test would have served as the base rating. An institution's
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base ratings would have been adjusted one or two levels ifthe institution's performance on the
other test( s) was exceptionally good or, in some cases, poor.
Industry representatives and community groups commented that the investment and
service tests should be given greater weight, but community groups were concerned that lending
maintain a primary position in the rating system. In response to these comments, the 1994
proposal would give primacy to lending performance by requiring an institution to receive a
satisfactory or better rating on the lending test in order to receive a satisfactory or better overall
rating. However, the rating system also would increase the importance ofthe service and
investment tests because the effects ofthese tests would no longer be limited to situations in
which an institution had extraordinarily strong or weak performances on one ofthese tests.
Community groups overwhelmingly supported the requirement that an institution receive a
satisfactory lending rating in order to receive a satisfactory overall rating. On the other hand,
many industry commenters believed that the lending rating should not be given so much weight.
Many industry representatives and community groups were concerned that the proposed rating
process would result in more subjectivity in the ratings process. Community groups were
concerned that the subjective criteria might not provide enough guidance for examiners. In the
past, community groups have claimed that examiners did not understand the needs oflow- and
moderate-income communities.
9.

Enforcement

One issue that received substantial supporting and opposing comment in both the 1993
and the 1994 proposals was the use of enforcement actions under 12 U.S.C. § 1818 by the
agencies against institutions receiving a " substantial noncompliance" CRA performance rating.
The Department ofJustice has concluded that the agencies do not have the authority under the
CRA to bring such enforcement actions based on an institution's poor record of meeting the credit
needs ofits local community. The agencies will modify the proposal accordingly.
C.

Significant Issues Raised on the 1994 Proposal
1.

Collection ofRace and Gender Data on Small Business and Farm Loans

The 1994 proposal required retail institutions not evaluated under the small institution
assessment method to request that a small business or small farm borrower indicate the
percentage ofthe business or farm owned by men and women, as well as the percentages owned
by members of different ethnic and racial categories. The loan registers filed with the agencies
would indicate whether an individual loan was to a business or farm that was more than 50
percent women-owned or more than 50 percent minority-owned. In its public file, the institution
would disclose the number and amount ofloans to minority- and women-owned small businesses
and farms.

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The proposed collection of race and gender data was the most frequently addressed issue
in the comment letters received by the agencies. Virtually every nonindustry comment that
addressed the issue endorsed collection, contending that this information was essential to
determine whether discrimination was occurring in small business and farm lending, and citing the
value ofHMDA data in monitoring home mortgage lending. Many comments sought more
detailed collection and disclosure. Most industry commenters opposed the collection as
proposed. Industry commenters believed the requirements would impose additional costs and
burden, would place reporters at a competitive disadvantage because " small" institutions and
lenders not within the scope of CRA would be exempt from these requirements, and would
present a distorted picture due to the limited collection . They also questioned the relevance ofthe
data to CRA, and expressed concern over the potential for misuse of data. Some industry
commenters endorsed collection of race and gender data, provided it was done pursuant to
Regulation B ( 12 C.F.R. § 202 ) , which implements the Equal Credit Opportunity Act. Other
industry commenters believed that ifthe agencies thought the data were necessary, the basis for
the collection should be under Regulation B and not the CRA.

2.

Data Collection and Reporting: Census Tract Reporting

The 1994 proposal provided that every large institution would include in its public file the
following information on small business and small farm loans: the number and amount of loans in
low-, moderate-, middle-, and upper-income census tracts; a list of each census tract with at least
one loan; the number and amount of loans inside the institution's service areas and outside the
institution's service areas; the number and amount ofloans to businesses under $ 1 million in gross
annual revenues ; the number and amount of loans to minority-owned businesses; and the number
and amount ofloans to women- owned businesses. The proposal did not provide that the agencies
would make any aggregate data available to the public.
The vast majority of community group commenters complained that the public disclosure
provisions ofthe 1994 proposal were not useful. They asked that small business loan data be
made available to the public in a HMDA-like format for individual institutions and aggregated.
They contended that, at a minimum, data must be available to the public on an aggregate and
institution-by-institution basis by individual census tract, including for each census tract the
number and volume of loans. Otherwise, the public would not be able to judge how an institution
is performing in a particular low-income neighborhood and, without incurring unreasonable cost,
they would not be able to compare the performance of one institution against the performance of
another. These commenters also objected on principle to the agencies' use of certain data to
evaluate institutions that would not be available to the public. Industry commenters generally
opposed detailed data collection and reporting requirements.

3.

Assessment Context

The 1994 proposal stated that evaluations of institutions would be made in the context of:
demographic data about the community; examiner-developed information about community

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characteristics and needs; information about the institution's capacity and constraints; information
about the institution's product offerings and business strategy; data on the prior performance of
the institution; and data on the performance of similarly situated lenders. As a specific burden
reduction measure, the preamble emphasized that the agencies, rather than the institution, would
develop this information. Any data submitted by the institution would be considered bythe
agencies, although no data would be required or requested from the institution.
Generally, the idea of an assessment context was received positively. However, many
commenters have interpreted the provision as meaning that the agencies would prepare formal
needs assessments that prescribe, rather than gather, information about credit needs. Industry
commenters criticized such agency assessments on several grounds: institutions know their
communities better than the agencies; the agencies do not have the resources or time to conduct
adequate needs assessments; agency needs assessments would lead to credit allocation; and
examiners might disregard data submitted by institutions. Many industry commenters requested
that the agency needs assessment be released a year in advance ofthe examination, and be subject
to review, comment, and appeal. Alternatively, a significant number of industry commenters
requested that institutions, rather than the agencies, be required to perform the needs assessment.
Community group commenters supported the notion of examiners performing the needs
assessment because they believed it would result in a more objective assessment context.
However, some community group commenters were concerned that if institutions were not
required to perform an assessment, they would not be able to effectively respond to the credit
needs oftheir communities.

D.

Promoting Better Public Policy with New CRA Regulation

The following discussion ofthe goals and objectives of this regulatory reform process
reflects the proposals made to date, the comments received by the agencies, and the present stage
ofdebate and discussion among the agencies regarding these matters. No final regulation has
been drafted, however, and, therefore, no final approval for a new CRA regulation has been given
by any ofthe agencies. Consequently, the discussion should be read in that light.
As revealed in the hearings, the existing CRA process suffers from a lack of credibility
with some members ofthe banking industry and with representatives ofthe communities that the
Act is intended to benefit. Many view the CRA process as not sufficiently objective, and others
believe that the burdens imposed by the system exceed the benefits that it produces.
Throughout the rulemaking process, the principal goal ofthe agencies has been to strike a
reasonable balance between improving the availability ofbanking services in the local communities
the law is intended to benefit and minimizing regulatory burden on the bank and thrift industries.
The agencies will strive to promulgate a final regulation that will rate institutions based on their
performance in helping to meet community credit needs without allocating credit. To succeed,
the agencies must put forth a regulation that clearly states both its objectives and the
responsibilities of financial institutions in a straightforward and unambiguous fashion.
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A straightforward and performance-based evaluation process requires an assessment
system that relies on objective measures ofperformance. At the same time, the system must allow
for an appropriate degree of examiner judgment. Financial institutions and their customers will
benefit from a system that allows examiners the flexibility to reward creative and unique activities
that are consistent with safety and soundness principles. Given the diversity that characterizes the
banking and thrift sectors and our country's communities, it is important for examiners to take
into account the characteristics, needs, and resources of an institution's community and the
capacities of and constraints on the institution. However, devising a regulation that explicitly
accommodates every possible scenario would be impractical, and too complex.
To provide the proper balance between objective analysis and subjective judgment, the
most recent proposed regulation would establish an assessment method that relies on data
concerning an institution's actual lending, service, and investment performance to direct examiner
judgment. Examiners would evaluate these data in the context of an institution's business
strategy, financial condition, and the needs ofthe community in which it operates. Moreover, to
minimize unnecessary subjectivity, the agencies would provide guidance as to the standards that
examiners would apply to make the required judgments.
One ofthe benefits of designing a CRA evaluation system that identifies a set of
performance-based assessment criteria and expands the objective performance data available for
examinations is that institutions and the public will be able to evaluate the basis on which
examiners make their judgments. A regulation that relies too heavily on subjective judgment -- as
some argue the existing regulation does -- creates at least the perception of inconsistent
evaluations across institutions and leads to wide differences in opinion between institutions and
community groups regarding performance. The agencies believe that greater consistency in
evaluations, reduction in compliance burden, and focus on performance can be realized
consistently with the necessary degree of examiner judgment.
Of course, a better regulation can only go so far in the quest for objectivity, consistency,
and a focus on performance. In an effort to promote interagency consistency and better
implementation of CRA policy, the agencies are evaluating different ways to improve examiner
training and to increase interagency coordination regarding application of standards, performance
of examinations, assignment of ratings, and use of enforcement procedures in the context of
evaluating corporate applications. The agencies will continue to work together to conduct
examinations as efficiently as possible, to minimize unnecessary compliance burden, and to strive
for appropriate levels of consistency and reliability in the rating process.
E.

No Use ofQuotas/Not Credit Allocation

While many recognize the benefit ofusing numeric measures to evaluate an institution's
lending, service, and investment performance, many institutions and some members ofthe public
may be concerned that this approach may lead, in practice, to the implicit establishment of quotas
or other mandatory credit allocation techniques within a given market. That is an outcome that

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we must avoid. We will not set forth a regulation that would require any institution, in any
community, to make any particular loan or to engage in any activity inconsistent with safety and
soundness.
An institution's performance should not have to fit every aspect of a predetermined profile
in order for the institution to receive a given rating. A reasonable rule would allow for
exceptionally strong performance on some aspects to compensate for weak performance on
others. In such a system, an institution's overall rating would reflect many factors, and would not
be determined by any single factor.
The agencies also believe that institutions should be evaluated within the context of factors
specific to each institution and to the communities they serve. It would be unfair and
counterproductive to develop an institutional profile to be applied nationwide. Factors such as a
community's characteristics, needs, and demographic profile should be considered in evaluating
how well that community is being served by local financial institutions' mix of credit and service
offerings. Likewise, an institution's size, business plan, and strategy should help determine its
ability to serve the community. Our goal is to craft a rule that enables examiners to take all these
factors into account in their assessments, as appropriate for the institution being evaluated.
F.

Impact ofReporting Requirements and Burden Reductions

A performance-based CRA evaluation system that is well understood by the industry, the
public, and regulators must be based on objective measures of clearly defined parameters. Much
ofthe industry and most community groups view the current assessment factors as too subjective,
and many consider them unduly burdensome and, in some instances, irrelevant to actual
performance. The goal ofthis reform effort is to provide that depository institutions will be
assessed on results, measured in objective terms appropriate for the type of institution. To
evaluate institutions based on their performance, however, examiners will have to rely on data that
measure such performance.
Such an approach would require examiners to evaluate information that goes beyond the
content of current reporting requirements for some financial institutions. Particularly for larger
institutions with extensive activity, the agencies need information on banks' and thrifts' lending,
community investments, and other services provided to low- and moderate-income areas in order
to refocus CRA evaluations on objective measures ofperformance. As a result, we expect that
some institutions may not see as great a reduction in regulatory burden as others, but we believe a
final rule will reduce burden for the great majority offinancial institutions. Even institutions that
would be subject to reporting requirements would benefit from the elimination of those factors
that have generated extensive documentation. Furthermore, all institutions would benefit from
greater clarity about expected performance and consistency in evaluations.
The agencies are well aware of industry concerns about reporting burdens. The goal is to
strike a fair balance between the cost ofnew requirements and the benefits of a more
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performance-based system. Every effort will be made to ensure that the revised rule relies, to the
greatest extent possible, on data that is already being reported.
One possibility under consideration is to reduce the data reporting burden by streamlining
reporting requirements to coincide more closely with existing requirements and eliminating
unnecessary reporting. It also may be possible to exempt a certain class of institutions from new
reporting requirements. For these institutions, the regulators would bear the burden of compiling
the information needed to make the assessment required by the revised rule. Burden also might
be reduced ifwe were to allow institutions to submit a strategic plan for regulatory approval; if
approved, such a plan could constitute the basis ofthose institutions' evaluations. These special
evaluation methods for certain classes ofinstitutions would, ofcourse, in no way exempt any
institution from the CRA rules.

IV.

Summary and Conclusions

This rulemaking process has been long, but it has been highly instructive about the current
CRA evaluation process, what works well, and what needs improvement. We are now nearing
the conclusion. Although a number of issues are yet to be resolved, we believe the 1994 proposal
is an improvement. We are carefully considering the comments on the 1994 proposal and believe
we will develop a final regulation that is both responsive to the commenters and achieves the
goals ofthe reform project.

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United States General Accounting Office
GAO

Testimony
Before the Subcommittee on Financial Institutions and

House of Representatives
NotTo Be
COMMUNITY
REINVESTMENT ACT

Preliminary Results of GAO's
Study on CRA Problems and
Proposed Reforms

Statement for the Record

S
ED TATES
OFFICE

AL

GENER

UNIT

ACCOUNTING

GAO/T-GGD-95-113

301

Ms. Chairwoman and Members of the Subcommittee :
This statement provides the preliminary results of our study of
the implementation of the Community Reinvestment Act ( CRA) , which
Our report

we have shared with your staffs in recent briefings .
is currently being drafted and reviewed internally .

While we

have discussed our preliminary findings with the federal bank and
thrift regulatory agencies ( regulators ) , we have not yet provided
them a draft report for official agency comment .

In addition,

the regulators have not finalized the proposed regulations .
Consequently , while we are pleased to respond to your request to
share our preliminary results with you for your deliberations on
CRA, we must note that these results are not yet finalized .

Our study was initially requested by former Committee Chairman
Gonzalez and former Subcommittee Chairman Kennedy .

Our study

objectives were to address the following four questions :

( 1)

What were the major problems in implementing CRA, as identified
by the affected parties ( bankers , regulators , and community
groups ) ?

( 2)

If adopted , to what extent would the regulators '

reforms address these problems? ( 3 )

What challenges would the

regulators face in ensuring the success of the reforms ? ( 4 )

What

initiatives have been taken to overcome community lending
barriers and enhance lending opportunities , particularly in lowand moderate - income areas?

To identify the major CRA

implementation problems , proposed solutions , and examples of

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and examiners in 40 judgmentally - selected case studies ,
representing banks and thrifts ( banks )

of different sizes and

types , with different CRA ratings located in different regions of
the nation .

We obtained additional perspectives from interviews

with officials from community groups , industry groups , and
regulators in Washington , DC .

We also reviewed public comment

letters on the initial and amended proposed CRA regulations
issued by the regulators as part of our assessment of the
proposed reforms .

As you know , CRA has been controversial since its enactment in
1977.

CRA requires the regulators to encourage banks to help

meet credit needs in all areas of the communities they serve ,
including low- and moderate - income areas , consistent with safe
and sound operations .

CRA also requires the regulators to assess

banks ' community lending performance during examinations .
Community groups urged its passage to curb what they believed to
be a lack of adequate investment in low- and moderate - income
areas .

Bankers generally opposed CRA as an unneeded measure that

could unduly affect business decisions and mandate relatively
low- profit lending that could conflict with other
In more recent

years , changing market conditions , along with increased public
disclosure about banks ' home mortgage lending , have raised

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about advantages for nonbank financial institutions , such as
mortgage companies , that compete with banks but are not subject
to CRA requirements .

They are also concerned that the cost and

paperwork burden imposed by CRA is not offset by positive
incentives to encourage CRA compliance .

For example , bankers

would like protection against CRA- based protests of applications
for expanding depository facilities .

Federal regulators are

required by the CRA to take a bank's CRA record into account when
considering certain types of applications from depository
institutions , including applications for mergers and acquisitions
of depository institutions .

On the other hand , community groups

have raised concerns about limited CRA enforcement , particularly
against poor performers that have no plans to expand , and
insufficient disclosure of information on banks ' community
lending performance .

In response to these concerns , both the administration and
Congress have looked for ways to make CRA more effective and less
burdensome .

The regulators ' reform initiative , announced by the

President in July 1993 , established goals to base CRA assessments
more on results than paperwork , clarify performance standards ,
make assessments more consistent , improve enforcement , and reduce
the cost and burden of compliance .

The regulators conducted a

review of the issues and suggested improvements to CRA through a
series of public hearings around the nation and in two notices of
proposed rulemaking .

They received extensive public comments on
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both the initial and amended proposals and are currently in the
process of finalizing the proposed regulations .

Congress also

enacted legislation to facilitate community lending , such as the
Bank Enterprise Act and the Riegle Community Development and
Regulatory Improvement Act of 1994 , that authorized funds to help
finance revitalization projects in low- income areas .

PRELIMINARY RESULTS

Through interviews with bankers , regulatory officials , and
community groups , we identified four major problems shared by the
affected parties :

( 1)

an overreliance on paperwork focused on

documenting efforts and processes rather than results , ( 2 )
inconsistent assessments resulting in uncertainty about how CRA
performance is to be rated ,

( 3)

assessments based on information

that may not reflect a complete and accurate measure of banks '
performance ; and ( 4 )

unsatisfactory CRA enforcement .

Our preliminary analysis indicates that the regulators ' proposed
CRA reforms would address these problems to varying degrees .

The

reforms would directly address the first problem by proposing a
results - based assessment system .

The regulators ' success in

addressing the problems related to inconsistent examinations
would largely depend on how effectively examiners use their
discretion when implementing the reforms .
4

To address concerns

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about information , the reforms would clarify the data to be used
to assess performance against results - based standards .

However ,

the affected parties disagree about whether the proposed data
collection requirements would provide for meaningful performance
assessment or be unduly burdensome .

The proposed reforms also

would not directly address the different enforcement concerns of
bankers and community groups .

The regulators dropped a proposal

to use existing formal enforcement actions set forth in the
banking laws for CRA violations due to a recent Department of
Justice opinion that such actions are not within the scope of
CRA .

The regulators also dropped a proposal that would have

clarified how banks ' CRA ratings affect applications for
expansion due to opposition by community groups to perceived
restrictions on application protests .

We also believe from our work to date that the regulators would
face significant challenges in successfully implementing the
proposed reforms .

During implementation , regulators would need

to address the problem of examination inconsistency that has not
been successfully addressed in the past .

We believe that the

likelihood of success could be increased if regulators ( 1 )
provide clear guidance and comprehensive training for all
examiners performing CRA assessments ;

( 2)

are more consistent in

ensuring that the data banks are required to collect are
accurate ; and ( 3 )

improve disclosure in public evaluation reports

of the information and rationale used to determine banks ' CRA
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ratings .

In addition , the regulators estimate that the reforms

would increase examiner responsibilities , as well as examination
time and resource needs .

Regulators may need to assess their

resource needs and determine what actions , if any , may be
appropriate to ensure that CRA examination requirements can be
completed without shifting examiner responsibilities back to

banks .

We also found that , independent of the regulatory reform efforts ,
many bankers , regulators , community groups , and others have taken
part in a variety of individual and cooperative initiatives to
improve banks ' community lending and reduce related burdens .
Through these initiatives , many banks have been able to overcome
real or perceived barriers to lending in low- and moderate - income
areas ( community lending ) .

Barriers to community lending and

investment may include a variety of economic factors , such as
higher costs and risks of community lending compared to other
lending , and restrictive underwriting requirements of major
participants in the secondary mortgage markets .

Regulators , to

varying degrees , play a key role in facilitating cooperation and
disseminating information to banks about such initiatives .

More

systematic interagency coordination may better utilize limited
resources and enhance lending opportunities for all banks .

Numerous alternatives for enhancing banks ' lending in their
communities have been raised by those we interviewed , as well as

6

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others .

We have not assessed these alternatives , which range.

from reforming CRA to replacing CRA with direct financial
subsidies to those willing to extend credit to low- and moderateincome areas .

To some degree , the range of alternatives may be

indicative of broader philosophical differences among the
affected parties about banks ' obligations for community lending .

Affected Parties Generally Agree

Our analysis to date indicates that bankers , community groups ,
and regulators generally agree on four major CRA problems :

( 1)

an

overreliance on paperwork focused on documenting efforts and
processes rather than results ,

( 2)

inconsistent assessments ,

( 3)

assessments based on information that may not reflect a complete
or accurate measure of banks ' performance , and ( 4 )

unsatisfactory

CRA enforcement .

The specific concerns and proposed solutions of bankers and
community groups differed substantially and , to some degree ,
reflected broader differences among the affected parties about
banks ' obligations to their communities .

Bankers generally

analyzed problems in terms of regulatory burden and sought
changes that would reduce the burden of paperwork and data
reporting .

Bankers also generally supported proposals to

7

308

increase certainty through guarantees ( " safe harbor "

provisions

that satisfactory or outstanding CRA ratings would protect
applications from CRA- based protests .

However , they opposed

suggestions to increase certainty by establishing objective
measures or formulas due to concerns that the standards would not
be flexible enough to consider such factors as a bank's business
strategy , financial condition , and its community's credit needs .

Community groups , on the other hand , generally analyzed problems
in terms of their ability to hold banks accountable for
performance and sought changes to increase that accountability ,
such as having banks publicly report additional data so that
their community lending performance could be assessed more
easily .

Community groups also identified as a problem the fact

that regulatory enforcement of CRA was limited to application
denials .

They pointed out that no sanctions were available to

penalize poor performers that did not have plans to submit
applications .

To strengthen regulators ' accountability for

enforcing the act , they advocated regulators ' use of formal
enforcement actions , such as cease - and - desist orders and civil
money penalties .

They strongly opposed safe harbor provisions .

8

309

Reform Proposals Would Address Some ,
But Not All , Major Problems

Overall , our preliminary conclusion is that the proposed reforms
attempt to address the major problems of the affected parties ,
but would not , and probably cannot realistically , wholly satisfy
the often contradictory proposed solutions of bankers and
community groups .

The reform proposals , if adopted and

effectively implemented , would address the problem of an
overreliance on documentation of a bank's compliance efforts and
processes by shifting the focus of assessment standards from
efforts to results in three performance areas -- lending ,
investment , and services .

We do not believe at this time that the potential effect of the
proposed reforms on some of the other problems is as clear .
Effective implementation of the reforms is key to addressing
assessment - related inconsistency because examiners are to
continue to use considerable discretion in assessing a bank's
performance .

9

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examiner training and might also increase the time and resources
needed to effectively complete examinations .

The proposed reforms also may not address the problem of data
adequacy for performing CRA assessments because the affected
parties do not agree on what data should be collected .

The

proposed reforms would establish data collection requirements to
assess banks ' CRA performance .

However , bankers expressed

concern about whether the proposed data collection requirements
would be too burdensome and appropriately reflect lending
results .

The proposed reforms also would not address the universal , but
differing , dissatisfaction with regulatory enforcement of the

10

311

better rating would generally result in the approval of an
application .

However , many commentors objected to the perceived

restriction on public protests .

Consequently , both of these

proposed measures have been dropped from consideration by the
regulators .

Challenges to Successfully

Implementing Reforms

We believe that successful implementation of the reforms would
require regulators to meet significant challenges that have not
been met in the past .

Specifically, to improve the consistency

of examinations , regulators would have to provide clear
examination guidance and comprehensive training for all examiners
in areas that many examiners believe has been lacking .

These

areas include how to analyze relevant information , how and when
examiners should apply discretion , and how examiners should
consider unique types of programs and products that bankers may
devise to address special needs in low- and moderate - income areas
of their communities .

Another implementation challenge indicated by our analysis would
be to ensure that lending and other data needed for resultsoriented assessments are accurate and accessible .

Some of the

regulators have acknowledged that data quality problems exist ,
but their responses to banks with poor data quality have not been
11

312

consistent .

For example , FDIC has assessed civil money penalties

for late or inaccurate reporting while the Federal Reserve has
required banks to resubmit data reported inaccurately .

Also ,

community groups have commented that the public evaluation
reports do not provide sufficient information about banks ' actual
lending performance and the regulators ' rationale for the
assessment ratings .

Finally , our case studies indicate that some examiners may have
lacked the time during examinations to perform many data
gathering and analyses tasks regarded as critical to CRA
assessments , such as making contacts in the community to assess
community needs .

Some regulatory officials estimate that

implementation of the proposed regulations may require additional
time and examiners .

Recognizing that they may be facing resource

reductions , some regulators are developing new techniques to
reduce examination time .

If not successfully addressed ,

examiners may either not perform needed analyses or shift
responsibility for conducting such analyses to the banks .

This

response could reduce the quality of assessments and increase
banks ' related burdens .

12

313

Initiatives Have Overcome
Some Barriers to Community Lending

Our analysis of successful community lending initiatives also
indicates that having good communication and cooperation among
regulators , bankers , and community groups is key to overcoming
lending barriers .

In such initiatives , banks have made community

lending an integral part of their business strategies ; involved
community groups in their plans and programs ; and developed
targeted underwriting standards , programs , and products to meet
community needs .

We also learned of community lending

initiatives that may overcome perceived or actual barriers to
lending in low- and moderate - income areas .

Barriers described by

bankers included higher transaction costs and credit risks , as
well as restrictions related to secondary mortgage market
underwriting standards .

Some bankers have found ways that may

lower the relatively high transaction costs and credit risks of
community development loans by sharing those costs and risks
through participations in multi - bank programs .

In addition , some

major participants in the secondary mortgage markets have
recently undertaken initiatives intended to make them more
responsive to community development concerns .

We have also found that regulators , to varying degrees , play a
key role in helping banks to enhance their community lending
programs .

Using the available resources of their community
13

314

affairs programs , some regulators have helped facilitate

Bankers Have Suggested Positive Incentives
to Encourage Community Lending

Finally, in order to encourage banks to lend to all parts of
their communities , bankers have suggested that CRA be replaced or
supplemented with financial subsidies or other positive
incentives .

One example of such a subsidy is the Bank Enterprise

Act , under which banks offering checking account and loan
services in qualifying low - income areas are eligible for
incentive grants .

Others have called for modifying or

supplementing CRA with incentives such as tax credits , deposit
insurance credits , streamlined or less frequent examinations ,
revisions of safety and soundness requirements for CRA lending ,
broadening the base of banks and organizations that can buy low-

14

315

income housing tax credits , and permitting below market financing
for community development lending programs with supporting funds
coming from FDIC or other regulatory premiums .

Some of these

proposals have been included in legislative proposals for
congressional consideration .

PRELIMINARY CONCLUSIONS

On the basis of our work , we believe that the following actions
by federal bank and thrift regulatory authorities could help
improve the certainty and consistency of CRA examinations during
implementation of the proposed regulations :

Revise regulatory guidance and training programs by
clarifying how examiners should interpret the performance
standards and require that all examiners receive

Ensure that the information used to assess performance is
accurate and that regulatory actions to improve data
accuracy are consistent .

15

88-882 - 95 - 11

316

Improve disclosures in publicly available evaluation reports
by more clearly presenting the information and rationale
used to determine banks ' performance ratings .

Assess agency resource needs and determine what actions
should be taken to ensure that CRA examination requirements
can be completed without shifting examiner responsibilities
back to banks .

Improve interagency coordination of community affairs
programs to better educate bankers and community groups on
strategies that have been successful in serving communities '
needs , including those in low- and moderate - income areas .

Finally , should the proposed CRA reforms , once implemented , prove
to be insufficient for improving CRA performance and reducing
regulatory burden , Congress may wish to consider whether
alternative approaches would better enhance banks ' community
lending .

This concludes our statement .

Thank you for the opportunity to

provide our preliminary views .

( 233471 )

16

317

Ordering Information
The first copy ofeach GAO report and testimony is free. Additional
copies are $ 2 each. Orders should be sent to the following address,
accompanied by a check or money order made out to the Superintendent ofDocuments, when necessary. Orders for 100 or more
copies to be mailed to a single address are discounted 25 percent.
U.S. General Accounting Office
P.O. Box 6015
Orders may also be placed by calling ( 202) 512-6000.

318

Verner, Liipfert , Bernhard , McPherson & Hand
95 MAR -6 PM 2:35
901-15th Street , N.W.
Suite 700
HARC
Washington, D.C. 20005-2301 VERWERA
A REPEC
ERS OF
PH
HC
202/371-6000
Telecopier: 202/371-6279
Telex: 1561792 VERLIP UT
TELECOPIER COVER_PAGE
DATE :

TO:

March 6, 1995

COMPANY NAME: Financial Inst . Subcomm .

Margo Tank

FROM:

Mac Bernstein

TELECOPIER NO .:

202 /225-6984

ORIGINATOR'S TEL. NO .: ( 202 ) 371-6051
TOTAL NO. OF PAGES

09000-0160
CONFIRMATION TEL . NO .: 202 / 225-2258
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this message is not the intended recipient, you are hereby notified that any distribution or copying of this
communication is strictly prohibited. If you have received this communication in error, please notify us by
telephone and destroy the facsimile mensage received. Thank you.
***

Margo,
Attached is the legislative language regarding CRA reform which the
Western Independent Bankers Association ( " WIBA" ) , a trade association of 250
community banks in the Western United States, has proposed to members of the
Senate Banking Committee. I have also attached some background information
about the CRA's impact on minority banks . I hope these materials are useful ,
and, as we discussed before, WIBA would very much like to testify regarding
CRA if and when the Subcommittee holds additional hearings . Please call me
at 202/ 371-6051 if you have any questions.
Mac Bernstein
FOR TELECOPIER OPERATOR ONLY
TRANSMITTED:

DATE :

TINE:

OPERATOR:

*******************
'FOR ASSISTANCE CALL TELECOPIER OPERATOR AT ( 202 ) 371-6245 .

319

3/1/95
MINORITY BANK AMENDMENTS TO

SECTION 1. SHORT TITLE .
This Act may be cited as the " Community Reinvestment Act Minority and
Women's Bank Preservation Amendments of 1995."

SECTION 2. DEFINITIONS.
The Community Reinvestment Act of 1977 ( 12 U.S.C. § 2901 et seq .) is
amended by inserting after Section 803( 2) , the following new paragraphs and
renumbering existing paragraphs " ( 3) " and " ( 4) " accordingly:

" ( A) more than 50 percent of the ownership or control of which is held by
1 or more minority individuals; and
" ( B) more than 50 percent of the net profit or loss of which accrues to 1
or more minority individuals.

" ( 5) the term " women's bank" means any regulated financial institution
" ( A) more than 50 percent of the ownership or control of which is held by
1 or more women;
" ( B) more than 50 percent of the net profit or loss of which accrues to 1
or more women; and
" ( C) a significant percentage of senior management positions of which
are held by women. "

SECTION 3. EVALUATION EXEMPTION FOR CERTAIN MINORITY AND
WOMEN'S BANKS.
The Community Reinvestment Act of 1977 ( 12 U.S.C. $ 2901 et seq .) is
amended by inserting In the appropriate place the following new section:

320

-2-

" SEC .
BANKS.

· EVALUATION EXEMPTION FOR CERTAIN MINORITY AND WOMEN'S

" A minority bank or women's bank shall not be subject to the evaluation
requirements of this title or any regulations issued under this title provided -" ( 1) such bank has not been found to be in violation of section 701 ( a) of
the Equal Credit Opportunity Act ( 15 U.S.C. § 1691 ( a) ) , or any other provisions
of such Act, during the preceding five ( 5) calendar years;
" ( 2) such bank was chartered , or ownership of such bank was acquired ,
in order to serve any community or group which has traditionally been
underserved by regulated financial institutions;
" ( 3) such senior officer of the bank as the bank may designate provides
annual certification to the appropriate Federal financial supervisory agency that
such bank qualifies for exemption under this section.
" A minority or women's bank which is exempted under this section shall
immediately notify the appropriate Federal financial supervisory agency of any change
In ownership, control , aggregate assets, or violations of law which would affect such
bank's eligibility for exemption under this section.
" Any material misrepresentations of eligibility for exemption under this section
shall be punishable pursuant to 18 U.S.C. § 1001 .

321

CONGRESS SHOULD REPEAL UNNECESSARY
COMMUNITY REINVESTMENT ACT REQUIREMENTS

•

Most minority-owned banks are established to provide banking services to
particular ethnic groups - and were encouraged to do so by federal
regulators. The operating plans of these banks plainly set forth this
purpose.

The targeted ethnic populations served by minority-owned banks are often
concentrated in urban pockets, which historically have not been a market
focus of surrounding financial Institutions; yet CRA often forces minority
banks to compete in heavily served areas with well-established , larger
institutions.

•

Minority-owned banks are a primary source of credit for many minorityowned businesses and minority entrepreneurs.

•

Forcing minority-owned banks to market their products beyond the
boundaries oftheir natural base - under the guise of the CRA -- imposes
untenable costs and administrative burdens that threaten the viability of such
institutions and is inconsistent with their stated business plans.

•

Requiring minority banks to market their products throughout a larger
" geographic market" is counter intuitive - minority banks already serve
markets the CRA was designed to protect.

•

Congress should exempt these minority banks from counterproductive CRA
requirements.

•

Minority banks would remain subject to federal oversight and supervision ,
including fair lending , consumer credit, and antidiscrimination laws if they
are exempted from onerous and unnecessary CRA requirement.

322

PCRG
PITTSBURGH COMMUNITY REINVESTMENT GROUP

Congresswoman Marge Roukema
Chair, Financial Institutions and Consumer Credit
Subcommittee
House Banking Committee
2129 Rayburn House Office Building
Washington, D.C. 20515

Post-it Fax Notc
7671 Date 3/7/957
To
From DenHulland
oTank
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Ma
Co/Dept
" HouseBankingCude. Con PLR.G
Phone#2.02) 225-2258 Phone( 412) 3.12.6053
Far
***202) 225-6984
( 412
) 31) .5767

DearCongresswoman Roukema:
The Pittsburgh Community Reinvestment Group ( PCRG) welcomes this opportunity to provide
its comments in support ofthe Community Reinvestment Act ( CRA) for the House Subcommittee
on Financial Institutions andConsumer Credit hearings. PCRG is concerned that recent efforts to
weaken and even climinate CRA will be a detriment not only to community based interests, but
alsoto financial institutions that work with local community development corporations ( CDCs) to
promote equal lending patterns and practices in lenders' entire delineated service area, including
low- and moderate-income communities. It has beenthe experience ofPCRG that, in working
with financial institutions, lending in all communities, including those that are low- and
moderate-income, is not only good business and a low credit risk but produces far more
reinvestment than numbers alone can quantify.
In this testimony, PCRG will explain who we are, what we do, who we work with, and describe
some ofthe community development initiatives that we helped foster with the financial
institutions. These arejust the highlights ofour successful endeavors with lenders; in fact, PCRG
is hard pressed to find examples offailures. Perhaps the only failure ofthe PCRG Partnership
CRA has created is that there are not morejust like it.
Who is PCRG?
PCRG is a coalition of32 community based organizations that works with eleven financial
institutions on a regular, ongoing basis to promote reinvestment in Pittsburgh's 90 neighborhoods,
with a special emphasis on low- and moderate-income areas. Through regularly scheduled
Community Development Advisory Groups ( CDAGs) , PCRG and financial institution
representatives develop home mortgage loan products and programs targeted toward low- and
moderate-income homebuyers, devise new and unique marketing and outreach strategies, promote
neighborhood employment initiatives, and establish credit counseling services for bank customers
Memberwho need assistance repairing their credit records, among other relevant topics.
Glen Hazel Citizens Association
North Side Civic Development Council
AlleghenyWest Civic Council
Bloomfield-Garfield Corporation
Northside Leadership Conference
Hal Community Development Corporation
Northside Tenants Reorganization
Hill District Ministries, Inc.
Breachnenders, Inc.
Calbride Place Citizens Council
Eastside Alliance
East Liberty Development, Inc.

Bifid Jubilee Association

Corporation

Troy Hill Ckizans, Inc.
West-End Elliott JointProject

323

PCRG conducts annual lending analyses of banks' mortgage lending in Pittsburgh neighborhoods,
by race and income, using information from the banks' loan application registers ( LARS) , publicly
disclosed under the Home Mortgage Disclosure Act of 1975 ( amended in 1991) , the critical
companion legislation to CRA From these annual studies, banks establish lending goals and work
with PCRG to meet and surpass these benchmarks. PCRG also provides neighborhood tours for
bank officials; technical assistance for items like brochure development, marketing strategies,
commercial lending program guidelines; access to minority and women contractors; housing
seminar coordination, and direct access to over 60% of Pittsburgh's neighborhoods, a still
untapped market.
PCRG awards the efforts offinancial institutions with the Annual PCRG Banking Awards
Luncheon, in which noteworthy financial institution initiatives and individuals are given awards.
Last year, the keynote speaker was Comptroller ofthe Currency Eugene Ludwig, who was
astounded at the display of productive bank-community interaction. Mr. Ludwig exclaimed, " The
banks, community groups, and political leaders assembled here today says a lot about how well
the Community Reinvestment Act works . " PCRG wholeheartedly concurs.
Background
Since PCRG's founding in 1988, there has been over $ 2.4 billion in inner city reinvestment in
Pittsburgh. PCRG strongly believes that the innovative lending programs and outstanding
community commitment that the financial institutions have demonstrated here in Pittsburgh is a
testament to the effectiveness of CRA and its goal of utilizing private-market forces to revitalize
deteriorating neighborhoods. But when PCRG was formed in 1988, the benefits ofCRA were
not immediately apparent to financial institutions.
PCRG was established out of a protest of Union National Bank 's proposed acquisition ofPenn
Bank Corp. in Pittsburgh PCRG strongly believed, and had proof, that Union National Bank had
failed to meet community credit needs set forth under the Community Reinvestment Act of 1977.
A formal statement ofprotest was filed with the federal government, and an analysis ofthe bank's
lending patterns over the last five years was drawn on a map ofPittsburgh, showing where Union
National had " redlined" Pittsburgh neighborhoods, those communities which received no loans.
But concurrent with the filing ofthe protest, PCRG engaged Union National with dialogue about
how the bank could meet community noods. PCRG prepared a Community Needs Assessment, a
document on how the bank can fulfill its obligation to our neighborhoods, and presented it to
Union National's executives. Bank officials was surprised to be sure, but they also agreed to meet
the needs PCRG forth, including the establishment of a monthly CDAG with PCRG in which
strategies for meeting community needs could be discussed. Most importantly, Union National
Bank put its commitment in writing, and with PCRG, signed a five-year, ongoing Memorandum
ofUnderstanding ( MOU) worth $ 109 million. PCRG consequently withdrew its protest.
Last summer, PCRG and Integra Bank ( formerly Union National) updated the MOU forthe nexi
five years to be a commitment worth $ 1.4 billion
2

324

PCRG and Integra Bank are very proud ofthis agreement because it is essentially a risk-reduction
document, a commitment by the bank and by the 32 members ofPCRG to work together to
minimize, even eliminate, the perceived and real risks in our neighborhoods and to find the
numerous opportunities that exist.
Who PCRG Works With
Since the first Integra MOU was signed, PCRG established ten other relationships with leading
Pittsburgh financial institutions: Allegheny Valley Bank, Community Savings Bank, Dollar Bank,
Fayette Bank and Trust Company, Fidelity Savings Bank, Laurel Savings Association, Mellon
Bank, NorthSide Bank, Parkvale Savings Bank, and PNC Bank. Not one financial institution has
ever terminated a relationship with PCRG. In addition, PCRG works closely with the Urban
Redevelopment Authority of Pittsburgh, the city government agency responsible for housing and
commercial development, the Pittsburgh School Board, and a number of other organizations that
have become part of the " PCRG Partnership. " PCRG is also a member of Center for Community
Change, National Community Reinvestment Coalition, and National People's Action.
The financial institutions with which PCRG works do not view CRA as a regulatory burden. In
fact, one lender said that since his involvement with PCRG, his regulatory requirements under
CRA have been minimized. This CRA officer simply points the federal examiner toward the CRA
filo, complete with all PCRG's comments and feedback, and the examiner's work is virtually in one
folder, or scrics offolders. In addition, by consulting the PCRG membership, the federal financial
supervisory agencies have direct access to feedback on bank performance from 32 individual
community groups, over two thirds ofthe city neighborhoods. Although, when PCRG conducts
business with a financial institution, it is with one unified voice.
The PCRG Partnership goes beyond just doing good business. The financial institutions have
become active players in our neighborhoods, financing deals as small as a modest $ 20,000 single
family home to the renovation of 127 units oflow- and moderate-income housing worth $ 2.2
million There are a number of examples, some of which will be explained in this testimony. The
most important point, however, is that this special relationship between bank and community
exists and flourishes because the Community Reinvestment Act provided the mechanism for the
PCRG Partnership to work, without government intervention or subsidy.
A Sampling ofFinancial Institution Initiatives Created with PCRG Under CRA
PNC Bank: The Housing Recovery Program, Community/Lender Credit Program, and
Neighborhood Employment Initiatives

PCRG's relationship with PNC Bank ( then Pittsburgh National Bank) began soon after we had
brokered our first deal with Integra Bank. It began similarly, with PCRG's threat to file a protest
against PNB's application to acquire another bank. But PCRG never filed a protest because
PNB's CRA Officer, President, and CEO all agreed to discuss ways ofmeeting our mutual needs
3

325

When PNB became PNC Bank, it not only met our needs, but it became a leader in Pittsburgh in
creating new and innovative mortgage programs that would become the cornerstone to this city's
successful revitalization Working with PCRG, PNC Bank created the Housing Recovery
Program, an affordable housing program that uses a deferred second mortgage provided bythe
URA that cuts the cost of a house by 25 to 50%, based on the homebuyer's income. HRP must
be used in a low- to moderate- income neighborhood within city neighborhoods. But PNC Bank
did not keep HRP to itself, four other banks with which PCRG works now use the program.
The results ofIIRP have been stunning: Since its inception in 1990, 226 HRP projects have been
completed producing 311 owner-occupied housing units Whole neighborhoods in Pittsburgh,
have been reinvigorated and turned around 180 degrees from communities at the margins to those
with a strong economic mix ofresidents. But HRP also accomplished what one CDC staff person
calls " The Butterfly Effect" : houses and businesses around homes purchased through the HRP
have become renovated and restored as well, without HRP. This is a prime example ofa
successful community-bank program that in many ways cannot be measured in dollars or numbers.
PNC Bank did not stop there. PCRG and PNC Bank developed the Community/Lender Credit
Program ( CLCP) to address the chronic problem of bad credit among some low-income
borrowers. The program was designed so that if a potential homebuyer did not qualify for a home
loan through a bank due to credit problems, the overwhelming majority ofloan denial reasons, he
or she was referred to CLCP. PNC Bank also did not share this initiative either. Now over 20
banks participate . Since its establishment in 1993, CLCP credit counselors have counseled over
110 home buyers into new homes.
Last year, PNC Bank initiated a neighborhood employment outreach strategy with PCRG and
Neighborhood Employment Projects ( NEPs) in Pittsburgh to recruit qualified job applicants from
local communities. PNC conducts employment seminars, meets regularly with NEP directors, and
forwards all job openings to PCRG and the NEPs for distribution to the community. Now, all the
other banks with which PCRG works have jumped on the neighborhood employment bandwagon
and send job postings to PCRG and some have initiated their own employment initiatives.
PCRG is more than satisfied with PNC Bank. Recently, PCRG submitted comments in support of
PNC Bank to the Federal Home Loan Bank for its quarterly Community Support Standards
Review . The document numbered 190 pages. But PNC is but one bank in the PCRG Partnership.
There are many more eagerly exploring the untapped opportunities in our neighborhoods
Mellon Bank: The CNDI Model

In 1994, Mellon Bank scized on an idea to look at revitalizing whole neighborhoods, not just in
pieces as has been donc before, and created the Comprehensive Neighborhood Development
Initiative ( CNDI, pronounced " Cindy" ) , a joint neighborhood revitalization program that works in
conjunction with Pittsburgh History & Landmarks Foundation ( a local historic preservation
group) and the URA.

326

CNDI offers both technical and financial assistance, in the form of loans and recoverable grants,
on qualifying projects to community based organizations. The concept is to restore historic
neighborhoods through a comprehensive " one-stop-shopping" approach, while saving the CDC
time, skills, and up-front costs.
The results of CNDI, while still early in the program's usage, appear to be remarkable. In a recent
CDAG meeting, Mellon explained that it working with the East Liberty Development, Inc., a
PCRG member, on a 127-unit scattered site restoration project in Pittsburgh's East Liberty
neighborhood ( a low- and moderate income community) worth $ 2.2 million. One hundred and
twenty seven units of mixed rental and for-sale housing is a substantial reinvestment in that
neighborhood. PCRG and Mellon Bank are confident many more of these similar projects will be
put to use in other Pittsburgh neighborhoods.
Allegheny Valley Bank: The Upstairs/Downstairs Program

At one point several years ago, PCRG was on the verge of picketing Allegheny Valley Bank for
its poor lending record extending back into the early 1980s. A protest was imminent and the
relationship was cold. But PCRG and Allegheny Valley Bank decided to establish a CDAG
meeting schedule and discuss ways the bank could meet the community's needs. Last year a
breakthrough occurred when Allegheny Valley Bank, working with PCRG, designed the
" Upstairs/Downstairs" program, a mixed commercial/residential program for use in low- and
moderate-income business districts
Under the " Upstairs/Downstairs" program, a borrower can purchase a commercial building in a
low- and moderate-income business district, convert the first floor to retail business use and live in
the upper floors, similar to " Mom and Pop" shops ofthe past. Pittsburgh is replete with such
buildings in small business districts and Allegheny Valley Bank is to be commended for creating a
program that builds upon the unique character of Pittsburgh's neighborhoods.
Dollar Bank: From $ 30 Million Commitment to $ 42 Million in Three Years
Raisingthe stakes to stay competitive
PCRG's initial relationship with Dollar Bank was not tremendously productive, until the bank
hired Howard Slaughter as its CRA Officer in 1991. Mr. Slaughter first accomplishment was an
overhaul ofthe bank's community mortgage loan product to be better tailored to the needs of
PCRG neighborhoods. Mr. Slaughter stunned PCRG in 1992 when he and Dollar's President and
CEO signed a commitment to lend at least $ 30 million in low- and moderate-income
neighborhoods over the next three years. As ofJanuary 1995, Dollar Bank reports that it has
surpassed this goal. Although Mr. Slaughter moved on to another organization, Dollar Bank
increased its three-year commitment to $ 42 million, and it will include small business and
employment initiatives as well. PCRG will ensure that Dollar Bank meets its goal.

S

327

Fidelity Savings Bank and Community Savings Bank: Ain't IA Woman Housing Initiative
" When was the last time your lending to African Americans went up by a thousandpercent?"
Both Fidelity Savings Bank and Community Savings Bank came to PCRG in early 1993 ashamed
of their lending to African Americans: Zero loans in 1991. But they were determined to reverse
this trend by actively working with PCRG to change the way they do community banking and
marketing.In late 1993, both banks used the technical assistance PCRG provided to create the
" Ain't I AWoman Housing Initiative," a strategy to attract single black female homebuyers to
institutions that had not traditionally sought this market but needed to in order to stay
competitive. The first seminar introducing the program was held at a church in pouring cold rain
in November 1993. Over 300 African American women showed up to learn more.
Today, both Community Savings Bank and Fidelity Savings Bank are partners in this unique and
innovative program that yields real results. While the official numbers are not out yet, Fidelity
Savings Bank reports that it made ten loans to African Americans in 1994, an increase of 1,000%
in one year. The President and CEO of Fidelity boasts about this program to fellow bankers:
" When was the last time your lending to African Americans went up by a thousand percent?"
Both Community Savings Bank and Fidelity Savings Bank are reaping the rewards ofthis
initiative, and they regularly keep in touch with prospective homebuyers, refer some to CLCP,
and aggressively market their programs citywide. There is no question in these bankers' minds
that CRA has meant more business for the bank where none previously existed.
The Urban Redevelopment Authority: Commercial Lending Initiatives
Capitalizing onthe public-private paradigm established through the PCRG Partnership
Finally, PCRG is proud to have been a partner in redesigning the Urban Redevelopment
Authority's commercial lending programs into two new initiatives: The Pittsburgh Business
Growth Fund, for financing working capital and equipment, and the Urban Development Fund,
for financing real estate PCRG and the financial institutions favor the programs' simplicity and
focus on small businesses or roal estate in the most distressed Pittsburgh neighborhoods. PCRG
and the financial institutions are still working on the marketing for these programs to ensure that
the lenders remain the first point ofcontact for business or commercial real estate loans.
CRA: We Still NeedIt
It should be clear throughthese anecdotes that what the Community Reinvestment Act is about is
developing private market partnerships among financial institutions, local community development
organizations, and public entities, not overburdening banks with unnecessary paperwork or filing
a protest every time a financial institution reports a poor lending record. In fact, PCRG views a
protest as a failure because PCRG and the bank havo failed to come to the table to conduct
business. But when business is conducted, it is profitable, innovative, and exciting.
There is no question that all ofthis would have never occurred without the impetus ofthe
Community Reinvestment Act.
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BOA

RD

OF

FED

ERA SERVE
LRE

BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
LAWRENCE B. LINDSEY
MEMBER OF THE BOARD

April 12 , 1995

The Honorable Barney Frank

Dear Congressman Frank :
This letter responds to an issue you raised during the
hearings held by the Subcommittee on Financial Institutions on
March 8 regarding reform of the Community Reinvestment Act . You
asked whether we knew of any circumstances in which loans to lowand moderate - income borrowers had caused safety and soundness
problems for a bank or thrift , due to default , delinquency and
the like .
I believe my quick answer at the time was " no . "
Certainly , the anecdotal information I have heard would indicate
that loans to low- and moderate - income people perform with
respect to repayment as well as , and in some cases better than ,
loan to others . Furthermore , I have heard of no cases in which a
bank's portfolio contained such a large number of such loans that
even if a significant number of the borrowers defaulted , it would
put the bank in a seriously adverse safety and soundness
position .
After you raised the question , I took some time to seek
out some harder data and studies that might illuminate the
matter . I was not able to find a lot in this vein , but I'll
briefly share what I was able to locate . One reason for the few
studies on the matter , I suspect , is that the data necessary to
conduct them are , rightly I believe , generally closely and
confidentially held in the loan files of the customers .
Consequently, producing the necessary data , without compromising
confidential information , can be time - consuming and expensive .
Nonetheless , the Woodstock Institute in Chicago
conducted a study of the performance of residential loans in lowand moderate - income areas as compared to loans made in other
neighborhoods . The October 1993 study based its conclusions on a
sample of 2231 loans collected by the National Association of
Affordable Housing Lenders from seven willing lenders .
of all loans that were ever delinquent were delinquent only once ;

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The Honorable Barney Frank

( 2 ) the delinquency rate for loans that had been delinquent for
90 days or more was one tenth of a percent ; and ( 3 ) the
delinquency rates for a national sample of loans , containing data
on loans in areas of all income levels , was 7.5 to 8.5 times
greater . The same study reviewed the performance of multifamily
loans in low- and moderate - income areas and , though the
characteristics of the data sets did not allow the researchers to
make perfect comparisons , the study did conclude that the loans
made in low- and moderate - income areas experienced delinquency
rates one to three times greater than national samples .
Foreclosure rates , however, seem more aligned to national
samples . As a result , the combined delinquency and foreclosure
rates for multifamily housing loans in low- and moderate - income
areas were slightly superior to those gleaned from national
samples reflecting loans in all income areas .
GE Capital Mortgage Insurance Company also did a study
of its own loans that were originated between 1987 and 1991. It
concluded that borrowers with annual incomes of less than $ 40,000
were eight percent less likely than those with higher incomes to
become delinquent on their loan payments and that the lowest
income group ( less than $ 20,000 annual income ) had the best
delinquency performance .
In addition , Richard G. Fritz , Vice President and
Senior Economist at the Federal Home Loan Bank of Atlanta ,
presented a paper in January of 1994 which highlighted results
from his study on the performance of the Atlanta Mortgage
Consortium. The consortium was created in 1988 shortly after the
Atlanta Journal /Constitution newspapers published a series called
" The Color of Money" that was critical of the racial distribution
of mortgage loans made by Atlanta lenders . The paper ,
" Consortium Residential Lending and Community Reinvestment : An
Analysis of the Atlanta Mortgage Consortium" , shows that for
loans made during what Mr. Fritz calls Phase I of the program's
existence ( roughly its first year) , the consortium experienced
heavy long term delinquencies ( 11.9% ) . However , adjustments were
made to the consortium's lending criteria during the next two
years or so ( Phase II ) and the delinquency rate was significantly
reduced to 6.7% . The consortium continued to effectively serve
the low- income population of Atlanta after making the
underwriting adjustments for Phase II .
In order to contribute an additional measure of
comparison regarding the consortium's lending performance , I
would like to provide some national data for the time periods
that roughly correspond to the two phases of the study . During
the Phase I period , the national delinquency rate was 4.78% for
all mortgage loans and 6.65% for all FHA loans ( possibly a more

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The Honorable Barney Frank
April 12 , 1995
Page 3
apt comparison given FHA's relative emphasis on a similar
market ) . National rates during Phase II were approximately 5%
for all mortgage loans and 7.32 % for FHA loans . Further , I am
informed by other sources that during the first quarter of 1995 ,
the AMC experienced a 9.99 % delinquency rate while all FHA loans
in the state of Georgia experienced a 10.01 % delinquency rate .
I think that this experience shows that , although it is
possible to go too far in reducing credit criteria , it is also
possible , with a sensible set of adjustments to those criteria ,
to serve low- and moderate - income areas effectively . It also
demonstrates that the consortium approach to lending in these
areas can serve to spread the risk and make this type of lending
possible without undue risk to any individual institution . I
think it is important , however, to put this discussion in a
fuller context , and to indicate that the answers to the question
you raised are probably more complex than this response has so
far indicated , particularly with respect to FHA- insured loans .
In this regard , I would point out that a recent study , coauthored by Glenn Canner, an economist here at the Board , showed
that FHA- insured loans in low- and moderate - income areas
experienced nearly twice the default rates ( as distinguished from
a delinquency rate ) of those made in upper income areas during
the sample period .
Finally , I would simply cite some statistics offered by
the National Association of Community Development Loan Funds ,
reflecting loans made by its 41 member funds . Through 1993 ,
these funds had made $ 193.1 million in 3,960 loans for housing
and businesses . The Association reports that its members had
financed 43,369 housing units , 88% affordable to low- income
Loan losses through 1993 were $ 1.69 million , or .87% of
the total .

I believe this information responds to the question you
raised . As you can see , the potential answers are complex and
may turn on the programs and experiences chosen for review and
the comparisons made . Furthermore , I would add that though these
studies and data appear reliable , I have not personally reviewed
their underpinnings and can only offer them for your
consideration . Additionally , aside from the issue of repayment
performance , there is the issue of profitability . We have no
studies on the relative profitability of loans in low- and
moderate - income areas compared to other areas . We do know,
however , that in many cases these loans are subsidized ( the AMC
loans are an example ) or involve credit counseling or other risk
mitigating aspects that have an impact on their performance as a
matter of relative profitability . Nonetheless , I have not heard
of situations involving loans of this type putting any banks at

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The Honorable Barney Frank
Page 4
risk . And the success stories for these kind of lending are
numerous . If you would like any other details on these studies
and data , please contact me .

Sincerely,

James R.Andrey

333

APPENDIX

March

9,

1995

334

STATEMENT OF

.
JAMES M. CULBERSON, JR

On Behalf of
THE AMERICAN BANKERS ASSOCIATION

Before the

Subcommittee on Financial Institutions and
Consumer Credit

ofthe
Committee on Banking and Financial Services

U. S. HOUSE OF REPRESENTATIVES

March 9, 1995

335

Statement of James M. Culberson, Jr.

Before the
Subcommittee on Financial Institutions and Consumer Credit
Committee on Banking and Financial Services
U. S. House of Representatives

March 9 , 1995

Madam Chairwoman , I am James M. Culberson Jr. , Chairman ofthe Board ofthe
First National Bank and Trust Company in Asheboro, North Carolina. I am the
President- Elect ofthe American Bankers Association . The American Bankers Association
is the national trade and professional association for America's commercial banks, from
the smallest to the largest. ABA members hold about 90 percent of the industry's total
assets . Approximately 94 percent of ABA members are community banks with less than
$ 500 million in assets.

I am pleased to be here this morning to speak to the Subcommittee on the
structure ofthe Community Reinvestment Act ( CRA) . We appreciate, Madam
Chairwoman, your undertaking this review. We are very hopeful that this process of
reexamining the current structure will result in a more workable and efficient system .
Few regulatory issues raise as much emotion as CRA. CRA began as a simple
statement of community responsibility -- that each bank should help meet the credit
needs of its entire community, including low- and moderate-income neighborhoods. I
am in complete agreement with this goal, as are virtually all bankers. The relationship
between banks and their communities is, after all, a two-way street -- the profitability and
strength of my bank rests squarely upon the economic health and vitality of my
community the individuals and local businesses that are my depositors and borrowers.
As one banker put it: " If we do not invest in our community, it will die and the bank
will die with it. We do not need a law and paperwork to understand this . " I can assure
you, Madam Chairwoman that anyone who does not understand this close relationship
between a bank and its community won't last long in the business of banking.
The problem bankers have with CRA is not its philosophy, but its implementation .
Over the years, as regulators struggled to find meaningful ways to judge compliance with

336

CRA, layer upon layer of paperwork and documentation has been added. It is time to
restore the basic intent of CRA: helping to meet the credit needs ofthe community in a
spirit of community cooperation and without a lot of paperwork and red tape. To do so
requires a CRA system that:
recognizes differences in institutions and the communities they serve;
fosters cooperation instead of confrontation, and rewards extra effort; and
cuts back the paperwork burden and puts dollars into the community
instead of red tape.

The remainder ofthis testimony details these requirements . But before that, an
observation: over three- quarters of the financial assets are held by firms outside the reach
ofthe Community Reinvestment Act. Securities firms, finance companies, mutual funds,
money market funds, insurance companies, members of the Farm Credit System, and even
credit unions offer bank- like products that draw savings and investment funds by the tens
of billions of dollars out of communities across the country -- yet they are under no
obligation to return anything to those communities. I find it particularly frustrating since
two of my biggest banking competitors are credit unions -- both larger than my bank and
federally insured -- and yet they have no CRA responsibilities . I also compete head-tohead with mortgage companies that do not have any CRA responsibilities.
Banks cannot and should not be expected to carry virtually the whole load in
meeting community credit needs. Other institutions should be held to the same high
standards of community responsibility to which banks are held.

I.

Recognize Differences in Institutions and Communities

Today, administration of CRA takes a one- size-fits-all approach. Large or small,
rural or urban, full service or limited charter banks are all treated alike. An effective
system must recognize the significant differences in where and how these institutions
operate. The documentation requirements designed for urban areas make no sense in
small communities and rural areas . Similarly, standards for a full-service retail bank make

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no sense for specialized banks. For example, credit card banks and wholesale banks
should be able to meet their CRA obligations in a way that is compatible with their type
of business, and, in the case of credit card banks, within the limitations of their charter.
We applaud the bank regulators for taking important steps in this direction in their recent
proposals.
The one- size-fits-all approach has been particularly hard on community banks,
which do not have the capacity to cope with the massive documentation requirements of
the current system. In fact, the vast majority ofthe banking industry is community banks
with assets less than $ 500 million. Moreover, nearly half of all commercial banks have
fewer than 25 employees; 1,300 banks have fewer than 10 employees . Moreover, the
cost of complying with regulations, while significant for all banks, is relatively higher for
small banks because there are economies of scale in compliance -- a fact clearly brought
out in a recent Federal Reserve study on the costs of implementing the Truth- in- Savings
statute as well as in an ABA study. In fact, for banks under $ 50 million in assets, one out
of every four dollars of operating expense is spent on compliance. This is robbing time
and resources that would otherwise have been invested in the community. One banker
put it this way:
Community banks ...are already doing all ofthe things CRA intends to
make them do. But to prove and document all of this is nearly impossible,
expensive, frustrating and time consuming.
Another made the point that:
Small town banks support their communities significantly more than any
other business in the community -- both in hours devoted to community
projects and in money spent. CRA ...is expensive and time- consuming
regulation that produces absolutely nothing .
The problem with CRA is not that it " requires " bankers to invest in the
community -- they do that anyway. The problem is that in today's regulatory
enforcement of CRA, we spend more time and money in compliance which takes away
from actually serving our community.

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I do not wish to imply that CRA costs are not significant for large banks -- they
are, and the overall costs of CRA need to be addressed for all banks . However, the size
ofbanks and the types of communities each serves need to be considered. For example,
there is absolutely no point in having a small bank in a small town geocode loans when
the banker literally knows personally every person who has a loan from that bank.
Streamlining the process for all banks will free up scarce resources for more
productive uses in the community, and will be welcome news to bank customers most of
whom are vitally interested in the betterment of their communities. A perfect
complement to a system which recognizes differences among banks and communities
would be to enable banks to choose from a menu of different options for demonstrating
that they are meeting their community's credit needs. Recognizing differences and
providing a variety of options to demonstrate compliance provide the flexibility to tailor
CRA compliance to all the different communities in this country. The regulators'
proposal does help in this regard by recognizing differences in banks and by offering
options for documenting compliance. We appreciate their efforts. There are additional
things that could be done, however, and ABA will be developing further suggestions for
Congress to consider.

II.

Foster Cooperation, Not Confrontation

The number of successful joint projects between banks, local governments,
nonprofit organizations and community groups demonstrates that cooperation, rather
than confrontation, yields far better results for all involved. There are many, many
examples of bankers, community groups and local governments working together to solve
local problems and to build a better future.
There are a number of problems with the current rating system. First, evidence
suggests that, each year, the standards for satisfactory or outstanding are raised by
examiners, regardless of whether or not there have been any changes in a bank's
community. And some have taken this to an extreme suggesting that only a specified,
small percentage of the banking industry can receive an outstanding rating. In fact, some
compliance examiners are very blunt in telling bankers that they never give an outstanding

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rating, regardless of the bank's performance record. Several recommendations in the
regulators' proposal , such as expanding the grading scale, appear to us to have the effect
ofsetting in regulation limits on the ability of banks to achieve outstanding ratings. Such
limitations, whether written in regulation or by examiner predilection, are not
appropriate.
A huge problem is that there are no assurances that a consistent record of CRA
compliance will stop unsubstantiated challenges to applications. Ironically, many bankers
believe that earning an " outstanding rating " only serves to make the bank a magnet for
criticism and demands for additional effort by the bank.
Even for banks rated " satisfactory " or " outstanding, " applications for an
acquisition or a merger are often protested, with the accompanying delay, by advocacy
groups seeking grants or loan commitments . What good does it do to get a good grade
when a merger or acquisition application can be challenged and delayed anyway? A bank
that is not deficient in meeting its community's credit needs deserves to be freed from
costly delays arising from unsubstantiated challenges during CRA review.
It is clear that Congress, when it enacted CRA, did not envision this result. It
intended to encourage cooperation, and in most cases banks do work closely with
community groups . Congress could not have intended that small groups, sometimes
pushed by non-local groups, could make demands to fund their individual projects or
groups and use the leverage of delay to try to force a bank to comply. Delays of months
have not been unusual, and since such delays can involve huge costs, banks have often
been forced to make grants or loans to these groups. A system whereby private
businesses can be " held hostage " in such a manner simply is unfair.
This system also constitutes credit allocation in the extreme. Many believe that
CRA, itself, is inherently credit allocation, but the current implementation of CRA, which
permits individual groups to leverage institutions to provide grants or loans to their
individual projects or groups certainly results in very specific allocation of credit. Banks
should be encouraged to talk to and work with community groups, but this type of
leverage by protest -- or, often, threatened protest -- should be removed from the system .

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III.

Improve Efficiency by Reducing Paperwork Burden

Paperwork, paperwork, and more paperwork. That's what CRA has become. One
banker characterized it by stating:
The documentation burden that this [ Community Reinvestment] Act has
created rivals the New York City telephone book. The banks are required
to document all areas of their community involvement, compile detailed
statistical analyses to prove their actions, dedicate staff resources to
developing, understanding and maintaining the records. The really sad
reality of all this work is that the only people who have ever looked at our
CRA records have been bank examiners.

Ironically, the legislative history of CRA clearly indicates that it would not impose
any new record keeping requirements on the industry . Senator Proxmire, the sponsor of
the bill that became the Community Reinvestment Act, stated on the floor ofthe Senate:

An early draft of the bill would have required additional reporting by
lenders. The committee considered this provision in markup, and we
unanimously agreed that bank examiners already have access to ample data
to carry out the purposes ofthis title. We deleted the reporting
requirement.
Senator Proxmire followed these remarks, in response to concerns by Senator Morgan
that the bill would end up requiring a lot more paperwork and a lot more red tape, by
stating: " That was true of the bill originally perhaps, but it certainly is not true of this
bill now. " 1

In fact, despite this clear Congressional intent, record keeping is now what CRA is
all about. What a bank is actually doing in its community is almost irrelevant -- what
counts is the thickness and neatness ofthe CRA files and whether or not they contain the
right documentation .

¹S.17631 , Congressional Record, June 6, 1977.
6

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Over the past several years, the regulators have undertaken the task of revising the
CRA regulations and are currently considering a second proposal. There are many
positive aspects of the second proposal -- such as the small bank streamlined assessment
and a flexible strategic plan option. But even these require proper implementation to
make them effective. In particular, the asset limitation for qualification for the
streamlined examination is too low. All across the country, banks like mine are doing a
good job in meeting the credit needs of their communities, and should have no trouble
demonstrating that fact under a streamlined examination process . In terms of bank sizes
today, $ 250 million is small . To add additional burdens -- particularly reporting burdens
-- to a bank my size will do absolutely nothing to improve credit availability nor will it
provide any meaningful information . To the contrary, it will add another costly and
unncecessary regulatory burden with no or nominal benefit. The cut-off at $ 250 million
should be raised.

The regulators proposals to date add significantly to the already huge reporting
burden of CRA for many banks. In particular, the banking regulators have proposed
substantial reporting of small business/small farm loan applications. As part ofthis
proposal, there is a provision that would require distinguishing loans by race and gender.
ABA has serious concerns over small business reporting and coding by race and
gender particularly. Before addressing the specific problems associated with small business
reporting ( including race and gender breakdowns ) , there are four fundamental problems
with any such proposal for such expanded reporting:
Added reporting will make small business borrowing more costly and will
waste even more scarce community resources on red tape;
The data collected is not necessary to assess whether a bank is meeting its
CRA obligations;
Requiring only banks and thrifts to report gives an incomplete and
misleading picture of lending in these markets; and
The reporting provides a worthless, and in fact misleading picture of a
bank's lending .

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Let me touch on these, and then discuss in detail the problems specific to small business
reporting under CRA.

Added Reporting Means Higher Cost ofCredit
Reporting is costly. Every dollar devoted to red tape is one fewer dollar that can
be productively used in providing banking services to the community. Several comments
from bankers serve to illustrate this point. For example, one banker commented:
The research, reporting and documentation burdens imposed by CRA force
our institution to spend approximately $ 50,000 more per year to provide
the same services we would provide without CRA.
And another said:

During the next three months, I estimate that 50% of my time will be spent
on regulatory compliance issues. What is really sad and ironic is that my
time will not be spent on regulations which affect the safety and soundness
ofthe bank's loans and other assets. Rather, it will be spent on regulations
such as the Community Reinvestment Act, Regulation CC ( Expedited
Funds Availability) , Regulation DD ( Truth in Savings) and the Bank
Secrecy Act which have little to do with safety and soundness issues.
What would I normally be doing with this lost 50% of my work week? I
would be calling on existing and prospective customers, making loans or
working to develop new deposit and loan products to more effectively
compete in the marketplace -- the real heart and soul of banking. Isn't that
what banking is all about?
And these comments relate to current reporting and compliance. The impact of
costly new CRA burdens should not be underestimated. The additional reporting will
increase costs by slowing down the lending process and by requiring the collection of
additional information from small business/small farm applicants, not to mention the
additional compliance burden. And, because reporting is likely to lead to a standardized

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lending format, it may also reduce the flexibility that is such an important element of
small business/small farm lending. In short, adding yet another expense to banks'
lending activities will surely have a negative impact on both the cost and availability of
bank credit. This will hurt most ofthose low- and moderate-income business borrowers
that the regulation is designed to help.
Last year, Congress took the first step to reduce the excessive regulatory burden
on the banking industry, helping to reverse one of the factors inhibiting the flow of credit
to small businesses . Since documenting performance under the current CRA system is
among the most costly and time- consuming regulatory burdens, it is vital that reform
efforts look carefully at this issue.
Added Reporting is Not Necessary to Assess CRA Performance
As Senator Proxmire stated in 1977, " ...bank examiners already have access to
ample data to carry out the purposes of this [ CRA] title. " Today, if anything, there is
much more information readily available to examiners. The data that would be collected
under additional reporting requirements are not necessary to assess whether a bank is
meeting its CRA obligations.

Reporting by Only One Lending Group Among Many Gives an Incomplete Picture
Banks and thrifts are important lenders to small businesses, but they are by no
means the only lenders . Many small business loans are made by nonbanks like finance
companies -- even Merrill Lynch has a small business loan program. Even the Farm
Credit System and the credit unions are active in small business lending. Surveys show
that small business borrowers rely on a variety of non-bank sources of credit including
vendors, retained earnings and private borrowings to finance their operations . None of
these sources ofsmall business credit would be captured byproposals to increase reporting by
banks. Finance companies, credit unions, asset-based lenders are major players, and their
omission will certainly give an incomplete picture of what is happening in these markets.

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Small Business Reporting Will Be Misleading
There are several very specific issues related to the value of small business/small
farm lending reporting. Moreover, the recent proposals to categorize small
business/small farm loan applications by race and gender create a whole additional series
of problems. I would like to detail our concerns. The bottom line, however, is quite
simple. We need to return to the basic intent of CRA and the promise made by
Senator Proxmire: that no new reporting would be required.

Small Business Loans Are Not Always Easy to Identify
In many cases, the ultimate use ofthe proceeds of a loan may not be obvious to
the lender. For example, many small business owners use home equity loans to finance
their operations. A recent Arthur Andersen/Small Business United survey indicates that
home equity loans account for almost one- half of the funds for start-up businesses. But
because a home equity loan may not be classified as a business loan, it may not be
captured in the proposed reporting.
A similar problem arises with respect to credit card loans, which are used by many
small business borrowers as a source of short-term working capital. In many cases the
credit card is issued to an individual rather than to a business, so the lender has no way to
identify the credit card loan as a business loan . Many of these loans will not be captured
by the proposed reporting, making the data even more incomplete and misleading.

Small Business Reporting is Not Like HMDA Reporting
Proponents of reporting small business/small farm loans reporting have claimed
that it would work just like HMDA reporting for home mortgage loans. This is simply
not true. First of all, bank regulators are finding that HMDA reporting is not as straight
forward as first thought . For example, there have been constant changes and reversals in
reporting requirements with respect to pre- qualifications, which are used with many new,
flexible mortgage products being offered by banks . Also, selling and purchasing of
mortgage loans may create double counting.

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And these problems of reporting and inconsistencies are with relative
straightforward, homogeneous loans. Small business/small farm loans are far more
complex than mortgage loans. They are not relatively straightforward or homogeneous
products. Because no two small businesses/small farms are alike, these loans are
individually tailored to suit each borrower's situation.
Second, the standardization of mortgage lending, created largely by secondary
market requirements, makes it relatively simple to design a standard application form
requesting the pertinent information. The flexibility required by small business/small
farm lending makes a standardized application form virtually useless for lenders. And this
is why so many banks do not even use an application form for these loans at least not
an application form that is in any way analogous to a residential mortgage loan
application.

Race and Gender Reporting Should Not Be Required
Proponents of reporting race and gender for every business loan application argue
it will increase credit availability to minority businesses. But it will not. It will only add
yet another layer of paperwork to small business borrowing, further complicate the credit
process, and increase the cost of small business credit .

Equally troubling is the fact that the data generated by the reporting requirement
will give an incomplete and misleading picture of both bank lending and the overall
availability of credit to low- and moderate-income communities.
And finally, race and gender reporting is completely counter to a color blind and
gender blind approach that should characterize decisions about creditworthiness. This is
the very reason why banks are currently prohibited by law from asking this information,
and believe that such a requirement is beyond the statutory authority of the regulators.
The following are some additional problems the proposal raises:
Categorizingthe Ownership ofSmall Businesses by Race and Gender is Not as
StraightForward as it Seems

346

For example, a business that has significant minority ownership -- up to 50 percent
-- will be classified as white- owned under the regulators proposal . Where the
ownership is split 50-50 , the tie goes to the majority gender or race. This means
that a " mom and pop " business would be categorized as male- owned, and that a
business owned equally by a minority and a non-minority would be classified as
non-minority-owned .
These inherent biases in the reported data mean that even ifa bank makes all its
Loans to businesses that have significant minority andfemale ownership -- up to 50
percent -- the data would show that all loans went to white males. In fact, if all
loans went to companies whose ownership mirrored the racial make-up of this
country, they would all be classified as loans to majority- owned businesses. Simply
put, the reported data will consistently and systematically understate minority
lending by banks. Such a distorted and inaccurate portrayal of bank lending does
not serve the best interests of small business or the public.

Voluntary Reporting Means Incomplete Data
In addition to the difficulties cited above, many small businesses will obviously be
reluctant to disclose the race and/or gender of their owners for privacy or other
reasons . Because of the voluntary nature of the reporting, the bank cannot require
( nor should it) that a borrower make such a disclosure. This means that the
reported data will give a fragmented and incomplete picture of bank lending to
minority-owned small businesses.

CRA Looks to Communities, Not Race and Gender

Lending in low- and moderate-income communities is not necessarily synonymous
with loans to minority- owned businesses. Thus, requirements that lenders geocode their business loans by census tract is inappropriate and misleading. What
about a loan to a company that may not be over 50 percent minority- owned, but
which provides employment to residents of low- and moderate-income

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communities? Certainly support for a community's employment base is critical to
its economic vitality.
In fact, the tie between race and gender reporting and CRA is not well-defined .
How would the race and gender data actually be used in the context ofthe overall
CRA examination? No such disclosure has ever been given by the regulators.
There is simply no justification for subjecting banks and bank borrowers to the
expense ofcomplying with a reporting requirement for which there is no specified
use within the statute.

No Legislative Authorityfor Reporting

Finally, the CRA statute does not contain the authority to support this type of
reporting, and it is not supported by the legislative history. HMDA reporting is
authorized by a specific statute. How can the regulators impose even more
onerous reporting on another subject without Congressional authorization?

Race and Gender Reporting Raises Serious Privacy Issues for Small Business
Owners

The proposed reporting would require banks to collect, on a loan-by-loan basis,
the racial and gender composition of their small business borrowers. If, as is true
for the HMDA data, the loan-by-loan data becomes publicly available, it would be
relatively simple for anyone interested to determine the borrowings of individual
companies. The public availability of this information may pose serious problems
as competitors, employees and even buy- out specialists could gain access to
sensitive financial information on individual companies.
In summary, the proposed reporting will be costly to both banks and borrowers
and will provide information that is, in fact, misleading since CRA was not designed to
impose new reporting in the first place, and since this reporting has not been approved by
Congress, ABA strongly believes it should be removed from the proposal.

13

88-882-95 - 12

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IV .

Conclusion

Let me assure you, Madam Chairwoman, that bankers are working hard to meet
the credit needs of their communities. As I said at the outset of my statement this
morning, they are doing so because the success of each bank is closely tied to the success
ofthe community it serves. As you and your colleagues review the Community
Reinvestment Act, we urge particular attention to the dangers of credit allocation.
Madam Chairwoman, the term " credit allocation " has a negative connotation -- and with
good reason. Allocating credit -- whether directly or indirectly -- may well be
inconsistent with safe and sound lending. This should concern not only bankers, but
regulators, the Congress and the public as well. CRA is potentially so open-ended that
we must be concerned about ever-increasing costs and its potential for slowly but surely
substituting government and political control over the credit decision process.
The first proposal from the regulators raised additional concerns about credit
allocation because ofthe inclusion of " market share " tests. We appreciate the changes
the regulators made in the second proposal in dropping this approach. However, there is
the ever present danger that such a mind set can creep back in, and in fact, a number of
banks have found their CRA examiners using their own informal market share test.
Basically this approach involves comparing a bank's market share in various submarkets
and believing it should be nearly identical in all submarkets . This simply won't work and
is counterproductive. For example, it makes it dangerous for a bank to try to enter a new
market -- for example, a low-income market -- because it's market share will, of course,
be less there.

Ironically, minority banks objected strongly to the market share test. Why?
Because they saw a system which would force large banks to " purchase " market share in
the minority banks' markets, possibly by reducing prices to the minority banks' best
customers. A system which drives banks to " purchase " market share to meet some preconceived government notion of " proper" market percentages would certainly be credit
allocation, and it would also undermine safety and soundness.
We all share concerns over America's distressed communities. But we must also be
realistic. Distressed communities cannot be reclaimed just with an increase in the

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availability of credit. Sustained community reinvestment requires not only profitable
business but also a healthy, growing community. No amount of bank lending can build
the infrastructure that a community needs to survive, much less prosper. Performance has
to be geared to the underlying reality of the community . Allocation of credit by
government fiat rather than by the marketplace will inevitably lead to inefficient use of
resources and will, in the end, not help the communities for which they were intended.
The banking regulators have put a great deal of work into rewriting the CRA
rules. It is an incredibly difficult task. We appreciate their efforts to take input from all
parties . Some of the new proposals are most helpful, but others do need to be
reconsidered, and in the case of the new reporting, removed.
We need to restore the basic intent of CRA. An effective CRA system must be
tailored for specific communities and institutions; it must have positive incentives to
encourage extra effort; it must have a structure that allows public input without constant
delays caused by protests, often filed purposely at the last minute; and it must not require
a huge amount ofreporting.

15

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Statement of the

Independent Bankers Association of America

Before the
Financial Institutions and Consumer Credit Subcommittee
Committee on Banking and Financial Services

U. S. House of Representatives

On Community Reinvestment Act ( CRA) Issues
March 9 , 1995

Independent Bankers Association of America

Telephone: ( 202) 659-8111

351

STATEMENT OF THE INDEPENDENT BANKERS ASSOCIATION OF AMERICA

Madam Chairwoman , my name is Tony Abbate, and I am President and CEO of
Interchange State Bank in Saddle Brook, New Jersey . I am pleased to appear before you
today on behalf of the Independent Bankers Association of America ( IBAA) , the only
national trade association that exclusively represents the interests of our nation's community
banks. I am Chairman of the IBAA's Marketing Committee, and I also serve on the
association's Federal Legislation Committee.
We are grateful for this opportunity to testify on the revised inter-agency proposal on
the Community Reinvestment Act . To better appreciate our testimony, it is important for
you to know something about our members. The average IBAA member bank is around $ 45
million in assets, and the great majority of members are below $ 100 million . So we truly
represent small , locally owned , locally operated community banks .
Equally important, our members are generally located in small towns and rural areas.
About 45 percent of IBAA bankers are considered " agricultural lenders, " and roughly 75
percent are located in towns with populations of 10,000 or less.
Madam Chairwoman, I am a community banker. But my community is somewhat
larger than that of the typical IBAA banker. The Interchange State Bank has $ 475 million in
assets and 190 employees . As you know, we are located five miles west of the George
Washington Bridge at the intersection of I-80 and the Garden State Parkway, so we are a
suburb of New York City. Saddle Brook is in Bergen County, New Jersey, which has a
population of 850,000 people. There are some 250 different financial institutions within a
five mile radius of my bank. So even though I may be large in comparison with the average
IBAA member, I am small in relation to the institutions with which I must compete in my
market area. More importantly, my bank is locally-owned, locally-operated, and our policies
are set locally.
Community banks ' bread and butter ongoing activity is community lending. If there
is no CRA we would continue this vital activity -- it is our reason for being. In a survey
taken by Grant-Thornton before CRA reform was put on the table by President Clinton on
July 15 , 1993 , CRA was identified by community banks as the most burdensome and most
expensive regulation . In past Congresses, we have worked with members of this Committee
for a CRA exemption for community banks. The interstate banking and branching bill,
which was passed last year, clearly exempts branches of multistate banks from direct CRA
examination which my bank faces. We look forward to working with you and this
Committee to achieve this goal in this Congress.

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2
Presidential Directive Recognizes CRA Burden
As you know, the inter-agency CRA proposal resulted from the President's 1993
directive to improve the CRA process in ways that " minimize the compliance burden on
financial institutions while stimulating improved CRA performance. "
The President's directive recognized that CRA is one of the most burdensome and
least effective banking regulations. The regulatory costs and burdens associated with the
current CRA process are staggering, particularly for community banks . Most of this cost
can be attributed to meaningless paperwork and documentation that banks must produce to
" justify" their CRA compliance , since the burden of proof currently rests on them. The
Grant Thornton study I mentioned earlier concluded that CRA was the most expensive preFDICIA compliance area for community banks, costing them more than a billion dollars a
year. Think of it, Madam Chairwoman . A billion dollars a year, just to convince examiners
that you're making loans in your community.
What has happened to the CRA examination process is indicative of the needless
regulatory burden imposed on this country in recent years . When CRA was first enacted,
bank examiners reviewed loan files, notices of credit rejection , Home Mortgage Disclosure
Act ( HMDA) disclosures, and other relevant documents. And they talked with bank officers
and, if necessary, the public , and determined the extent of the bank's compliance with CRA.
Today, the banker has to create voluminous detailed records, including a map showing the
location of every single housing-related loan . What this has done is shift the burden of
production of evidence from the examiner to the banker. It has not made the examination
more accurate, and the burden it has placed on community banks has hurt their ability to
serve their communities because it takes executive officers away from community lending
activities and makes them spend their time creating federally-required paperwork.
In late 1993 , the regulators issued their first CRA reform proposal . Because of the
overwhelming response to that proposal, and the intense controversy and divergent views that
it generated, the regulators felt that a further revised proposal was warranted.
The proposals went a long way towards returning the CRA examination to what it
was fifteen years ago -- one where the regulator has the burden of collating the information
in the bankers' files and they have recognized that a tiered examination system is necessary
and desirable.

CRA Small Bank Exemption
The IBAA has long supported an exemption from CRA for community banks . As
noted, the very reason for our existence is community lending. And in the new banking
world which will be created by the interstate banking and branching bill , it is bad public
policy to mandate a heavier CRA burden on community banks than the branches of out-ofstate domestic and foreign banks. The branches of multistate banks will almost never face a

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3
direct CRA examination -- my bank will at least every 18 months .
Members of the Congress have long recognized our special relationships with the
communities we serve.
In 1991 , the Financial Institutions Subcommittee adopted an amendment offered by
Representative Kanjorski ( D-PA) exempting from CRA all institutions under $ 150 million in
assets and all rural institutions under $ 250 million . This welcomed initiative was traded
away at the full Committee level.
This year, Congressman Bill McCollum ( R-FL) has introduced a similar bill . It
exempts institutions with assets under $ 100 million and institutions in communities with
populations less than 25,000 . It also provides for streamlined examinations for institutions
under $ 500 million that have a five-year record of compliance with ECOA and have a
satisfactory or better CRA rating , and a two-year safe harbor for institutions applying for
deposit facilities that have received a satisfactory or better CRA rating within the current
rating period. IBAA strongly supports the McCollum bill .
IBAA favors an even stronger recognition of the differences between large and small
banks. In the Financial Institution Regulatory Reform Act of 1995, which is IBAA's 26-point
regulatory relief proposal , we proposed to exempt from CRA all institutions with assets of
$ 500 million or less ( with an inflation adjustment) .
Small banks do not have the resources to comply with the data gathering requirements
or to deal with Federal bank examiners , who can take two to three weeks , or more, to
complete a CRA examination . Imposing CRA requirements and examinations on these small
institutions cannot be justified on a cost-benefit basis, as virtually all small institutions are
doing a good job of serving their communities, and the resources expended documenting
CRA performance and dealing with the examination process far outweighs any increase in
community lending resulting from CRA requirements.
An article in the 1994 Annual Report of the Federal Reserve Bank of Richmond by
one of the Bank's research officers states:
" After a review of the empirical literature relevant to critics' claims, I will
argue that there is little conclusive evidence that banks fail to meet the
credit needs of low-income neighborhoods per se. Instead, the CRA
regulations should be understood as a transfer program, aimed at
redistributing resources to low-income neighborhoods. The basic goal of
the CRA to improve conditions in distressed neighborhoods is obviously a
worthy one. But the lending and community investment obligations
impose an implicit tax on the banking industry for which there is little
justification. "

354

CRA Safe Harbor
The IBAA Financial Institution Regulatory Reform Act of 1995 also provides for a
safe harbor that allows a bank to rely on a CRA rating given during the last exam in the
applications process if the exam was within the preceding twelve months . This safe harbor
provision recognizes that an institution's policies and procedures do not change drastically in
a short period of time. If an institution has received a satisfactory or better CRA rating in
the previous twelve months, it should not have to go through the expense of having another
CRA review or defending against a protest when it makes an application .
IBAA will continue to work for enactment of these portions of our Financial
Institution Regulatory Reform Act of 1995.
Goals of CRA
Community bankers strongly support the goal of CRA -- to reinvest local deposits in
our communities. Most community banks serve low to moderate income residents, and in
some small towns and rural areas, they make up the majority of the market. This is where
we work and live . CRA as it is presently administered detracts from banks serving these
communities by emphasizing documentation rather than ongoing lending performance.
The original CRA statute is actually very flexible and provides ample discretion to the
implementing agencies to establish a tiered system. If you look at the legislative history , it is
clear that Congress did not mean to impose on banks the burden of paperwork that is
prevalent today. Over the past decade , implementation of CRA has changed dramatically, as
noted before, and a huge data collection burden has been placed on banks . Moreover, it is
unrealistic to assume that small community banks can meet the same requirements as their
larger counterparts.
Existing regulatory policies pay lip service about the need to differentiate between
small banks and large banks. Yet, most often , no meaningful burden reducing distinctions
are made. Banks with staffs of 10 are being asked -- and are expected -- to do the same as
those with staffs of thousands. Banks in towns of 1,000 are being held to standards that
parallel those for multinational financial corporations operating nationally and serving the
world.
No public purpose is served by a regulatory system that discriminates against
community banks by inflicting them with the same regulatory burden as multi-billion dollar
institutions.
Indeed, the noble goals of this Congress of supporting entrepreneurship and economic
growth are being thwarted in that every dollar a community bank spends on CRA compliance
means less is available for local community reinvestment. IBAA strongly supports a tiered
system for CRA examinations.

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5
Streamlined Exam for Small Banks
Changes in the CRA such as a small bank exemption require legislation . Until our
goal of an exemption is realized , IBAA strongly supports the revised inter-agency CRA
proposal because it is more user-friendly and represents a more reasonable process for
community banks than exists today. We particularly commend the regulators for recognizing
that local community banks should not be under the same paperwork requirements as
multinational and multistate institutions. And we strongly support the streamlined
The tiered system approach
examination process for banks under $ 250 million in assets.
will make community banks better able to serve their communities, and it should be
implemented across the spectrum of government regulations .
The tiered examination system recognizes two indisputable facts. First, because a
small bank has fewer deposit accounts and loans than larger banks, a bank examiner can
review the working files of the bank and draw conclusions regarding performance and
compliance with various laws. In a large bank, the volume of records is such that the
examiner must have the data presented in a manner that can be used . For example, an
examiner can geocode 200 home loans with ease , but could not geocode the many thousands
of home loans Citibank or Bank of America generates over the course of a year.
Second, a tiered system recognizes the disparate impact of regulatory burden . In a
small bank, there are few official staff. The week or two or three out of each year that these
officials spend complying with paperwork requirements means that they cannot spend that
time running the banks and serving their communities .
In a large bank, there are sufficient resources available to have people working full
time on regulatory burden . NationsBank has testified that it has over 110 people dedicated to
CRA alone. This means that officials are not taken from their banking duties to do
government paperwork.
Under the proposed streamlined examination system, banks under $ 250 million in
assets would be assessed on their lending performance based on five criteria. To receive a
satisfactory rating a small bank would have to have a reasonable loan-to-deposit ratio, a
majority of its loans in its service area, a reasonable distribution of loans across income
levels and geographies, and a satisfactory record of taking action in response to complaints
about CRA performance.
In contrast, large banks would be evaluated based on three different bases including
lending performance: the lending test ( which would receive the most weight) , the investment
test ( which measures qualifying community development and similar investments) , and the
service test ( which assesses the branching network and other means of delivering services to
the community) . Large banks also would have specified data collection requirements for
home mortgage and small business and farm loans.

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6
IBAA Supports Raising Streamlined Examination Threshold
IBAA also believes the streamlined examination level should be raised -- to $ 500
million . If the size remains at $ 250 million , the streamlined exam would apply to
approximately 17 percent of the banking industry's total assets . There are many community
banks larger than $ 250 million , mine included . We operate with small staffs and have an
intense local focus. By raising the threshold to $ 500 million , banks like mine will be
covered under the streamlined examination procedures, but the total banking assets covered
would be increased by only 3 more percentage points. Eighty percent of the banking assets
in this country would still be covered by the CRA. These banks will still be examined for
CRA, but will not be subject to onerous paperwork requirements.
A key element to the success of the revised CRA regulations in reducing regulatory
burden will be the manner in which the new rules are implemented . This will require
examination guidelines that keep the burden to a minimum and comprehensive examiner
training that ensures examiner judgement is exercised consistently and judiciously.

IBAA Supports $ 1 Billion MBHC Threshold
In addition to raising the threshold for streamlined exams to $ 500 million , IBAA
believes that small banks in holding companies up to $ 1 billion should be allowed to use the
streamlined procedure . Many community banks owned by larger holding companies are
operated as completely independent entities in widely separated markets and do not have any
greater resources than banks outside of holding companies. In other words, two small
community banks of $ 100 million and $ 160 million would not be eligible for the small bank
exam if they were owned by the same bank holding company.
There is precedent for this concept . We would note that recently the OCC has
initiated a tiered system for safety and soundness exams. The OCC is differentiating banks
based on complexity. If a " noncomplex " bank happens to be owned by a " complex " holding
company, this does not make the noncomplex bank complex. Because a community bank is
owned by a small bank holding company does not mean that the bank has the resources or
the capability of a large institution.
The same concept should apply to CRA. Just because a community bank is owned by
a small bank holding company does not mean that the bank has the resources or the
capability of a large institution with respect to CRA compliance. As a matter of fact, many
small bank holding companies are merely ownership shells and provide little if any support to
their affiliated banks. It makes sense to treat these institutions as still being small .
Whatever asset level is used, we urge that regular adjustments to the size threshold be
made to the tiered system. This is needed to account for the fact that banks grow as a result
of inflation, economic activity, and interest credited to deposit accounts while maintaining the
same level of staffing. A static asset level for streamlined examinations could discourage

357

community banks from growing and helping their communities create jobs .
Congressional Support for Tiered Structure
There is one more point I wish to underline concerning the tiered system. There are
many Congressional supporters of this approach . On two separate occasions last year,
Members of Congress wrote to the regulators supporting the tiered approach . In February,
71 House members signed a letter circulated by Representatives Charles Stenholm ( D-TX) ,
Pat Roberts ( R-KS) , and Larry Combest ( R-TX) , supporting the tiered system . And in
March, 40 Senators led by Senators Bryan Dorgan ( D-ND) , Malcolm Wallop ( R-WY) , Jim
Exon ( D- NE) , and Thad Cochran ( R- MS) also wrote to express support. After the revised
regulations were published , the leaders of the groups again wrote to congratulate the
regulators for including the tiered system in the new version .
So this is an idea that has widespread support, including here in Congress, and
represents a sense of fairness and a recognition of the differences between small and large
institutions. We urge you to endorse the streamlined examination procedures for small
banks.
IBAA Opposes Race and Gender Coding
Madam Chairwoman, the issue of race and gender coding is one of great importance
to community bankers, and I believe it warrants a thorough examination at this time. The
IBAA Financial Institution Regulatory Reform Act of 1995 also would prohibit the collection
of this data pursuant to the CRA .
The CRA was enacted to insure that geographic redlining does not occur. The
collection of race and gender data on loans, by itself, does nothing to answer the question of
whether an institution is meeting the credit needs of its community. One of the criteria that
can point to such redlining is a violation of Fair Lending laws. Therefore, fair lending
compliance remains the appropriate place to examine whether an institution is discriminating
on the basis of race or gender.
The Senate Committee Report on the Community Reinvestment Act of 1977 is very
clear. The Report states that the committee specifically " rejected the course of setting
percentage targets for investments. " During floor debate, the late Pennsylvania Senator John
Heinz stated that " CRA is not an attempt to allocate credit" .
Now, for the first time, race and gender reporting would be required for small
business and small agricultural loans . The IBAA is very pleased that these new data
requirements will not be applied to banks with less than $ 250 million in assets. However,
we urge opposition to this controversial provision for any bank.

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8
In opposing such race and gender reporting, Federal Reserve Governor Larry Lindsey
noted that, since the passage of the Equal Credit Opportunity Act, the Fed's regulations have
" sought... a race-blind policy. " He also highlighted the increased burden that this would
place on banking institutions and small business in addition to heightened privacy concerns.
Governor Lindsey warned that such new reporting requirements had enormous
protection of privacy implications for the " millions of small business owners in this country
who apply for bank loans. " He added , " In the case of small businesses, we are asking for
loan information, which may be crucial to the lifeblood of the company. Not only the usual
suspects, but also potential competitors, employees, and buyout specialists are now in the
market for information . Furthermore, there are far fewer small businesses in the typical
census tract than there are homes, on the order of a dozen or less. Identification therefore
becomes much easier. "
The " public's right to know" cannot be used to justify collection of indiscriminate
data. In this case it has a corresponding and unacceptable erosion of the right to financial
privacy. And the borrower will have the option to report or not report this data to the
institution. So the data itself would be incomplete, fragmented and unreliable.
I would like to add that there is no legal authority to collect this data for CRA. The
legislative history of CRA makes clear that the Act was not intended to be open to additional
paperwork. Moreover, Congress has considered and rejected several times small business
loan data reporting measures. One new reporting requirement for small business and small
farm loans was added as part of FDICIA that could be gleaned from the Call Report. This
proposal goes much beyond that. It is inappropriate for the regulators to be making such
policy.
CRA is based on geographic and income considerations, not race and gender. That is
proper since CRA's objective is to encourage banks to meet the credit needs of all the
residents of their community, including low- and moderate-income neighborhoods. The race
and gender of small business borrowers is the focus of the Equal Credit Opportunity Act
( ECOA) and Regulation B, which prohibit lenders from discriminating against borrowers
based on race, gender and a number of other prohibited factors , not CRA. And how is this
information going to be used? That is not spelled out in the proposal . That argues even
more that banks should not be asked to collect information for an unknown purpose.
A likely, if unintended , outcome of such a requirement would be to lead the media
and others to reach unfounded conclusions about banks' small business lending. That has
been the experience with HMDA data. HMDA is far too incomplete to draw any rational
conclusions or prove lending discrimination . Yet it has not prevented it from being used for
just that purpose. The IBAA urges that race and gender data collection provisions be
eliminated from the agency proposal .

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9
Fair Lending Implications
CRA has been evolving in many ways since its enactment. Fair lending examination
procedures have properly been incorporated into the CRA examination procedures. As part
of a CRA exam and compliance, the bank is evaluated for its adherence to antidiscrimination
and other related credit laws. During the exam, violation of the Equal Credit Opportunity
Act, the Fair Housing Act, and other regulations related to discrimination are considered .
The IBAA is committed to fair lending and strongly supports the voluntary efforts of
the industry to ensure that lending activities are conducted in a fair and non- discriminatory
manner.
Madam Chairwoman , you asked if there was any overlap between CRA and other fair
lending laws. The legislative history of CRA would suggest that Congress neither intended
nor envisioned CRA as fair lending legislation . At the time of its passage , there was
considerable debate about the goal ,of CRA. But most legislators agreed that the focus of the
legislation was the problem of depository institutions making loans outside of their market
areas. The focus of CRA was on communities, not race, ethnicity, gender, or other
protected classes.
We feel that the current system provides for a rigorous review and recognizes that
banks guilty of discrimination cannot effectively be serving their entire community. No
more is needed in this with regard to a CRA exam.

Interstate Branching Implications
With the advent of interstate branching, Mrs. Roukema , our members -- which are
fully examined for CRA compliance -- will often compete with branches of larger regional or
nationwide banks that may never be visited by a CRA examiner. These branches are free to
accept deposits and do little else to serve their community. The large interstate bank may
use some of the deposits to make targeted and politicized CRA commitments in far-away
communities that are relatively small . Otherwise, these branches get a free ride.
The proposed regulations begin to address this loophole . Even so, you should
understand that the agencies lack the resources to examine all branches of large banks. They
will have to rely on sampling. The competitive inequity will remain , though it might be
somewhat decreased.
Similarly, the Riegle-Neal interstate law will re-define CRA service areas for
interstate banks to include individual states , or when a metropolitan area crosses a state line,
individual MSAs. But the fact remains that no branch of an interstate bank will face the
same level of CRA scrutiny as a community bank.

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10
Expanded Financial Powers and Non-Bank Bank Competitors
At the time Congress passed the Community Reinvestment Act, banks and savings
and loans played much larger roles in the financial marketplace than they do today. The cost
of federal deposit insurance was comparatively low. Only commercial banks had direct
access to the Federal Reserve's discount window. This has all changed.
Banks and thrifts have lost significant market share to competitors . They hold less
than 30 percent of the home mortgage market today . In 1991 Congress gave securities firms
direct access to the discount window. Non-bank lenders have proliferated, the Farm Credit
System continues to steal away our best customers, and credit unions enjoy tremendous tax
and regulatory advantages. But CRA continues to apply only to banks and savings and
loans.
Especially in light of the debate over the reform of Glass Steagall and the Bank
Holding Company Act, Congress should consider this issue very carefully. Non-bank
institutions such as mortgage bankers, mutual funds, insurance companies, and credit unions
benefit significantly from the Federal Government's commitment to maintain the stability of
the financial system. However , the government imposes no community investment
requirements on them . Given the shifts in market share from banks and savings and loans to
these other financial service providers, a smaller and smaller share of the financial
marketplace is under any CRA obligations. Banks and thrifts cannot singlehandedly cure the
problems CRA was designed to address . We recommend that Congress consider levelling
the CRA playing field to insure that those firms that are gaining a greater share of the
financial marketplace also share in the obligation to serve their communities.
At the same time , IBAA believes that any reduction in the CRA burden -- such as
implementing a tiered examination system -- should apply equally to banks and other
financial institutions.
Conclusion
IBAA believes that the interagency proposal is positive first step . It goes a long way
towards improving the CRA examination process for community banks. The tiered system
and the streamlined exam are important steps forward .
But the IBAA urges Congress to do more . A community banking exemption is
needed. Community banks should not be under more onerous CRA examination
requirements than the branches of multistate or foreign banks and such banks do not face
direct CRA examination under the interstate banking and branching bill.
Returning to the reform proposal that is on the table, we urge that race and gender
coding of small business loans for any bank be eliminated . This race and gender coding
proposal has serious privacy implications and does not further community lending .

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11
Thank you, Madam Chairwoman and Members of the Subcommittee, for this

362

IBAA

November 21. 1994

Mr. William Wiles
Board of Governors of the

Communications Division
Ninth Floor
Office of the Comptroller of the Currency
250 E Street, S.W.

Richard Mount
Leland Step? cm .
In light
Terry1 rie
James K i'
Kennel · 20" 96"

Mr. Robert E. Feldman
Acting Executive Secretary
Attention: Room F-400

Ms. Kathy Semone
Director, Information Services Division
Public Affairs

Re: Revised Community Reinvestment Act Regulations
Dear Sir/Madam:
The Independent Bankers Association of America ( IBAA) submits these comments in
response to the joint agency proposal to revise the Community Reinvestment Act ( CRA)
regulations that was published in the Federal Register on October 7, 1994. The IBAA is the
only national trade association that exclusively represents the interests of the nation's
community banks.
The banking agencies have followed the mandate of President Clinton to work with
the industry to reform the Community Reinvestment Act. The IBAA commends the agencies
for incorporating many of our recommendations in this second proposal, which we believe is
much more reflective of the goal of measuring performance over paperwork. The IBAA
supports this proposal and wholeheartedly approves of the streamlined examination approach
for community banks. We strongly support the removal of the 60 percent loan-to-deposit
ratio test since this will make the streamlined examination more workable for community
banks. However, we believe that specific aspects of the proposal, including the enforcement
provisions and the data collection, require modification and/or elimination. Our detailed
comments follow, as outlined below.

WASHINGTON OFFICE. ONE THOMAS CIRCLE NW SLITE 950 WASHINGTON DC 20005-5802 • 202 659-8[ 1]

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2
Table of Contents
Tiered System
Regulatory Burden of Current CRA System

Reasonable Loan-to-Deposit Ratio
Majority of Loans in Service Area

Enforcement Authority
Legal Authority
Service Area
Multiple Service Areas
Assessment Context
Affiliate Lending

Legal Authority for Data Collection
Appropriateness to CRA
Privacy Implications
Practical Problems with Race and Gender Coding
Strategic Plan
Public File, Documentation and Disclosure
Ratings
Outstanding Ratings for Small Banks
Large Bank Ratings
Effect of Lending Discrimination on CRA Ratings
Weight of Ratings During Application Process
Transition Period
Publication of Examination Schedule and Public Comments
Appeals Process
Official Commentary
Examination Guidelines
Examiner Training
Bankers' Banks
Conclusion

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IBAA strongly supports a tiered system for CRA examinations. A tiered system will recognize the
real differences in circumstances in which community banks and thrifts operate. A tiered system that replaces
paperwork and uncertainty with greater performance, clarity and procedures is a goal that the President said is
critical to improving the CRA process. The proposed streamlined examination for community banks
recognizes that it is counterproductive to subject community banks to the same onerous paperwork . reporting
and other requirements as large multinational and multi-state banks. Different size banks have differing
abilities to comply with paperwork and reporting requirements.
As we noted in our letter on the first proposal, the IBAA believes that a tiered system is fully
consistent with the requirements of the statute. CRA directs the agencies to promulgate regulations. The
statute is very flexible and provides ample discretion to the agencies to establish a tiered system for
community banks. In fact, the legislative history makes clear the Act was not intended to require banks to do
any additional paperwork. ' The proposed streamlined examination process is more consistent with the original
intent and should significantly reduce the paperwork requirements for community banks.
REGULATORY BURDEN OF CURRENT CRA SYSTEM
There is ample evidence to support the need for a tiered CRA system. The regulatory costs and
burden associated with the current CRA process are staggering, particularly for community banks. Most of
this cost can be attributed to meaningless paperwork and documentation that banks must produce to " justify"
their CRA compliance. As we have noted, a study on the costs of the regulatory burden conducted in 1992 by
Grant Thornton for the IBAA concluded that CRA was the most expensive pre-FDICIA compliance area for
community banks.
CONGRESSIONAL SUPPORT
Congress also has demonstrated strong support for a tiered regulatory system. In February, 71 House
members signed a comment letter circulated by Representatives Charles Stenholm ( D-TX) , Pat Roberts ( RKS) , and Larry Combest ( R-TX) supporting the streamlined examination system for community banks and the
elimination of the 60% loan-to-deposit ratio test. In March, more than 40 Senators, led by Senators Byron
Dorgan ( D-ND) , Malcolm Wallop ( R-WY) , Jim Exon ( D-NE) and Thad Cochran ( R-MS) also wrote to express
this sentiment.
To emphasize their concerns, Stenholm, Roberts and Combest wrote again in October after the revised
regulations were published. They said in part, " ...we commend you for retaining the streamlined examination
system for banks under $ 250 million in assets, and for dropping the 60% loan-to-deposit ratio test, substituting
in its place a reasonableness standard. We also are pleased that the alternative examination procedures for
community banks were not expanded to include additional documentation requirements, such as race and
gender coding of small business and farm loans. This will help insure that CRA compliance for community
banks will be judged on the basis of performance rather than documentation." A similar letter was sent by
Senators Dorgan, Wallop, Exon and Cochran.

The Senate Report states. " The Committee believes that the regulatory agencies already have sufficient data available to carry
out the intent of this Act without requiring additional red-tape." S. Rep. 95-175, 95th Cong.. Ist Sess., May 16, 1977, at 34. The
Senate report goes on to discuss the fact that the CRA, as originally introduced, would have required banks to file additional material
with the regulators. However, the Senate Banking Committee concluded that additional burdens " would not be necessary or
appropriate to the enforcement" of CRA. Id.

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Members of Congress recognize that there are important differences between community banks and
large banks, and their ability to absorb the costs of regulatory compliance, and that the same rules should not
be applied to both. We believe the philosophy embodied in these congressional letters will be even more
prevalent in the new Congress.
SIZE THRESHOLD FOR STREAMLINED EXAMINATION
The revised proposal retains the criteria originally proposed for defining a small bank, or what the
IBAA terms a " community bank." The proposal provides for a streamlined CRA examination for banks with
less than $ 250 million in total assets and banks owned by holding companies with total banking assets of less
than $ 250 million.
Bank Size Threshold
The bank size threshold for the streamlined examination should be increased to $ 500 million. At the
proposed size of $ 250 million in assets, the streamlined examination only applies to approximately 17 percent
of the banking industry's total assets. There are many community banks larger than $ 250 million in assets
that operate with small staffs and an intense local focus, frequently in non-metropolitan areas.
IBAA requests that the final rule be revised to allow banks with up to $ 500 million in assets to qualify
for the streamlined exam option. Raising the size cut-off increases the banking assets subject to the bank
assessment method by only a nominal percentage ( 3 percentage points) for a total of 20 percent of the
industry's assets. There is no downside to increasing the bank size threshold--the bank is still examined for
compliance with CRA, yet is not subjected to burdensome paperwork and data collection requirements.
Holding Company Size Threshold
The IBAA believes that the holding company threshold also must be increased to avoid placing
hundreds of community banks at a significant disadvantage. The agencies assert that " no compelling evidence
was presented to support a change in the asset limit. " The IBAA strongly disagrees. Many community banks
owned by larger holding companies are operated as completely independent entities in widely separated
markets and do not have any greater resources than banks outside of holding companies . This may be
particularly true in former unit banking states or limited branching states.
Community banks in small multi-bank holding companies ( MBHCs) have little access to services that
would measurably increase their ability to comply with the full-blown CRA exam and burdensome new data
collection requirements. Many of these small MBHCs, while owning more than one bank, are not much more
than an ownership shell and provide few services, if any, to their subsidiary banks. Often community banks
owned by the same holding company are also miles apart and operate as completely independent banks. To
penalize community banks owned by small MBHCs by barring them from the streamlined exam will
perpetuate an unwarranted burden on community banks.
Of 769 MBHCs, 188 fall in the asset range of $ 250 million to $ 1 billion, which we define as small.
There are 1,373 banks with less than $ 250 million in assets that are owned by MBHCs and 326 of these banks
are less than $ 50 million in assets, 491 fall in the asset range of $ 50 million to $ 100 million, and 566 banks
are in the $ 100 million to $ 250 million asset range.
For small MBHCs in the asset range of $ 250 million to $ 1 billion, there are 164 banks with less than
$ 50 million in assets. 202 banks with assets ranging from $ 50 million to $ 100 million, and 165 banks in the
$ 100 million to $ 250 asset million asset range. To subject these banks in small MBHCs to the large bank
CRA exam and data collection would disadvantage these community banks. Raising the MBHC asset
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threshold would recognize the institutional diversity under which banks are operating today. It would also
reflect the fact that small holding companies often do not have the same resources or engage in the same
operations as larger holding companies.
The statement of Comptroller of the Currency Eugene Ludwig before the Senate Banking Committee
on July 15 , 1993 , can be read as being supportive of a higher threshold for the tiered system . Comptroller
Ludwig noted that the new CRA standards must recognize the diversity of the institutional and community
settings in which banks and thrifts operate. He said. " How any particular institution meets its CRA obligations
will depend on a variety of factors including its overall business strategy, size, financial resources, corporate
structure, location, and the needs of the community in which it operates. While all institutions must strive to
meet CRA requirements. we must recognize that smaller community banks simply cannot engage in the same
type of sophisticated efforts ( such as geocoding) as large banks in order to demonstrate that their CRA
performance is satisfactory."
IBAA notes that recently the OCC initiated a tiered system for safety and soundness exams. The OCC
is differentiating banks based on complexity. If a " noncomplex" bank happens to be owned by a " complex"
holding company, this does not make the noncomplex bank complex. Because a community bank is owned by
a small MBHC does not mean that the bank has the resources or the capabilities of a large institution.
Furthermore, we believe that the agencies have the necessary data on holding companies to ascertain that most
small bank holding companies are in fact ownership vehicles and provide little, if any, managerial support to
their affiliated banks.
IBAA requests that the agencies revise the final rule to permit banks owned by MBHCs of $ 1 billion
in assets or less to be eligible for streamlined examinations. IBAA also urges the agencies to provide for
regular adjustments to the size thresholds adopted for the small bank assessment method. This is needed to
account for the fact that banks grow as a result of inflation, economic activity and interest credited on
accounts, while maintaining the same level of staffing. A fixed asset level for streamlined examinations could
discourage community banks from growing and helping their local economies to grow. It also will allow
small MBHCs to remain competitive with branching networks of large banks, which will not be examined
individually for CRA on an annual basis.

STREAMLINED EXAMINATION
The IBAA strongly supports the proposed streamlined examination for community banks which
involves five assessment criteria. The five criteria for a satisfactory rating are:
A reasonable loan-to-deposit ratio ( given bank size, financial condition, and credit needs of service
area) , adjusted for seasonal variation, and other lending-related activities, such as loan origination for
sale to the secondary market;
A majority of loans, and other lending-related activity, in the bank's service area;
A reasonable distribution of loans, and other lending-related activities, for borrowers of different
income levels and businesses and farms of different sizes;
A reasonable geographic distribution of the bank's loans given its service area;

The bank's record of taking action, if warranted, in response to written complaints about its CRA
performance.

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A community bank that meets each of the standards for a " satisfactory" rating and exceeds some or all
of all these standards may warrant consideration for an overall rating of " outstanding. " The IBAA supports
using the proposed assessment factors to evaluate a community bank's CRA compliance. However, we offer
these comments on aspects of the streamlined examination that need further clarification in the final rule.
Reasonable Loan-to-Deposit Ratio

The IBAA commends the agencies for deleting the 60 percent loan-to-deposit ratio as a presumption of
reasonableness. A loan-to-deposit ratio should be considered reasonable if it is consistent with that of a bank's
local peers ( an institution may not have local peers, in which case, no peer comparison should be done) . and
the local market and economic conditions. In this connection. it is especially important to keep the assessment
context in mind. ( See discussion, infra, p.12. ) Examiners should evaluate a bank's lending performance based
on the size of the bank, community size and demographics, the bank's, competition, and regional and local
economic conditions.
For example, a community bank in a metropolitan community with stiff competition may not have as
high a loan-to-deposit ratio as a bank with little competition in a smaller community. Likewise, a rural bank
in a depressed economic area may have a lower ratio than banks in non-depressed areas. Or a bank in a small
community that recently lost its largest employer, or that has a substantial percentage of retired or older
residents, may have a lower ratio than similar banks in the region.
Loans originated and subsequently sold into the secondary market should also be considered in the
evaluation of the reasonableness of the loan-to-deposit ratio. Many banks are active lenders, yet choose not to
hold the loans in portfolio because of interest rate risk or other factors. In addition, the sale of loans to the
secondary market allows a bank to originate more loans than it could if it held the loans in portfolio.
However, under the proposed rule loan sales would not appear in a bank's loan-to-deposit ratio. Making loans
that are sold into the secondary market helps a bank meet the credit needs of its community and should be
counted as a measure of lending activity.
Loans should also include mortgage-backed securities ( MBSs) , collateralized mortgage obligations
( CMOS) , and other collateralized securities that represent loans originated by the bank and sold into the
secondary market. To better manage interest rate risk and capital requirements, many banks are selling their
loans into a secondary market and repurchasing a collateralized security which requires a lower risk weighting
for capital purposes. The bank's effort to serve its community's credit needs should not be overlooked or
disregarded based on subsequent action the bank has taken to lower its interest rate risk or capital
requirements.

Majority of Loans in Service Area
A bank must make the majority of its loans in its service area to satisfy this criterion. There are a
variety of means by which an examiner can determine if a bank is making the majority of its loans locally
For example, a bank which is required to report data under the Home Loan Mortgage Act would have a report
available for examiner inspection. Other acceptable methods would include examiners reviewing a sampling
of loans to identify zip code, county, or local address. Whatever method is chosen, it must ensure that a
documentation or reporting burden is not placed on community banks.
Application of this standard must not be so strict as to penalize banks with low loan demand in their
area or other factors that limit loan opportunities. These banks may be forced to lend in outlying areas or
purchase loan participations or loan packages to maintain profitability.

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Loans to Borrowers of Different Income Levels
The purpose of the CRA states that " regulated financial institutions have a continuing and affirmative
obligation to help meet the credit needs of the local communities in which they are chartered. " Helping to
meet the credit needs of a community does not mean that all potential borrowers will be qualified and receive
loans. The agencies must recognize that the credit needs of low- and moderate-income borrowers may not
match those of other segments of the community. Serving potential borrowers with different income levels
may also require services and products other than credit products. We assume that this will be addressed by
the criterion's reference to " engaging in other lending-related activities."
Analyzing a record of making loans across income levels must be done carefully to avoid any
suggestion of credit allocation. Congress specifically rejected the use of credit allocation in CRA.
Additionally, the agencies have been clear that credit allocation is not the intent of CRA. Previous interagency
policies on CRA stated the long-standing view of the agencies that the CRA was not intended to establish a
regulatory allocation of credit. The agencies have neither requested commitments from applicants to make
particular types or amounts of loans nor specified the terms of or conditions for such loans. The IBAA
requests that the agencies reiterate this long-standing policy in the final CRA rule.
Reasonable Geographic Distribution
This criterion requires banks to have a reasonable geographic distribution of the loans given its service
area( s) . IBAA believes that more effective CRA examinations would result if this criterion was revised to
focus on " analyzing the geographic distribution of loans." The examination guidelines must avoid any
suggestion that a certain number of loans must be made in every census tract in the service area, regardless of
whether these loans are consistent with safety and soundness or customer demand.
Previous agency policy statements on HMDA support focusing on the analysis of the geographic loan
distribution. The interagency policy statement entitled, " Analyses of Geographic Distribution of Lending"
adopted. December 6, 1991. stated that HMDA " data should be seen as reliable by the institution that carefully
collects and reports it, and [ the HMDA data] can be used without change to reach some conclusions about the
demographic impact of the geographic lending patterns of the institution's housing related loans." This
statement made no mention about having a " reasonable" distribution of HMDA loans or what type of
distribution could be considered reasonable.

Action on Complaints
This criterion looks at the bank's record of responding, if warranted, to written complaints about its
performance in meeting the credit needs of its service area( s) . The IBAA supports this assessment factor with
some modifications. IBAA recommends that the final rule, or an official commentary, clarify that complaints
resolved satisfactorily for the complainant should be considered " closed" and should not affect the CRA
evaluation.
Complaints about technical, nonsubstantive violations, such as a failure to include arequired item in
the public file or failure to post a CRA notice in a branch, should not affect the CRA evaluation. Complaints
from customers or community members residing within a bank's service area should be considered legitimate.
Complaints filed by individuals or organizations that do not reside in the bank's service area should not be
considered legitimate. Banks may be slower to respond to complaints from out-of-area individuals or

2 The Senate Banking Committee specifically " rejected the course of setting percentage targets for investments." S. Rep. 95-175.
95th Cong.. 1st Sess., May 16, 1977, at 34. During the floor debate. Senator Heinz stated that the CRA " is not an attempt to allocate
credit." 123 Cong. Rec. S. 9039-9119, June 7, 1977.
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organizations. An out-of-area complaint, made by an individual or organization without firsthand knowledge
of the bank or its community, would result in little more than the bank being held to a standard based on
hearsay.
Community banks remain concerned about the possibility that large advocacy groups with agendas not
related to the local community or the local bank will involve themselves in a local complaint as a means of
focusing attention. Community banks do not have the resources to handle such " manufactured" complaints.
We ask that the agencies give less weight to complaints brought by out-of-area individuals or organizations
than those from entities located in the service area.
ENFORCEMENT AUTHORITY
The revised proposal retains the enforcement provisions providing for use of the full complement of
enforcement authority granted by Section 8 of the FDI Act ( 12 USC Section 1818) . including civil money
penalties, against banks that receive a composite CRA rating of " substantial noncompliance . " The IBAA
continues to adamantly oppose this and does not believe that it is appropriate to include this enforcement
provision in the final rule. We request that it be deleted.
Legal Authority
First and foremost, the enforcement provision of the proposal is beyond the scope of the agencies'
legal authority. The CRA statute provides only one specific regulatory sanction for a poor CRA record--the
agency may condition or deny an application for a deposit facility by the bank. Beyond that, the agencies
must " encourage" banks to meet their CRA obligations. No other regulatory enforcement mechanisms are
authorized by the CRA statute."
The legislative history fully supports this view. Senator William Proxmire, floor manager of the bill .
stated in the Senate debate that CRA provides that the agencies " in passing on whether a bank or savings and
loan would be allowed to branch or grow or extend by having other units, would take into consideration
whether or not that institution has reinvested in the community. " Senator Richard Lugar of the Banking
Committee noted that the sanctions offered were that " the institution would have some difficulty extending its
facilities, no more and no less than that." ?
Under Section 8 of the FDI Act, the agencies have general authority to use regulatory enforcement
sanctions whenever an institution is " engaged in an unsafe or unsound practice" or is " violating a law, rule or
regulation." Section 8 of the FDI Act contains only general regulatory enforcement authority. Under wellsettled principles of statutory construction, the specific enforcement sanction of the CRA statute controls over
the general authority of Section 8.

3 CRA. Section 804( 2) .

4 CRA, Section 802( b) .
The statute does contemplate one other " enforcement" mechanism using the court of public opinion: the public disclosure of an
institution's CRA rating and written evaluation. CRA. Section 807. This provision was added in 1989 as part of an effort to
strengthen the provisions of CRA. Congress could have, but chose not to add any additional sanctions for CRA enforcement purposes
In fact, during the House floor debate, the sponsor of the CRA amendments, Rep. Joseph P. Kennedy, stated that there was " not a
single thing in the amendment that is in any way punishing to any institution." See 135 Cong. Rec. H. 2755 ( 1989) .
⚫ 123 Cong. Rec. S. 8931 , June 6, 1977.
7 123 Cong. Rec. S. 8961 , June 6, 1977.
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Even applying Section 8, however, a " substantial noncompliance" rating for CRA performance does
not constitute an " unsafe or unsound practice." nor is it a " violation of law or regulation." The CRA statute
does not require an institution to maintain a satisfactory CRA rating or any particular level of performance.
The crux of the statute is that the " agency shall assess the institution's record of meeting the credit needs of its
entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound
operation of the institution" and that the agency shall " take such record into account in its evaluation of an
application for a deposit facility" ( emphasis added) . Receipt of a less than satisfactory CRA rating does not
constitute violation of a law or regulation. Accordingly. Section 8 enforcement sanctions do not apply.
The statute does direct the agencies to publish " regulations to carry out the purpose of the title"
( Section 806) . The purpose of CRA, as stated in Section 802( b) of the Act, is to require the agencies to use
their examination authority " to encourage institutions to help meet the credit needs of the local communities in
which they are chartered..." The statute does not say that the agencies can force institutions to achieve a
certain level of performance.
Use of the Section 8 enforcement powers is also inappropriate because CRA evaluation is such a
subjective process. Severe penalties for subjective findings of failure are inherently unfair.
Clearly, the agencies have authority to use the full range of enforcement sanctions against banks that
violate anti-discrimination laws ( which are adverse factors in the CRA performance record) . But this
enforcement authority is derived from those laws ( e.g., Equal Credit Opportunity Act, Fair Housing Act) , not
CRA. The CRA statute calls for no such enforcement actions and by proposing same the regulators are
stepping beyond the scope and intent of the law.
The Interagency Questions and Answers Regarding Community Reinvestment adopted by the FFIEC
February 16, 1993, recognizes the appropriate sanctions that are available to the agencies under CRA. The
answer to Question 29, which asks what sanctions are available to the agencies under the CRA, states that the
agencies can deny a corporate application for poor CRA performance; they can use enforcement powers to
ensure compliance with the requirements of the regulation ( currently, preparation of a CRA Statement.
maintenance of a public comment file, and posting of a CRA Notice) ; and they can use enforcement powers to
ensure compliance with antidiscrimination and fair lending laws. This is appropriate, since there are more
objective ways to determine a bank's compliance with these requirements. This is not true of CRA ratings
themselves.
SERVICE AREA
The proposed rule states that a bank may delineate its service area using any method it chooses
provided that the service area( s) : 1 ) Do( es) not reflect illegal discrimination; 2) do( es) not arbitrarily exclude
low-and moderate-income geographies, taking into account the bank's size and financial condition and the
extent of its branching network, as appropriate; and, 3) consist( s) of only whole census tracts or block
numbering areas.
A retail bank's service area must also include those geographies in the local areas around a bank's
branches and deposit-taking ATMs in which the bank has originated or had outstanding during the previous
year a significant number and amount of home mortgage, small business and small farm loans . ( At the bank'>

CRA. Section 804.
⁹ Moreover, the purposes of the CRA and the findings of Congress as stated in the statute do not provide authority for the
agencies' enforcement powers, since it is well-settled that purposes and findings clauses do not have the force of law.
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option consumer loans may be included.) The geographies must be equidistant from the bank's branches and
deposit-taking ATMs, taking into account political boundaries or significant geographic barriers.

The IBAA remains troubled with the proposed service area definition. While this proposal improved
upon the previous draft by including the deposit-taking functions, it still limits the consideration of lending
activity to certain types of loans and imposes an unrealistic equidistant requirement. In addition , it may depart
from the CRA statute's focal point--communities.
Consistent with the statute, the current regulation and interagency guidelines adopted in June 1992
require that a bank delineate the local community or communities it serves. The guidelines suggest two
methods for delineating the community. First, the bank could consider using widely recognized existing
boundaries such as MSAs or counties. The agencies noted that such boundaries are " frequently a reasonable
approximation of an institution's community." The second guideline stated that a bank may use its effective
lending territory--that area or areas around each office or group of offices where the lender makes a substantial
portion of its loans. Each community must, of course, include the contiguous area surrounding each office or
group of offices.
What is missing in the new service area definition is the agencies' previous acknowledgement that
many factors influence the size and shape of a lender's community. Using the service area definition could
unnecessarily constrain a bank's ability to serve its community, or to accurately reflect the community it is
serving. The service area definition needs to be more flexible to ensure it reflects the bank's true community
To include deposit-taking ATMs in a service area, rather than full-service branches, could extend u
bank's service area beyond its effective lending territory. While the IBAA supports considering deposit-taking
functions when determining a service area, we recommend that consideration be limited to those areas where
the bank also lends. Keeping in mind the new interstate banking and branching legislation, it is not
unreasonable to expect that banks may soon accept deposits from ATMs located outside their community
IBAA is concerned that the new service area definition could require a community bank to arbitranly
draw two service areas, when in reality it is one community. Many community banks are often located on the
edge of an MSA and consider their local community to be the " exurbs" or those areas moving away from the
MSA. This could mean that a small portion of the bank's community is located in an MSA, with the
" substantial" portion located outside the MSA. Our reading of the proposal suggests that this scenario would
require two service areas. We see no justification for splitting such a community into two distinct and
separate service areas. Such splitting could distort the analysis of the bank's activities in its entire
community."

10 FFIEC Interagency Policy Statement " Community Reinvestment Act," June 17, 1992, p. 3.
" The June 1992 CRA guidelines noted that when an institution has an office near the boundary of an MSA or county , it should
also include in its delineated community those portions of the adjacent counties that it services. In rural areas, it was expected that
local community could include more than one county. There is no requirement to split these areas into two service areas.
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IBAA is also concerned that the " equidistant" requirement of the service area provision not be

For example, a bank that is located to the south of a metropolitan area may have a service area that
extends a short distance north towards the metro area, but a much longer distance south, away from the metro
area--essentially an elliptical or rectangular area. This is because people in the outlying areas will tend to
travel from the exurbs to the bank to conduct business. but people closer to the metro area may obtain banking
services in the metro area. In addition, there may be many more banks in the metro area than in outlying
areas, thus competition and market opportunities would dictate that the bank's service area extend farther out
towards the rural areas, rather than in toward the metropolitan area.
Another example is a rural bank that is located in the county seat ( but not necessarily in the center of
the county) . The bank may serve the entire county ( unlikely to be a circle) since people living in the county
would tend to come to the largest town and the county seat to conduct business.
The proposed prohibition on the splitting of census tracts when drawing the service area should also be
dropped. Banks do not determine their service area or local community by census tract--this is a marketplace
determination. Banks should continue to be prohibited from arbitrarily excluding low- and moderate-income
areas or census tracts from their service areas. However, to propose that banks include areas in their service
area that they are not serving is also arbitrary and could lead to unintended consequences. Banks should be
permitted to draw their service area to reflect the area they serve, with the caveat that low- and moderateincome areas not be arbitrarily excluded.
Correct identification of a bank's service area would appear to be essential in order to receive a
satisfactory CRA rating. Since so many ofthe criteria are based on the service area, incorrect identification of
the service area by the bank or examiner could lead to disastrous results. For this reason, the agencies should
give serious consideration to providing a mechanism whereby a bank could receive prior review and
certification of its delineated service area.
Congress intended for the agencies to look at the entire community, not an artificially drawn service
area using an equidistant methodology. Appropriately, the overriding concern identified in the past is that
low- and moderate-income neighborhoods are not arbitrarily excluded from the delineated area. The statute
requires the agencies to assess an institution's record " of meeting the credit needs of its entire community.
including low- and moderate-income neighborhoods...".12 There is no reason to change this focus.
The IBAA recommends that the agencies retain the existing requirements on delineating the local
community or communities rather than adopting the proposed " service area" definition. At a minimum, if the
agencies adopt the service area as proposed, banks will need further guidance to clarify the difference between
" service area" and " local community." Without such clarification, institutions could incorrectly identify their
service area.
Multiple Service Areas
IBAA concurs that an institution's CRA rating should reflect its performance in all of the local
communities in which it does business. We recognize that it will not be possible to conduct a CRA exam of
12 CRA, Section 804( 1) .

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every service area or community of a large bank during an examination cycle. Branches of large banks
generally will not face a CRA exam. We believe this gives a tremendous advantage to larger banks.
particularly those competing against community banks.
We recognize that the agencies believe it is more appropriate to handle the issue of examination of
multiple service areas through examination procedures. Nonetheless, we urge the agencies to recognize the
competitive concerns that community banks have regarding large banks with multiple distinct communities or
service areas. Even with the streamlined examination, community banks will receive regular examinations.
while their competitor across the street may never be " sampled. "
IBAA requests that the agencies include as part of the examination procedures an examination
schedule for multiple service areas. Such an examination schedule should reflect a sampling of both urban
and rural areas, and provide for all of a bank's service areas to be examined within a 3-to-5- year period .
ASSESSMENT CONTEXT
According to the proposal, all CRA examinations will be conducted in the context of the particular
characteristics of each bank and its community ( the " assessment context" ) . The proposal states that the
agencies are responsible for developing the assessment context for each bank. The assessment context will
include: demographic data on the community; examiner-developed information regarding the credit needs of
the bank's service area obtained from community-based organizations, state and local governments, and from
any information the bank may choose to provide; the bank's product offering and business strategy as
determined from data provided by the bank; institutional capacity and constraints, including the size and
financial condition of the bank, the economic climate ( national, regional and local) , safety and soundness
limitations, and any other factors that significantly affect the bank's ability to lend to the different parts of its
service area; the bank's prior performance and the performance of similarly-situated lenders; the bank's public
file; and, any other information deemed appropriate by the agency.
In many ways, it appears that the assessment context is simply a codification of current agency
practice. However, several aspects of this codification are unclear. First, it is not clear that the bank will see
the assessment context or have any opportunity to comment on its completeness and accuracy. Since the
bank's examination will be based on this context, it is critical that the bank be given a written copy of the
context and have the opportunity to clarify, expand, or otherwise comment. Without such an opportunity, it is
completely conceivable that the results of the bank's examination would be placed in the wrong context, which
could negatively affect the bank's rating. As the assessment context includes seeking public comment from
members of the bank's community, it is important that the bank have the opportunity to respond to ( or to put
into " context" ) any criticisms or other negative comments.
It is also unclear what portion, if any, of the assessment context will be included in the public section
ofthe CRA performance evaluation. If any part of the assessment context, which establishes the basis for the
evaluation and subsequent rating, is to be included in the public evaluation it would be of the utmost
importance that the bank have the opportunity to review and comment on the context. Furthermore, all
confidential information related to the bank's business strategies or plans, as well as its financial condition.
must be excluded from any publicly released assessment context.
LENDING TEST
As in the original proposal, large banks will be evaluated on the basis of their performance under three
tests: the lending test, the investment test and the service test. The lending test will continue to receive the
most weight in assessing the composite rating of a retail bank.

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The most significant change in the lending test, which IBAA strongly approves, is the removal of the
misguided market share test that would have formed a primary basis for the lending score. The market share
test would have led to contradictory conclusions and misplaced incentives that could undermine safety and
soundness. The market share test was an artificial, arbitrary and unworkable measure of a bank's performance.
In many cases, it would not have resulted in an accurate conclusion about the bank's CRA performance . In
addition, it could have forced credit allocation--something the Congress clearly did not intend.
Another improvement to the lending test is the inclusion of community development lending as a
direct component of the lending test, not merely an adjustment factor that could affect the lending score at the
margins. However, we recommend deletion of the requirement that to qualify as community development
lending, a loan must meet " needs not being met by the private market." If a bank, a private entity, is
participating in the lending, by definition the need is being addressed by the private market. This requirement
appears to be a circular one that could be impossible to meet.
IBAA also welcomes the recognition that innovative and flexible lending practices deserve credit under
the lending test. For example, frequently a community development project financed by a bank may take a
disproportionate amount of time and effort to bring to fruition, relative to the dollars loaned out. The revised
proposal appropriately recognizes the importance of the quality of a bank's lending service to its community.
in addition to the quantity.

Affiliate Lending
The agencies propose to allow a bank to consider in its CRA lending assessment the lending of an
affiliate if the affiliate reports or collects HMDA data and small business and farm loan data. The agencies
may consider affiliate lending practices even if the bank has chosen not to have the lending considered if the
agency determines that this lending is integral to the business of the bank. The proposal attempts to make
clear that both the bank and the affiliate may not count the same loan ( no double counting) . In addition. all
the loans made in the service area( s) by the affiliate will be looked at, not just those that are made to low- and
moderate-income borrowers in the service area.
Many banks are affiliated with entities that provide credit or credit-related services. These affiliates
can be related to the bank in several ways. They can be a subsidiary of the bank, a sister entity that is owned
by the bank's holding company, or a contractual affiliate. An example of a contractual affiliate is IBAA
Mortgage Corporation, which acts as an intermediary to allow community banks that do not have the resources
to originate and hold mortgages to provide their customers with access to a mortgage provider. This enhances
the ability of the community bank to provide credit services to its community. The use of affiliates in the
lending process is integral to extending credit and we support its recognition in the CRA evaluation process.
INVESTMENT AND SERVICE TESTS
The revised proposal also improves the investment and service tests. A bank's qualifying investments
will no longer be measured against the bank's risk-based capital, a requirement that would have penalized
well-capitalized banks. Instead, the revised proposal appropriately focuses on the dollar amount of the
investments and the responsiveness to credit and community development needs.
The service test has been revised to eliminate the focus on the percentage of branches located in or
readily accessible to low- and moderate-income geographies. IBAA supports the revised proposal's inclusion
of delivery systems and services other than branches in the service test. This recognizes improvements in
retail bank service technology and should shift the focus from branching to actual services provided.

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DATA COLLECTION AND REPORTING

As in the original proposal, the agencies have proposed significant new data collection requirements .
Banks not examined under the small bank assessment method would be required to collect and report data on
their home mortgage and small business ( including community farm ) loans. Collection of data on consumer
loans would be optional. For small business loans, banks would have to collect and report data on outstanding
loan amounts, location of the business by MSA. county and census tract/block numbering area. gross revenues
of the business, and race and gender composition of the business owners.
The IBAA commends the regulators for not proposing that these new data collection requirements be
applied to banks with less than $ 250 million in assets. We urge the regulators to consider dropping this
controversial provision for any banks. The bread and butter lending of almost all community banks is small
business lending. These proposed new reporting requirements put a heavy burden on small business and also
raise very significant privacy concerns. We note that there is no legal authority to collect this data for CRA:
collection would be burdensome without any corresponding benefit; it is not clear how race and gender data
would be used in the assessment of CRA performance; and the data will be inconclusive and may be used to
reach unfounded conclusions.

Legal Authority for Data Collection
There is no statutory basis to require collection of this data for CRA. In fact, the legislative history of
CRA makes clear the Act was not intended to require banks to do additional paperwork. The Senate report
states, " The Committee believes that the regulatory agencies
113already have sufficient data available to carry out
the intent of this Act without requiring additional red tape."
The Senate report discusses the fact that the
CRA, as originally introduced, would have required banks to file additional material with the regulators.
However, the Senate Banking Committee concluded that additional burdens " would not be necessary or
appropriate to the enforcement" of CRA. "
In addition, Congress has considered, and rejected several times, small business loan reporting
requirements ofthis nature. As part of the FDIC Improvement Act ( FDICIA) , Congress imposed new
reporting requirements for small business and small farm loans as part of the Call Report. The extent of the
data collection envisioned by this proposal goes beyond that required for the Call Report and would be very
burdensome and costly, greatly offsetting any perceived benefit. It is inappropriate for the regulatory agencies
to impose a burdensome data collection requirement of this nature without authority from Congress.

Appropriateness to CRA
The premise of CRA is to encourage banks to meet the credit needs of their entire communities.
including low- and moderate-income neighborhoods. As such, CRA is based on geographic and income
considerations, not on race and gender. The race and gender of small business borrowers is the focus of the
Equal Credit Opportunity Act and Regulation B, which prohibit lenders from discriminating against borrowers
based on race, gender and a number of other prohibited factors, not CRA. A further indication that this
information is not proper focus of CRA is that the proposal does not state how the race and gender
information reported on small business borrowers will be used in the CRA evaluation. Banks should not be
asked to collect data for an unknown purpose.

13 S. Rep. 95-175, 95th Cong.. Ist Sess., May 16, 1977, at 34.
14 Id.
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Privacy Implications
The proposal presents grave implications for the financial privacy of millions of small business owners
and small farmers. Banks will be collecting very sensitive information about small businesses and small farms
and recording this information on a loan-by-loan basis on loan registers. If the loan-by-loan information
becomes public, anyone--including competitors--would have access to information about the farm's or
business's loans. annual revenues and ownership.
The current proposal takes minor steps toward preserving privacy . Only aggregate loan information
would have to be included in the public file. We remain concerned that it will still be possible to identify
certain borrowers in specific census tracts despite the aggregation of data. This could be particularly true for
less densely populated areas, where there may only be one or two businesses of a particular size in a census
tract. Identification would be even easier for small farms since the number of small farms in any specific
census tract or county is small in comparison with the number of small businesses.
We are extremely skeptical that individual loan information will remain protected. Witness the
experience of the banking industry with HMDA data. When HMDA data was first collected, it was only
available on an aggregate basis similar to that proposed for the small business loans. However, over time.
more data has been required to be collected and more data has become publicly available. Today, individual
loan application registers are available to the public. It is a simple matter to obtain race and income
information about a particular person by using the sales price of a home, the property transfer date, the lender
( obtained from county deed records) and census tract information, and matching this information with the
lender's loan application register.
It is ironic that the federal government's data collection15 requirements, as outlined in a working paper
on privacy, stress fairness. protection, and privacy for citizens. The principles state, " users of personal
information must recognize and respect the stake individuals have in the use of personal information." Yet.
the banking agencies propose to collect data that could be highly sensitive and which could be used at the
government's discretion for undisclosed purposes. No recognition has been given to the stake of the
borrowers who would be required to disclose the information.
According to the working paper, collection of information should " reasonably be expected to support
current or planned activities." 17 The agencies have articulated no planned use for this data, nor have they
fully considered the possible downside of this data collection. There is an appetite for more and more data in
the name of " the public's right to know" with a corresponding and unacceptable erosion of the right to
financial privacy.
Practical Problems with Race and Gender Coding
As proposed by the agencies, collecting race and gender information on small farm and small business
loans presents a number of practical problems and will result in incomplete. fragmented and unreliable data
This in turn could lead the media and others to reach unfounded conclusions about banks' small business
lending.

15 Principlesfor Providing and Using Personal Information, " Acquisition and Use Principles." National Information Intrastructure
TaskForce, Information Policy Committee. Working Group on Privacy in the National Information Infrastructure ( part of the US
Dept. ofCommerce) ( draft) ; 5/4/94.

16 Id., p. 2.
17 Id. p. 3

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For example, according to the proposal a business must be more than 50 percent owned by minorities
or women to be considered a minority- or women-owned business. A bank may be making a significant
number of loans to businesses that are 50/50 owned--minority/non-minority or male/female ( the " Mom and
Pop" business) --or to businesses that have significant minority or female ownership that do not approach 50
percent, and yet receive no " credit" for this lending . The data will significantly underestimate the extent to
which banks are serving minority and women entrepreneurs .
In addition, provision of race and gender data will be optional for the borrower . There may be many
borrowers who decline to provide the information for privacy reasons. The greater the number of borrowers
that do not provide the information, the lesser the utility of the data collected. Banks will be judged based on
this data, yet have no ability to force borrowers to provide it ( or any means to ensure its accuracy. )
Finally, there will be no information to place this data in context that would make it meaningful.
Again, we point to the industry's experience with HMDA data. HMDA data is far too incomplete to draw any
rational conclusions or prove lending discrimination. Yet that has not prevented it from being used for just
that purpose by the media and others. For all of the foregoing reasons, we request that the proposed data
collection requirements be deleted from the final rule.

STRATEGIC PLAN
Under the proposal, any bank, as an alternative to being rated under the streamlined exam or the
lending, service and investment tests, may request to be rated under a strategic plan. The IBAA supports
providing institutions the option to be assessed under the strategic plan. However, most community banks
have indicated that they would not use this option.
Many community banks have indicated that aspects of the strategic plan option require clarification.
IBAA recommends that the agencies be more explicit about the requirements for a strategic plan. For example .
the plan must contain measurable goals, yet it is unclear how these will be measured. Measurable goals also
suggests the possibility of credit allocation. How can the agencies prevent this from occurring?
The IBAA opposes requiring banks to formally solicit public comment on the strategic plan. We
believe that banks preparing a strategic plan should seek input from their community. However, seeking
formal public comment could place the bank in a position of releasing confidential business strategies. We
urge the agencies to revise this requirement.
PUBLIC FILE , DOCUMENTATION AND DISCLOSURE
A bank would have to make available for public inspection a file with all signed, written comments
from the public received over the last two years; maps of its service areas and lists of census tracts or block
numbering areas that make up each service area; list of branches, remote service facilities, street addresses and
geographies; list of branches opened and closed in the last two years; and a copy of the public section of the
most recent CRA performance evaluation. In addition, large banks would have to include two years of
information derived from the data collected on their small business and farm loans.

The IBAA requests that the agencies clarify that banks do not need to keep in the file the
correspondence related to any written complaints that have been satisfactorily resolved for the consumer
Since banks with less than $ 250 million in assets are not subject to the data collection requirements and yet
could be located in an MSA, IBAA requests that the agencies clarify that these institutions need maintain only
the maps of their service areas and not the accompanying census tract data or block numbering area data.

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The proposal also requires a community bank to include in the public file its loan-to-deposit ratio
computed at the end of the most recent calendar year. A year-end snapshot is not necessarily a reliable
indicator of a bank's loan-to-deposit ratio. Particularly for agricultural banks, the loan-to-deposit ratio is
seasonal and will fluctuate significantly ( as much as 20 percentage points or more) during the course of the
year. IBAA recommends replacing the requirement to include the year-end loan-to-deposit ratio in the public
file with a requirement to include the quarter-end loan-to-deposit ratios or an annual average ratio computed
by the bank.
IBAA also requests that the agencies delete the requirement for a bank with a less than satisfactory
rating to include in its public file a description of current efforts to improve its performance. This requirement
could compromise confidentiality. A bank's plan to improve its CRA performance could contain confidential
information about its strategic business planning that should not be available to the public.
RATINGS
Provisions on assigning ratings and evaluating a bank's performance under the applicable criteria are
set forth in Appendix A to the proposal. The ratings profiles include terms like " excellent," " good."
" adequate, " " poor, " " very poor, " " extensive use," " limited use," " substantial majority," " high percentage."
" community percentage," etc.
IBAA recognizes that, in using words of this nature, the agencies have attempted to balance the need
for flexibility against the desire for certainty and consistency in examinations. We oppose the imposition of
fixed ratios. However, to avoid inconsistent application and to ensure fair and reasonable application of these
terms, the agencies have a responsibility to ensure that examiners receive comprehensive guidance and training
and that bankers understand what is necessary to achieve a specific rating. ( See discussion, infra, at p. 21.)
Outstanding Ratings for Community Banks
The IBAA seeks clarification about how a community bank evaluated under the small bank assessment
method can achieve an outstanding rating. The agencies must set forth the criteria that can lead to an
outstanding rating. In addition to determining whether the bank has exceeded some or all of the requirements
for a satisfactory rating, the agencies will take into account its record of making qualified investments and
providing services and delivery systems that enhance credit availability in its service area. Flexibility to
consider the full range of activities that can enhance credit availability and promote community development is
paramount to avoid a presumption that community banks that meet the five criteria are " merely" satisfactory.
We recommend that the following activities be given appropriate credit in assessing whether
community banks should receive outstanding ratings: time- or labor-intensive efforts to facilitate lending to
targeted or lower-income borrowers or to community development projects; credit, borrower or small business
counseling; homebuyer seminars; low-cost deposit or check-cashing services, and agriculture risk management
seminars. This list is by no means all inclusive, rather it is representative of activities which warrant credit.
Downgrading to Substantial Noncompliance

The proposal retains the provision whereby a bank that would otherwise be rated " needs to improve"
would be automatically downgraded to " substantial noncompliance" if the bank has received ratings of " needs
to improve" on its two previous examinations. IBAA opposes this because it is a rigid, inflexible provision
that fails to take account of the bank's circumstances. Ifthe bank has been making a good faith effort to
improve its performance, but has not yet been able to achieve the satisfactory level, it should not be penalized
and essentially given a lower rating than it deserves. Arbitrarily downgrading banks in this manner is

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especially objectionable if a " substantial noncompliance" rating carries the potential for enforcement sanctions.
as is proposed. ( See discussion, supra, pp. 8-9.)

Large Bank Ratings
Large bank ratings are determined by a point matrix. A total of 18 or more points is needed to score
an " outstanding;" 9 through 17 points earns a " satisfactory: " 5 through 8 is a " needs to improve:" and 0
through 4 is a " substantial noncompliance. " To keep the emphasis on the lending test, a bank's total score
may not exceed 2 times the lending score. The proposed matrix follows:

Lending

Service

Investment

Outstanding

12

6

6

High Satisfactory
Low Satisfactory

9

4

4

6

3

3

Needs to Improve

3

1

1

Substantial Noncompliance

0

0

0

Component Test Ratings

While the matrix scoring system is designed to give primary importance to the lending test, IBAA is
concerned that it simultaneously overcounts and undercounts lending performance. For example, in the point
scale, lending is emphasized by giving it twice--or in some cases, more than twice--the points available under
eitherthe service or investment test. Additionally, a bank's total score cannot exceed twice the lending
score, again giving emphasis to lending. This seems to give lending not twice as much weight as service or
investment, but four times.
Thus, a bank that received a low satisfactory in lending ( 6 points) , and an outstanding in both service
and investment ( 6 points each) would not receive an outstanding rating even though its raw score was 18.
because it would receive a total score of 12 ( twice the lending score) for a satisfactory rating.
In contrast, a bank that received a low satisfactory in lending ( 6 points) and a needs to improve in
both service and investment ( 1 point each) would receive a needs to improve rating ( 8 points) despite the fact
that its lending record was deemed satisfactory. If lending is to receive primary emphasis, then a bank that is
performing satisfactorily in lending should receive a satisfactory rating.
These anomalies appear to stem in part from the use of five categories of ratings in the component
tests--breaking satisfactory into two parts, " high" and " low" satisfactory--instead of the four authorized by
statute. In the first example, if the bank had received a high satisfactory instead of a low satisfactory in
lending, its overall rating would have been outstanding. In the second example, if the bank had received a
high satisfactory in lending, its overall rating would have been satisfactory. Use of the five category rating
system is in conflict with the rating scheme set forth in the statute.
IBAA requests that the agencies modify the matrix scoring system and the ratings categories for the
component scores to correct these anomalies.

Outstanding service or investment is worth 6 points, but outstanding lending is worth 12 points. High satisfactory service or
investment is worth 4 points, but high satisfactory is worth 9 points.
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19

Weight ofRatings During Application Process
Pursuant to the CRA statute, a bank's CRA rating is taken into account when an agency reviews the
bank's application for a deposit facility ( e.g., branch, merger, acquisition or conversion application) . A current
outstanding rating should receive great weight during the applications process. If a bank has performed in
such a manner so as to warrant an outstanding rating, it is only fair that the bank be protected from
obstructionist protests filed during an application.
IBAA recommends that the agencies establish a rebuttable presumption that an outstanding rating will
result in approval of the CRA aspect of an application. Under the rebuttable presumption, the burden should
be placed on the protestant to show why the application should not be approved on CRA grounds. The
rebuttable presumption for an outstanding rating is appropriate since potential protestants will have the
opportunity to provide comments to the agencies during the CRA examination process.
Establishing a rebuttable presumption in favor of an outstanding rating during the corporate application
process would help reduce or eliminate the time and costs incurred by a bank that must defend itself against a
frivolous protest. This is particularly critical for community banks and small bank holding companies that
have less monetary and managerial resources to draw upon in defense of any such protest. Furthermore,
failure to recognize the value of an outstanding CRA rating during the application process diminishes the
value of the rating and unjustly penalizes banks that have been recognized as having outstanding CRA
performance.
Effect of Lending Discrimination on CRA Rating
Under the previous proposal, a bank would have presumptively received a less than satisfactory CRA
rating if it had engaged in a pattern or practice of illegal discrimination that it had not fully corrected: or had
committed an isolated act of illegal discrimination, of which it had knowledge, that it had not fully corrected.
or was not in the process of correcting fully. IBAA strongly objected to evaluating and rating a bank based
on an isolated instance of discrimination that it had not been aware of, condoned or promoted.
This provision has been replaced by a standard comparable to that in current regulations--any evidence
of discriminatory or other illegal credit practices would adversely affect the agencies' evaluation of the CRA
rating. In determining the effect on the rating, the agencies would consider the nature and extent of the
evidence, the bank's policies and procedures to prevent illegal discrimination, and corrective actions taken.
IBAA supports this change, particularly the removal of the presumption that a less than satisfactory rating
would be required. It is essential that the regulators have discretion to consider the listed factors and apply a
rule of reason. in determining what effect the evidence will have on the CRA rating.
TRANSITION PERIOD
The new rules will become fully effective July 1 , 1996. The new recordkeeping will take effect by
July 1995. Beginning after July 1 , 1995, a bank that qualifies for a streamlined exam may be evaluated under
this new method.
The IBAA believes that this time frame may be unrealistic depending on when the agencies adopt a
final rule. To ensure that the examiners are adequately trained, we recommend a transition period of at least
six months after the publication of the final rule and the completion of the examiner training. As for the data
collection, it is not reasonable to expect banks to assemble the new data and prepare the appropriate reports in
the allotted time frame. At a minimum, the agencies should provide a transition period of at least six months
from the adoption and publication of the final rule for banks to begin collecting the data.

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20
PUBLICATION OF EXAMINATION SCHEDULE AND PUBLIC COMMENTS
The agencies propose to publish a list of banks which are scheduled to undergo CRA exams in the
next calendar quarter. This would alert members of the public who wished to submit comments to the
agencies regarding the CRA performance of banks on the list. IBAA requests that the final rule be amended
to clarify that only pertinent comments related to the specific bank under examination and received from
members of the bank's own community will be considered during the exam .
Community banks are concerned that large advocacy groups with agendas not related to the local
community or the local bank will file comments to hold a community bank hostage to the CRA process and
try to " make an example" of the bank as part of a large advocacy organization's CRA campaign.
APPEALS PROCESS
The IBAA believes that an effective appeals process is essential to the successful implementation of
the revised CRA rule. An appeals process would help ensure consistency in an agency's CRA evaluation and
ratings. In general, community bankers are dissatisfied with the current appeals process. Most bankers are
unsure how to pursue an appeal, while others have expressed concern about the lack of objective decisionmakers in the process.
The Riegle Community Development and Regulatory Improvement Act of 1994 ( " Riegle Act" )
provides for a regulatory appeals process and ombudsman. The Riegle Act requires the agencies to create an
appeals process that will be available to review determinations relating to examination ratings. " An
ombudsman must also be created by each agency " to act as liaison with respect to any problem that any party
may have in dealing with the agency." 20 The implementation of Section 309 of the Riegle Act will help to
implement an effective and fair appeals process for the revised CRA rule.
We offer the following recommendation regarding the implementation of the appeals process and
ombudsman with regard to the CRA. The CRA is the only area of the examination report where the rating is
made public. Although publicly available, the rating is not subject to modification as a result of any public
comment arising from the publication of the rating. Any use of the appeals or ombudsman process must occur
before publication of the CRA rating in order to avoid any negative impact on the bank caused by publication
of an undeserved rating.
In this regard, we note that Section 807 of the CRA provides for a public evaluation report detailing
the agency's conclusions on the CRA assessment factors, the facts and data supporting the conclusions . and
the rating. We believe that publication of the foregoing while an appeal is pending would be a strong signal
of agency bias towards the original findings. This would obviate the efficacy of the process and essentially
render the Congressional intent to create an effective appeals process moot.
OFFICIAL COMMENTARY
The IBAA reiterates our recommendation that the agencies create a commentary to the CRA
regulation. A commentary would provide an ideal vehicle for the agencies to issue official staff interpretations
of the regulation. Good faith compliance with the commentary should afford institutions protection from
enforcement actions.

19 Section 309( b) . See also 171 H. Rep 103-652, 103 Cong., 2d Sess., August 2, 1994.
20 171 H. Rep. 103-652, 103 Cong., 2d Sess., August 2, 1994.
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21
EXAMINATION GUIDELINES

The IBAA requests that the agencies, jointly or independently, seek comment on the examination
procedures that will be used to implement the revised CRA rule. We recognize that seeking comment on
examination procedures is not a standard agency practice; however, the magnitude of change proposed by the
revised CRA rules warrants a departure from usual and customary procedures. Furthermore, receiving public
comment on the examination procedures will help ensure that the rule is implemented as intended.
EXAMINER TRAINING
IBAA strongly urges the regulators to ensure that all examiners receive comprehensive training prior to
the imposition of the CRA rules. Under the new rule, examiners will be required to exercise a considerable
amount of discretion and judgement. To do this effectively and judiciously, consistent and appropriate
implementation of CRA depends on how examiners apply the standards they have been given to work with
when they come into the bank. Examiners will need to be properly trained on how to conduct the
examinations to avoid unintentionally shifting the burden back to the banks.
The agencies must also take steps to reconcile the conflict that develops between CRA exams and
safety and soundness exams. Too often bankers make what they believe are good " CRA loans" ( which, in
fact, may be favorably cited in a CRA exam) only to have the safety and soundness examiner later classify the
loans. All examiners should be " cross-trained" in compliance and safety and soundness to minimize this
situation.
We recognize that evaluation of CRA performance requires examiner judgement. This is necessary so
that examiners can take adequate account of the differences among communities and the banks that serve
them. However, in a review ofthe first proposal, the GAO noted that there are numerous areas where
examiners will be required to use discretion to determine an institution's performance. The same is true in
this revised proposal. The GAO's conclusion that, in addition to the need for specific guidance " on how and
under what circumstances examiner discretion will be used," " comprehensive training programs for all
examiners will be important to emphasize the guidelines for using discretion," holds true for this revised
proposal.
BANKERS' BANKS
The proposal contains an exemption for certain special purpose banks, including bankers' banks.
( Section ____ 11 ( d) ( 2) . ) IBAA strongly supports this exemption. However, the definition of bankers' banks in
this section is obsolete and should be revised to conform to the definition of bankers' bank as amended by the
Riegle Community Development and Regulatory Improvement Act of 1994 ( " Riegle Act" ) . Pub. L. No. 103325.
The Riegle Act defines a bankers' bank as a bank which is engaged exclusively in providing " services
to or for other depository institutions, their holding companies, and the officers, directors and employees of
such institutions and companies, and in providing correspondent banking services at the request of other
depository institutions or their holding companies." See, Section 322 of the Riegle Act, amending 12 U.S.C
24 ( Fifth) and 12 U.S.C. 27( b) ( 1) .
The IBAA requests that the language of Section

11 ( d) ( 2) be conformed to the Riegle Act's revised

21 Letterfrom James L. Bothwell, Director, Financial Instittuions and Market Issues, General Accounting Office, to
Representatives Henry B. Gonzalez and Joseph P. Kennedy II, January 26, 1994, p. 10.
November 21, 1994
IBAA/CRA

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22
CONCLUSION
IBAA is appreciative of the agencies ' efforts to revise CRA, the highly burdensome regulation--and
make it less burdensome and more performance oriented. IBAA is strongly supportive of the streamlined
examination for community banks--a tiered system that recognizes the real differences under which large banks
and community banks operate. The agencies' concern about the ever growing and crushing regulatory burden
that community banks face is evidenced in this proposal. A tiered system with real regulatory relief for
community banks will allow them to return their focus to what they do best--serving their communities.
We appreciate this opportunity to comment and would be pleased to discuss any parts of this letter in
further detail.
Sincerely,

Schivers

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384

JohnpegShivers
jent
Richard
L.. Mount
Preset
E.c.:
1M. Stenehjem. Jr"!
Can Knight
I Jurde
" er

IBAA

March 24, 1994
Mr. William Wiles
Board of Governors of the Federal Reserve System

Communications Division
Ninth Floor
Office of the Comptroller of the Currency
250 E Street, S.W.

Mr. Robert E. Feldman

Ms. Kathy Simone
Director, Information Services Division
Public Affairs
Office of Thrift Supervision
OTS 93-234
Dear Sir/Madam:
Enclosed please find an executive summary of key points from the IBAA comment letter
on the proposed CRA revisions, as well as our comment letter.

Sincerely,
Jahe Shivars
John Shivers
President
Enclosures
WASHINGTON OFFICE, ONE THOMAS CIRCLE NW, SUITE 950. WASHINGTON, DC. 20005-5802 202 659-8111

385

INDEPENDENT BANKERS ASSOCI. 10.
SUMMARY OF KEY POINTS FRC
COMMENT LETTER ON PROPOSED CRA

ME
ON

Tiered System
IBAA strongly supports a tiered system for CRA with streamlined examination p
small banks.
The cumulative cost of CRA and other regulations is threatening community t
to remain independent and effectively serve their customers.
Pending interstate branching legislation magnifies the need for a streamlined exam .
for smaller banks. Consolidated branches will be examined infrequently , if at all , wh..
community banks that compete against them will continue to face annual CRA
examinations.
Requiring small banks to comply with the same paperwork, reporting requirements and
examination procedures as large banks hinders their ability to achieve the goals of CRA.
CRA represents a huge data collection burden on banks, especially small banks. A
streamlined examination process for small banks will lessen their compliance burden .
Streamlined Examination Threshold
IBAA recommends that the final rule raise the streamlined examination eligibility threshold for
banks from $ 250 million to $ 500 million in assets and for bank holding companies from $ 250
million to $ 1 billion in assets.
The $ 250 million threshold for streamlined examination eligibility applies to roughly 17%
of the banking industry's total assets and 20% of the industry's total deposits.
Raising the threshold to $ 500 million only nominally raises by 3 percentage points the
amount of bank assets eligible for the streamlined examination.
The small-bank assessment threshold should be subject to regular adjustments for
inflation, economic activity and interest credited on accounts.
Small Bank Test
1. Loan-to-Deposit Ratio IBAA recommends that an institution be presumed to have a
reasonable loan-to-deposit ratio if it is consistent with the bank's peers, local market and
economic conditions. A " reasonable " loan-to-deposit ratio standard would permit latitude to
considerthe level of public deposits, municipal bonds and loans originated and sold intothe
secondary market.
IBAA strongly opposes the use of a fixed ratio, such as the proposed 60%, for
determining a reasonable loan-to-deposit ratio for the following reasons:

a)
b)
c)

the potential for misuse as a hard and fast rule;
a fixed standard could result in credit allocation;
imposition of a fixed ratio would contradict Congressional intent;

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d)

a fixed ratio might undermine safety and soundness as banks try to meet an
arbitrary " magic number;"

e)
f)
Public deposits should be excluded from the definition of " deposits . "
" Loan" should be defined to include purchases of local municipal bonds ( a close
substitute for community development lending ) and loan originations and their
subsequent sale into a secondary market.
2. Makes the Majority of Loans in Its Service Area The final rule should clarify that banks
should not be required to " geocode " their loans as proof of community lending.
3. Adequacy of Loan Mix The proposed definition of " good loan mix " exceeds the scope of
CRA and suggests credit allocation. The final rule should delete the reference to making loans
" across economic levels. " In addition, the final regulation should clarify that banks and thrifts
have the discretion to develop the types ofproducts and services that are best suited to their
expertise, business objectives and the credit needs of their communities.
4. No Legitimate Complaints IBAA recommends that the agencies adopt complaint procedures
to determine " bona fide complaints " and incorporate a specific definition for " consumer
complaint " in the final rule. Additionally, only complaints by customers or community members
residing within a bank's service area should be considered legitimate.
5. No Evidence of Discriminatory Practices /BAA strongly opposes evaluating and rating a bank
based on an isolated instance of discrimination; judging compliance on an isolated instance fails
to prove intent. Creating a new standard that requires banks to be downgraded for isolated acts
establishes an impossible compliance standard and is bad public policy.
6. HMDA Reporting Banks Have Reasonable Distribution of Such Loans There is no statutory
basis for requiring HMDA reporting banks to have a " reasonable geographic distribution " of
reported loans, and such a requirement is tantamount to credit allocation. IBAA recommends
that this criterion be rewritten to focus on " analyzing the distribution of HMDA related loans. "

Enforcement Authority
IBAA requests the agencies delete from the final rule the provisions permitting the agencies to
use the full complement of enforcement authority, including levying of civil money penalties,
against banks that receive a composite CRA rating of " substantial noncompliance. "
The enforcement provisions of the proposal are beyond the scope of the agencies ' legal
authority.
The statute requires the agencies to encourage compliance, suggesting that positive
incentives are in order, rather than severe penalties.

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3
Service Area
The proposal unnecessarily constrains a bank's community to an artificially drawn service area
based on " reportable " lending activity. IBAA recommends that the agencies rewritethe
definition of " service area, " broadening it to reflect the entire community that a bank serves and
giving consideration to all lending activity.
Lending Test
The lending test as proposed is unworkable. The test will likely lead to contradictory
conclusions and misplaced incentives that could undermine safety and soundness and could be
criticized for forcing credit allocation. In addition, the market share test is an artificial, arbitrary,
and unworkable measure of a bank's performance. The IBAA recommends that the lending test
be totally reworked to accommodate the following concerns:
The proposal places institutions in direct competition with each other for outstanding
CRA ratings. It is inappropriate to treat CRA performance as a zero-sum game or grade
institutions on a bell curve, thereby making it is impossible for all banks to achieve
satisfactory performance.
The proposal creates unwise incentives for banks to engage in predatory pricing or to
lower their credit underwriting standards in order to garner loans ( and market share) in
the low/mod areas.

•

Carefully thought out community development plans could be disrupted by efforts to
" buy" good business and gain market share at any price.
Since loan activity is not measured for non-bank lenders or small banks , market share
results for the CRA-reporting lenders will reflect artificial markets that do not accurately
reflect true market shares.
Heightened scrutiny of specific geographic tracts would not constitute a meaningful
evaluation of a bank's CRA performance in rural areas where low/mod residents are
widely dispersed.
The proposal's emphasis on quantity of loans ignores much of the time- and laborintensive efforts , or quality of service , needed to facilitate lending to targeted borrowers
and community development.

Investment Test
To avoid penalizing well-capitalized banks, total assets is a more equitable and appropriate base
against which to measure a bank's commitment to CRA investments.

Service Test
Banks should receive credit for lending-related activities, such as borrower counseling, which
may help to increase the bank'sleveloflending in its community, and for deposit-related
activities, such as government check cashing, which provide needed services to a bank's
community.

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Strategic Plan
Banks should have the option to be assessed under a strategic plan, but IBAA strongly opposes
mandating that a bank prepare such a plan.
Publication of Examination Schedule and Public Comments
IBAA requests that the final rule clarify that only pertinent comments related to the specific
institution under examination and received from members of the bank's own community will be
considered during CRA examinations.

Composite Ratings
The automatic downgrading to substantial noncompliance for institutions receiving consecutive
" needs to improve " ratings fails to take account of the individual circumstances ofthe bank and
should be deleted.

Data Collection
There is no statutory basis for the extremely burdensome proposed data collection requirements,
which should be deleted from the final rule.
Transition Period
The agencies should provide a transition period of at least six months from the adoption and
publication ofthe final rule to allow banks to begin to collect data and comply with the proposed
reporting requirements. Evaluations based on the new assessment standards should not begin
until at least six months after examiner training is completed.
Rebuttable Presumption
IBAA recommends that the final rule make clear that a bank can rebut a presumption at any time
during the examination process and at any time during an appeal of a CRA rating. The final rule
should clarify that the rebuttable presumption provision is for banks only, and that community or
consumer groups do not have such rights.
Weight of Ratings During Application Process
IBAA recommends that the agencies establish a rebuttable presumption that an outstanding
rating will result in approval of the CRA aspect of an application. Under the rebuttable
presumption, the burden should rest on a protestant to show that the application should not be
approved on CRA grounds.

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JohnJ-~Shivers
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Richard Mount
Leland Meneh
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TerryJJurde
James R. Lauffer
FroKenneth A Guenther
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IBAA

March 24, 1994

Mr. William Wiles
Board of Governors of the Federal Reserve System

Communications Division
Ninth Floor
Office of the Comptroller of the Currency
250 E Street, S.W.

Mr. Robert E. Feldman

Ms. Kathy Simone
Director, Information Services Division
Public Affairs
Office of Thrift Supervision
OTS 93-234
Re: Revised Community Reinvestment Act Regulations

Dear Sir/Madam:
The Independent Bankers Association of America ( IBAA) submits these comments in
response to the joint agency proposal to revise the Community Reinvestment Act ( CRA)
regulation that appeared in the Federal Register on December 21 , 1993. The IBAA is the only
national trade association that exclusively represents the interests of the nation's community
banks.

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2
On July 15, 1993, President Clinton requested the banking agencies-- " in close
consultation with the banking industry, thrift industry, Congressional leaders , and community
groups across the country--to work together to reform the CRA enforcement system by
developing new regulations and procedures that replace paperwork and uncertainty with
greater performance, clarity, and objectivity. " In response to these presidentially mandated
goals, the agencies have released a comprehensive proposal for comment.
Community bankers strongly support the goal of CRA--lending and investing in all
areas of our communities, including low- and moderate-income areas. IBAA strongly
supports the establishment of a streamlined CRA procedure for community banks. The
proposed streamlined examination approach for small banks is the type of innovative
approach that is responsive to the President's challenge to focus CRA on real investment and
services rather than meaningless documentation. By proposing a streamlined procedure for
small banks, the agencies are appropriately relying on the ample authority that is provided in
the CRA statute.
IBAA believes that other specific aspects of the proposal require modifications prior to
their adoption . Our detailed comments on the proposal follow as outlined in the table of
contents below.

Table of Contents
Burden of Current CRA System
Implications of Pending Interstate Branching Legislation
Application of CRA to Non-Banks
Need for a Tiered System

IBAA/CRA

15
16
16
17
18
19
20
20
21
21
21

22222

Size Threshold
Streamlined Examination
Reasonable Loan-to-Deposit Ratio
Makes a Majority of Loans in Its Service Area
Has a Good Loan Mix
No Legitimate Complaints
No Evidence of Discriminatory Practices
HMDA Reporting Banks Have Reasonable Distribution
of Such Loans
Failure to Meet One or More of the Six Criteria
Enforcement Authority
Legal Authority
Incentive vs. Sanction
Service Area
Multiple Service Areas
Lending Test
Competition for Ratings
Safety and Soundness Concerns
Effect on Niche Lenders
Artificial Markets
Inability to Monitor Performance
Special Problems for Rural Areas

3
4
4
4
5
6
6
7
7
10
10
12
13
14

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3
Failure to Address the Quality of a Bank's CRA Performance
Recommendation
Investment Test
Service Test
Strategic Plan
Public File, Documentation and Disclosure
Publication of Examination Schedule and Public Comments
Composite Ratings

Broadening of HMDA Data Collection
Transition Period

Basis for Assessment
Applicability of CRA to Bankers' Banks
Affiliates
Rebutting the Presumptions
Weight of Ratings During Application Process
Regulatory Flexibility Act
Conclusion

22
23
23
23
24
25
25
26
26
26
27
27
27
28
28
29
29
29
29
29
30
30
30
31
31

BURDEN OF CURRENT CRA SYSTEM
There is ample evidence to support the need for a tiered system for CRA . The
regulatory cost and burden associated with the current CRA process are staggering ,
particularly for community banks. Most of this cost can be attributed to meaningless
paperwork and documentation that banks must produce to " justify" their CRA compliance.
A study on the costs of the regulatory burden conducted by Grant Thornton for the
IBAA last year concluded that CRA is the most expensive pre- FDICIA compliance area for
community banks. The study found that the nation's 10,000 community banks spend over
$ 1 billion annually to comply with CRA. Community bankers spend 14.4 million hours each
year--1,440 hours per bank-in paperwork exercises, such as filling up their CRA files with
memoranda documenting routine activities, attending civic meetings, and the like. This
wasteful process hinders community banks' ability to serve their customers . The study also
found that CRA compliance accounted for nearly one-third of the total compliance costs for
the 13 most costly regulatory areas studied in the IBAA/Grant Thornton study, almost three
times more costly than the safety and soundness examination.
Other industry studies have also concluded that CRA is the most burdensome
regulatory requirement. The American Bankers Association ( ABA) 1991 study found thatthe
" single most burdensome regulatory requirement was determined to be compliance with the
Community Reinvestment Act as it is currently supervised and enforced . " As with the
IBAA/Grant Thornton study, ABA found that the paperwork involved in documenting CRA
activities was the greatest burden, particularly for community banks.
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The agencies themselves have found that costs of regulatory burden are high. An
FFIEC study completed in 1992 estimated that the banking industry's costs of regulatory
compliance for 1991 reached some $ 17 billion or 14 percent of noninterest expense. We
believe that the agencies' own expenses are increasing due to the escalating regulatory
burden imposed on financial institutions.
The cumulative costs of CRA and other regulations is threatening community banks'
ability to remain independent and effectively serve their customers.
IMPLICATIONS OF PENDING INTERSTATE BRANCHING LEGISLATION
The streamlined examination system for smaller banks is justified by the fact that the
pending interstate banking and branching legislation--which is highly likely to be enacted--will
give large multistate banking organizations substantial CRA relief. This legislation will allow
multistate banks to consolidate their separate banks into branches of a single bank . The
branches of these consolidated banks and their service areas will most likely be examined
very infrequently, if at all, while community banks that compete against them will continue to
face annual CRA examinations. The streamlined examination will offset some of this
inequity.
APPLICATION OF CRA TO NON-BANKS
Only traditional depository institutions carry an explicit community reinvestment
responsibility. Yet, they are losing market share to a wide array of other financial
institutions, including securities firms; mutual funds; insurance, mortgage and finance
companies. These firms are drawing deposits away from local communities and make little, if
any, effort to serve local credit needs. Furthermore, these institutions benefit, directly and
indirectly, from government activities designed to maintain financial stability and, as such ,
have a responsibility to the communities they are serving.
Given the shifts in market share from banks and savings and loans to these other
financial players, a smaller and smaller share of the financial marketplace is under any CRA
obligations. IBAA urges the agencies to recommend to Congress that CRA be extended to
these nonbank providers of deposit and credit services to ensure that all communities ' credit
needs are served .
NEED FOR A TIERED SYSTEM
Comptroller of the Currency Eugene Ludwig's statement before the Senate Banking
Committee on July 15, 1993, made the indisputable case for a tiered system :
As we develop new CRA standards, we must recognize the diversity of the
institutional and community settings in which banks and thrifts operate. How
any particular institution meets its CRA obligations will depend on a variety of
factors including its overall business strategy, size, financial resources,
corporate structure, location, and the needs of the community in which it
operates. While all institutions must strive to meet CRA requirements, we
must recognize that smaller. community banks simply cannot engage in the
same type of sophisticated efforts ( such as geocoding) as large banks in order
to demonstrate that their CRA performance is satisfactory.

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Today's rules apply CRA in the same manner to all insured banks and thrifts,
regardless of size or location . Regulatory policies have attempted to differentiate between
the documentation requirements for small banks and large banks, but with little success.
Today, banks with staffs of 10 are asked to do the same as those with staffs of thousands.
Banks in towns with populations of 1,000 are being held to standards that rival those for
multinational financial corporations headquartered in the United States and serving the world.
No public purpose is served by a regulatory system that inflicts community banks with
the same standards and requirements as multi-billion dollar institutions . No public purpose is
served by a regulatory structure that threatens the very existence of small community banks
and, in turn , the communities they serve.
At the agencies' last public hearing on CRA reform , then-IBAA- President James
Lauffer recommended that the agencies consider a six-part examination program for
community banks. The IBAA proposal called for the agencies to evaluate a bank on the
following criteria: whether it makes the majority of its loans locally and has a good loan mix,
and makes a variety of loans, including commercial ( farm ) , real estate and consumer; has had
no legitimate, bona fide complaints from community members; has a reasonable loan-todeposit ratio based on peer group analysis and local economic conditions; has revealed no
evidence of discriminatory practices in compliance and/or fair lending examination; has
properly delineated its community for CRA purposes; and , has orally reported to examiners on
ascertainment of community needs, and community outreach . We are pleased that the
proposal incorporated many of the IBAA recommendations.
At that same hearing , the ABA also recommended that the agencies explore a " simple
screen " examination for small community banks, tracking very closely the recommendations
previously made by the IBAA. ABA suggested that the agencies look at the following criteria
to assess CRA compliance of community banks: adequacy of a bank's community
delineation, the contents of the CRA public file, the loan-to-deposit ratio ( on a relative
standard by peer group) , the percentage of loans in the community, credit product mix, and
credit underwriting standards. Again , we are pleased that the proposed streamlined
examination incorporated many of the industry's recommendations.
We note that the Consumer Advisory Council ( CAC) to the Federal Reserve Board also
recommends a tiered system . The CAC said the " Regulators should create a tiered structure
for CRA examinations that contains cost-effective requirements for small community
banks. " 1
PROPOSED TIERED SYSTEM
IBAA strongly supports a tiered system for CRA examination , with streamlined
examination procedures for small banks. A tiered system will " recognize the real differences
in circumstances in which our banks and thrifts operate, " which President Clinton said is
" critical to improving the CRA process. " IBAA commends the agencies for proposing a
streamlined CRA examination system. The proposed streamlined examination for small banks
recognizes that it is counterproductive to subject community banks to the same onerous
paperwork, reporting and other requirements as large multinational and multistate banks.

1 Consumer Advisory Council Recommendations on CRA Reform, Attachment B to the
Federal Reserve Board Staff Memo on CRA Reform Project, December 7, 1993.
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Different size banks have differing abilities to comply with paperwork and reporting
requirements.
Statutory Authority

The Community Reinvestment Act directs the agencies to promulgate regulations to
implement the statute . The statute is very flexible and provides ample discretion to the
implementing agencies to establish a tiered system for community banks. In fact, the
legislative history makes clear the Act was not intended to require banks to do any additional
paperwork.2
CRA examination techniques have changed drastically over the last decade and have
moved far from the original Congressional intent by imposing a huge data collection burden
on banks. The proposed streamlined examination process is more consistent with the original
intent and should significantly reduce the paperwork requirements for smaller banks.
Conversely, requiring small banks to comply with the same paperwork, reporting
requirements and examination procedures as large banks hinders their ability to achieve the
goals of CRA. Numerous studies have shown that it is much more difficult for small banks to
meet community reinvestment obligations if they divert their finite resources away from
lending in order to meet examination requirements.
Size Threshold
Under the proposal, only independent banks with less than $ 250 million in total
assets, and banks owned by holding companies with total banking assets of less than $ 250
million, are eligible to elect to be evaluated under the small bank assessment method . While
a large number of banks would be eligible for streamlined procedures at this asset level , it
only applies to approximately 17 percent of the banking industry's total assets and 20,
percent of the industry's total deposits.
Larger community banks should have the option to be examined under the streamlined
system. There are many community banks larger than $ 250 million in assets that operate
with small staffs and an intense local focus, frequently in non-metropolitan areas. A
streamlined examination for these large community banks would free up more compliance
dollars that can be better spent on actual community reinvestment.
Therefore, IBAA requests that the final rule be revised to allow community banks with
up to $ 500 million in assets the option of being examined under the streamlined procedures .
Raising the size cut-off to $ 500 million only increases the banking assets subject to the small
bank assessment method by a nominal percentage ( 3 percentage points) for a total of 20
percent of the industry's assets.

The Senate Report states that, " The Committee believes that the regulatory agencies
already have sufficient data available to carry out the intent of this Act without requiring additional
red-tape. " S. Rep. 95-175, 95th Cong., 1st Sess., May 16, 1977, at 34. The Senate report goes
on to discuss the fact that the CRA, as originally introduced, would have required banks to file
additional material with the regulators. However, the Senate Banking Committee concluded that
additional burdens " would not be necessary or appropriate to the enforcement" of CRA. Id.
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Under the rule as proposed , two small community banks of $ 100 million and $ 150
million in assets would not be eligible for the small bank assessment method if they were
owned bythe same holding company. However, many small banks owned by somewhat
larger holding companies are operated as completely independent entities in widely separated
markets and do not have any greater resources than banks outside of holding companies .
This may be particularly true in unit banking or limited branching states ( and states that were
formerly so) .
We strongly urge the agencies to revise the final rule to permit small banks owned by
somewhat larger holding companies to be eligible for streamlined examinations . IBAA
recommends that the holding company threshold be increased to $ 1 billion in banking assets.
If the size threshold for independent banks remains $ 250 million , then it is even more critical
that the holding company limit be increased .
IBAA also urges the agencies to provide for regular adjustments to the size thresholds
adopted for the small bank assessment method . This is needed to account for the fact that
banks grow as a result of inflation , economic activity and interest credited on accounts , while
maintaining the same level of staffing . A fixed asset level for streamlined examinations could
discourage community banks from growing and helping their local economies to grow.
STREAMLINED EXAMINATION
Under the small bank assessment method , examiners would evaluate small banks
using a streamlined examination process based primarily on an examination of their lending
records through the six factors described below. The bank's overall CRA performance will be
presumed to be satisfactory if the bank:
Has a reasonable loan-to-deposit ratio ( a ratio of 60%, adjusted for seasonal variation,
is presumed reasonable) given its size, financial condition and credit needs of the
service area

In general , the IBAA supports using such a combination of factors to evaluate a small
bank's CRA compliance . However, we do have concerns and questions about some aspects
of this streamlined examination that we believe need to be clarified or modified in the final
rule. The language in the proposal , in some instances , is vague and ambiguous. The final
rule should contain more elaboration and explanation of each criterion as suggested below.
Reasonable Loan-to-Deposit Ratio
The proposal states that a loan-to-deposit ratio of 60% , adjusted for seasonal
variation, is presumed to be reasonable . IBAA strongly opposes the use of the 60% ratio, or
any fixed ratio, because it does not take into account the ebbs and flows of the marketplace .
While it has been stated that this ratio is not intended to be a bright line test, past experience
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of bankers suggests that it will become one . Specific numbers, or ratios, that appear in a
regulation are usually enforced as hard and fast rules. Furthermore, the diversity of
communities and institutions rules out imposing fixed numerical performance standards.
Such a fixed standard could result in credit allocation--something the IBAA strongly opposes
as bad public policy.
In addition, a fixed loan-to-deposit ratio clearly violates Congressional intent. Prior to
the passage of the CRA, three days of hearings were held by the Senate Banking Committee
to discuss the bill. At the opening of those hearings, the bill's sponsor, then -chairman of the
Senate Banking Committee , Senator William Proxmire said:
The Community Reinvestment Act would not allocate credit, nor would it
require any fixed ratio of deposits to loans. But it would provide that a bank
charter is indeed a franchise to serve local convenience and needs , including
credit needs. [ emphasis added]
The law the Congress eventually adopted did not include any fixed ratios. To impose
a fixed ratio with this regulation would contradict the clear Congressional intent.
The use of a fixed numerical ratio could also undermine safety and soundness as
banks try to reach the " magic number" by lowering credit standards or otherwise making
unsafe and unsound loans. A fixed ratio would also contradict the statutory requirement that
banks meet the credit needs of their community consistent with the safe and sound operation
of such institutions. A recent detailed analysis of the CRA concluded there are some
profitable loans to be made in low- and moderate-income communities but this does not mean
that greatly increasing lending in such communities is going to be a profitable activity. The
authors went on to note that the evidence indicates that the general effect of the CRA is to
reduce depository institution safety and soundness.5
In a review of the CRA proposal, the General Accounting Office ( GAO) indicated that it
was concerned that the proposed loan-to-deposit ratio " may inadvertently encourage unsafe
and unsound banking practices . " The GAO noted that very small institutions typically have
low loan-to-deposit ratios because they are often located in small towns with undiversified
economies. The GAO points support our contention that imposing a fixed loan-to-deposit
ratio would undermine safety and soundness.
The fact that a 60% loan-to-deposit ratio is the median for all banks with less than
$ 250 million in assets is disturbing since, at the outset, half of all banks would not be

3 See Community Credit Needs: Hearings on S. 406 before the Senate Committee on
Banking, Housing, and Urban Affairs, 95th Cong ., 1st Sess. 133 ( 1977) ( opening statement of
Senator Proxmire) .
Macey, Jonathan R. and Miller, Geoffrey P., " The Community Reinvestment Act: An
Economic Analysis," Virginia Law Review, Vol. 79, pp. 291 , 320.

6

Ibid, p. 320.

Letter from James L. Bothwell, Director, Financial Institutions and Market Issues, General
Accounting Office, to Representatives Henry A. Gonzalez and Joseph P. Kennedy II , January 26,
1994, p. 8 ( hereinafter, " GAO Letter" ) .
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presumed to be in compliance with the loan-to-deposit test. This exclusion of 50 percent of
the small banks is arbitrary and not supported by the agencies as being necessary or

Additionally, a national median does not reflect regional differences or seasonal
variations. Loan demand and banks' lending is directly related to the local economic
conditions. A median ratio is not sensitive to the wide variations in local conditions . In
particular, agricultural banks have very seasonal loan demand that is also subject to
fluctuations in weather patterns, international trade policy and marketplace demands.
Rural areas also generally have older populations and less turnover of residents and
businesses than more urban areas. As a result, rural banks often have much lower loan
demand than their urban and suburban counterparts.
Simply averaging a rural bank's loan-to-deposit ratio over the course of a year would
not accurately reflect its commitment to community lending . Typically, a bank lending to
farmers and other agricultural borrowers will reach its lending peak and maintain it for about
two quarters each year. As farmers sell their production into the market they pay off their
loans; they will not borrow again until the following year . The bank cannot commit those
funds to other borrowers for more than a few months , since it knows that the community's
farmers will need loans to get ready for the next growing cycle.
The regulation as drafted does not define " loans " and " deposits . " " Deposits" should
be defined to exclude public deposits. Many small banks accept public deposits as a service
to their communities and these public deposits can be a significant portion of their deposit
base. Yet, they are often short-term and must be fully collateralized . It can be difficult to
lend against collateralized deposits and , as such , they should be excluded from any deposit
measure.
" Loans" should be defined to include all pertinent instruments, including local
municipal bonds which are a close substitute for community development lending . Often,
community banks are primary purchasers of these local municipal bonds, for which there is a
limited market. In fact, often community banks will lend directly to local municipalities for
community or economic development purposes , eliminating the need for a bond issue.
Whether community banks have lent directly to their community, or indirectly through a bond
purchase, they should receive " CRA credit" for meeting this community credit needs.
Loans should also reflect loans originated and subsequently sold into the secondary
market. Many banks are active lenders, yet choose not to hold the loans in portfolio because
of interest rate risk or other factors. In addition, the sale of loans to the secondary market
allows a bank to originate more loans than it could if it held all of its loans in portfolio.
However, loan sales would not count in a bank's loan-to-deposit ratio. Making available longterm , fixed-rate home mortgage loans that are sold into the secondary market helps a bank
meet the credit needs of its community and should be counted as a measure of the bank's
lending activity.
Loans should also include mortgage-backed securities ( MBSs) , collateralized mortgage
obligations ( CMOS) , and other collateralized securities that represent loans originated by the
bank and sold into the secondary market. To better manage interest rate risk and capital
requirements, many banks are selling their loans into a secondary market and repurchasing a
collateralized security which requires a lower risk weighting for capital purposes. However,
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the bank's effort to serve its community's credit needs should not be overlooked or
disregarded based on subsequent action the bank has taken to lower their interest rate risk or
capital requirements.
IBAA recommends substituting a reasonableness standard for the loan-to-deposit ratio .
An institution should be presumed to have a reasonable loan-to-deposit ratio if it is consistent
with its local peers ( an institution may not have local peers , in which case, no peer
comparison should be done) , local market and economic conditions . Examiners should
evaluate a bank's lending performance based on the size of the bank and community,
community demographics, the competition the bank faces, and regional and local economic
conditions.
For example, a small bank in a metropolitan community with stiff competition may not
have as high a loan-to-deposit ratio as a bank with little competition in a smaller community.
Likewise, a rural bank in a depressed economic area may have a lower ratio than banks in
non-depressed areas. Or a bank in a small community that recently lost its largest employer
or that has a substantial percentage of retired or older residents, may have a lower ratio than
similar banks in the region.
The use of a " reasonable " loan-to-deposit ratio standard should be flexible enough to
consider the level of public deposits, municipal bonds, and loans sold into the secondary
market. A reasonable standard would give a much more accurate view of the level of a
bank's investment in its local community than using a fixed loan-to-deposit ratio.
Makes a Majority of Loans in Its Service Area
A small institution must make the majority of its loans in its service area to satisfy this
criterion. There are a variety of means by which an examiner can determine if a bank is
making the majority of its loans locally. For example, a bank which is required to report data
under the Home Loan Mortgage Act would have its LARS report available for examiner
inspection. Other acceptable methods would include examiners reviewing a sampling of
loans to identify zip code , county, or local address. Whatever method is chosen, it must
ensure that a documentation or reporting burden is not placed on the small bank.
IBAA is concerned that " service area" may be too narrowly defined to reflect the
bank's community. ( See discussion on service area, infra, at pp. 17-18.) We recommend
that this criterion be revised to reflect the " majority of loans in its community. " The final rule
should clarify that small banks are not required to institute a tracking system for individual
loan identification , or otherwise " geocode" their loans as proof to the examiners. Geocoding
is time-consuming and burdensome for community banks. And it is in direct violation of
Congressional intent. ( See discussion , supra, at p. 6 and footnote 2. )

Has A Good Loan Mix
Evaluating whether a bank has a good loan mix and makes a variety of loans will
depend on the charter and business plan of the bank, as well as on the availability of loan
products from other financial service providers. An agricultural bank should be presumed to
be in compliance if it offers a variety of agricultural loan products, such as real estate and
production loans, FmHA loans and agri-business loans. A business bank might offer SBAguaranteed loans to service customers who might not otherwise qualify for a loan. Likewise,

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an institution concentrating on residential real estate lending should offer products accessible
to low- and moderate-income customers, such as FHA- and VA-guaranteed loans.
However, a small business bank should not be required to offer mortgage loans if
there are other providers of mortgage credit in the community, and vice versa. A small bank
competing in a metropolitan area where there are many other service providers should not be
required to be " all things to all people " and offer a full array of loan products . The existing
interagency policy statement on CRA adopted on March 30, 1989, states as much:
The CRA was not intended to limit an institution's discretion to develop the
types of products and services that it believes are best suited to its expertise
and business objectives and to the needs of its particular community, as long
as the institution's program is consistent with the objective of the CRA. Nor is
it the purpose of this statement to establish specific lending requirements or
programs for financial institutions subject to CRA.
We recommend that the final regulation include clarifying language regarding adequacy
of loan mix that reflects this previously adopted statement of the agencies.
The proposal defines a good loan mix as " makes to the extent permitted by law and
regulation , a variety of loans to customers across economic levels . " This definition goes
beyond the scope of the law . The purpose of the CRA states that " regulated financial
institutions have a continuing and affirmative obligation to help meet the credit needs of the
local communities in which they are chartered . " Helping to meet the credit needs of a
community does not mean that all potential borrowers will be qualified and receive loans.
Defining a " good loan mix" as loans made across all economic levels also suggests
credit allocation. Congress specifically rejected the use of credit allocation as a portion of
CRA. Additionally, the existing interagency policy statement on CRA clearly states that
credit allocation is not the intent of CRA. The policy states, " in line with the long-standing
view of the agencies that the CRA was not intended to establish a regulatory allocation of
credit, the agencies have neither requested commitment from applicants to make particular
types or amounts of loans nor specified the terms of or conditions for such loans."
It appears that the agencies are attempting to formulate a means for determining
whether a bank is serving all segments of its community, including low- and moderate-income
areas, by referencing " all economic levels " as part of this criterion . We do not dispute that
CRA requires an institution to serve all segments of its community, but believe that the
proposed criterion fails to address this requirement with the reference to serve borrowers at
all economic levels. The agencies must recognize that the credit needs of qualified low/mod
borrowers may not match the other segments of the community. Serving potential borrowers
at all economic levels may also require services and products other than credit products.
The examiner should consider the banker's knowledge of his/her local community and
its credit needs. The banker who understands the local community will be able to explain

7 The Senate Banking Committee specifically rejected the course of setting percentage
targets for investments. " S. Rep. 95-175, 95th Cong ., 1st Sess., May 16, 1977, at 34. During
the floor debate, Senator Heinz stated that the CRA " is not an attempt to allocate credit. " 123
Cong. Rec. S. 9039-9119, June 7, 1977.
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why the bank offers particular products and credit services to its community and what the
credit needs of the community are.
Finally, the procedures that an examiner will use to determine that an institution has a
good loan mix are unknown . Will small banks be required to prepare or assemble data for
examiners? What information will examiners deem necessary? What factors are considered
to make the presumption that an institution has a good loan mix? The final rule must clarify
which party is responsible for assembling any pertinent information and how a bank can
ensure that they will be presumed to have a good loan mix. To the extent possible , as stated
in the proposal , the burden should be on the examiner and not the bank . We recommend that
examination procedures include a discussion with bank management to incorporate the
bank's ascertainment of its community's credit needs. The final rule should also strike the
language " across all economic levels, " as the qualifier of having a good loan mix. ( See
discussion on HMDA distribution criterion, infra, at pp. 14-15 .)
No Legitimate Complaints
The institution must not have had any legitimate, bona fide complaints from
community members to satisfy this criterion . The first step for the examiner should be to
determine the validity of the complaint . This would require a subjective judgement on the
part of the examiner, but it is critical that the opinion and judgement of the banker also be
considered. The final rule should clarify that complaints that are resolved satisfactorily for
the complainant should be considered " closed" and should not affect the CRA evaluation.
IBAA recommends that the agencies adopt complaint procedures comparable to those
found in 12 CFR 227 , Unfair and Deceptive Practices. Tracking this regulation, we
recommend that a definition for " consumer complaint" be added to the proposed regulation
as follows:
Consumer complaint means an allegation by or on behalf of an individual, group
of individuals, or other entity from the bank's community that a particular act
or practice of a bank violates the Community Reinvestment Act or regulation
issued pursuant thereto, or evidences the bank's failure to help meet the credit
needs of its entire community, including low- and moderate-income
neighborhoods, consistent with the safe and sound operation of the bank.
Complainants should be required to follow certain procedures in lodging their
complaints, including:
1) The complaint must be in writing.
2) The complaint should include information describing the act or practice that is
thought to violate CRA.
3) The name and address of the bank.

Procedures should be developed for complaints filed either directly with the bank or
with the agency. Within 15 business days of receipt of the complaint, the complainant
should receive either a substantive response or an acknowledgement setting a reasonable
time frame for a substantive response. If the agency receives the complaint, a copy should
be sent to the affected bank within 10 business days. If the bank receives the complaint, it
should place the correspondence in its file for review by the examiners during the

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examination. Once the complaint is satisfactorily resolved , the correspondence should be
removed from the public file. ( See discussion on public file, infra, at p. 25.)
Complaints about technical , nonsubstantive violations , such as a failure to include a
required item in the public file or failure to post a CRA notice in a branch , should not affect
the CRA evaluation . Only complaints from customers or community members residing within
a bank's service area should be considered legitimate . Any complaints filed by individuals or
organizations that do not reside in the bank's service area should not be considered
legitimate. Without firsthand knowledge of the bank or its community, an out-of- area
complaint would result in little more than the bank being held to a standard based on hearsay.
Complaints should not be automatically disqualified or considered non-legitimate by either the
bank or the agency if a local consumer relies upon a nonlocal organization to help make their
complaint.
Of particular concern to small institutions is the possibility that large advocacy groups
with agendas not related to the local community or the local bank will involve themselves in a
local complaint as a means to focus attention . Small banks do not have the resources to
handle such " manufactured " complaints. If the agencies choose not to prohibit complaints
from out-of-area individuals or organizations, then it is critical that special procedures be
developed to handle these types of complaints . To do otherwise would create a situation
where small banks could be held hostage by a large advocacy campaign to " make an
example. "
No Evidence of Discriminatory Practices
This criterion requires that an institution must not have engaged in a pattern or
practice of illegal discrimination that it has not fully corrected ; and has not committed
isolated acts of illegal discrimination, of which it has knowledge, that it has not fully
corrected, or is not in the process of correcting fully.
The IBAA supports fair lending and believes that the industry and the agencies must
take the necessary steps to eliminate illegal discrimination . However, the IBAA strongly
opposes evaluating and rating a bank based on an isolated instance of discrimination . Such a
narrow test is inherently unfair and sets up a scenario where almost any institution in the
country could be guilty at some time of lending discrimination . Judging compliance on an
isolated instance fails to prove intent. IBAA recognizes that the aggrieved party in an isolated
instance is entitled to pursue action against the bank, but individual action provides no
justification for the agencies to take action under CRA against a bank that has not condoned,
promoted, or possibly been aware of the illegal discrimination .
Reviewing the legislative history of CRA, it is clear that Congress neither intended nor
envisioned CRA as fair lending legislation. At the time of its passage , there was considerable
debate about the goal of CRA. But most legislators agreed that the focus of the legislation
was on the problem of depository institutions shipping funds outside the areas in which the
funds were obtained . The focus of CRA was on communities, not on race, ethnicity, gender,
or other protected classes.

Macey, Jonathan R. and Miller, Geoffrey P., " The Community Reinvestment Act: An
Economic Analysis, " Virginia Law Review, Vol. 79, pp. 291 , 299.
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Over time, fair lending examination procedures have been incorporated as part of the
CRA examination . The current CRA evaluates banks for their compliance with
antidiscrimination and other related credit laws. This assessment considers actions by
institutions, including efforts to avoid doing business in particular areas or illegal
prescreening . The evaluation process considers two assessment factors :

D

Any practices intended to discourage applications for types of credit set
forth in the institution's CRA statement( s) .

F

Evidence of prohibited discriminatory or other illegal credit practices.

Under the current system , a bank can receive a " needs to improve " or " substantial
noncompliance" rating if it fails to accept applications from all segments of its local
community; policies and procedures are inadequate; the board of directors and senior
management are uninvolved; and, the institution is in violation of the Equal Credit Opportunity
Act, the Fair Housing Act, the Home Mortgage Disclosure Act or other regulations related to
discrimination.
The current system provides for a rigorous review and recognizes that banks guilty of
discrimination cannot effectively be serving their entire community. IBAA recommends that
the focus in the revised CRA rules incorporate the same balance . Creating a new standard
that requires banks to be downgraded for isolated acts establishes a standard that is
impossible to meet satisfactorily and is bad public policy. Furthermore, the IBAA requests
that the agencies define what is meant by " fully corrected " and " has knowledge of" to
ensure banks can develop the appropriate policies and procedures.
HMDA Reporting Banks Have Reasonable Distribution of Such Loans
This criterion requires HMDA reporting banks to have a reasonable geographic
distribution of the reported loans. IBAA strongly opposes this criterion , which is tantamount
to credit allocation . There is absolutely no statutory basis for this criterion in either HMDA or
CRA. In fact, a reading of the purposes of the HMDA statute reveals quite the contrary . The
purpose of HMDA is " to provide the citizens and public officials of the United States with
sufficient information to determine whether depository institutions are filling their obligations
to serve the housing needs of the communities and neighborhoods in which they are
located..." Congress also stated that " nothing in this title is intended to, nor shall it be
construed to, encourage unsound lending practice or the allocation of credit . " 10 Therefore,
to evaluate banks based on a " reasonable geographic distribution of HMDA loans" implicitly
suggests that loans should be distributed across all census tracts in the service area,
regardless if this is consistent with safety and soundness or consumer demand .
The interagency policy statement on Analyses of Geographic Distribution of Lending
adopted December 6, 1991 , stated that HMDA " data should be seen as reliable by the
institution that carefully collects and reports it, and [ the HMDA data ] can be used without
change to reach some conclusions about the demographic impact of the geographic lending

12 USC 2801 et seq; 89 Stat. 1125; Pub. L. 94-200, Title III, ( hereinafter, " HMDA" ) ,
Section 302 ( b) .

10 HMDA, Section 302 ( c) .
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patterns of the institution's housing related loans. " No mention is made in that statement
about having a " reasonable" distribution of HMDA loans or what type of distribution could be
considered reasonable.
HMDA data is a starting point for analyzing a bank's lending , not an ending point.
Without looking at other factors involved in a bank's lending , no determination can be made
regarding whether the distribution of HMDA loans is reasonable . The HMDA data have
significant limitations , including the lack of information about factors important in assessing
the creditworthiness of applicants and the adequacy of collateral offered as security on
loans." Without this information , determining if lending patterns are reasonable or if
applicants have been treated fairly is not possible.'2
There have been numerous discussions on the uses of HMDA data and the limitations
of such data . The proceeding of a Fannie Mae Research Roundtable on HMDA Data and
Mortgage Market Discrimination Research , held December 9, 1992 , described many of the
problems associated with HMDA data . Fannie Mae's Office of Housing Research found that
instances of redlining and discrimination of mortgage applicants on the basis of race or
national origin can be suggested but not proven by the HMDA data.¹³
To require as part of CRA that lenders have a " reasonable geographic " distribution of
HMDA loans goes beyond the capabilities of this limited data . IBAA recommends that this
criterion be rewritten to focus on " analyzing the distribution of HMDA- related loans. "
Failure to Meet One or More of the Six Criteria
If a small bank fails to meet or exceed all of the six standards for a satisfactory rating,
it is not presumed to be performing in a less than satisfactory manner, according to the
proposed rule. Rather, the agency will conduct a " more extensive examination of the bank's
loan-to-deposit ratio, its record of lending to its local community, and its loan mix. " Members
of the community may be contacted and the most recent fair lending examination will be
reviewed. A bank may also request that the agency take into account its investment and
service record.
IBAA requests that the agencies provide more clarity in the final rule about the nature
and extent of the " more extensive examination . " Community bankers are concerned about
what data and other information they may be called on to provide in the more extensive
exam. They are concerned that, if the extent of documentation required is of a similar nature
and degree to that required under current examination practices, then there will be little, if
any, reduction in the paperwork burden . Banks will have to maintain the documentation that
they currently assemble " just in case" the examiners decide to conduct a more extensive
examination .

11 Canner, Glenn B., Expanded HMDA Data on Residential Lending: One Year Later, " Federal
Reserve Bulletin, October 28, 1992, p. 801 .
12 Ibid.
13 " Proceedings: HMDA Data and Mortgage Market Discrimination Research, " James H. Carr
and Isaac F. Megbolugbe, Fannie Mae Roundtable Series, December 9, 1992, p. 8.
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In addition, how contact with community members will be made is unclear. In small
towns, such contacts could be disruptive and raise the specter of nonexistent problems.
Bank management should be given the opportunity to suggest potential contacts and make
reasonable objections to any contacts proposed by the examiner.
IBAA requests that the requirements for the more extensive exam be stated
definitively in the final rule and make clear that the examination burden should remain with
the examiner to the greatest extent possible. Some of the detail necessary to explain these
procedures could appropriately be placed in an official commentary, provided the commentary
is released before banks are required to comply with the new rules. ( See discussion on
Official Commentary, infra, at p. 29.)
ENFORCEMENT AUTHORITY
According to the proposal , the agencies intend to use the full complement of
enforcement authority granted by Section 8 of the FDI Act ( 12 USC Section 1818 ) , including
the levying of civil money penalties, against banks that receive a composite CRA rating of
" substantial noncompliance. " The IBAA strongly opposes this and does not believe that it is
appropriate to include this enforcement provision in the final rule for several reasons. We
request that it be deleted.
Legal Authority
First and foremost, the enforcement provision of the proposal is beyond the scope of
the agencies' legal authority. The CRA statute provides only one specific regulatory sanction
for a poor CRA record--the agency may condition or deny an application for a deposit facility
by the bank.14 No other regulatory enforcement mechanisms are authorized by the CRA
statute.15
The legislative history supports this view. When the Senate bill that became the CRA
was debated on the Senate floor, Senator Richard Lugar of the Banking Committee noted that
the sanctions offered were that " the institution would have some difficulty extending its
facilities, no more and no less than that. " ¹º
Under Section 8 of the FDI Act, the agencies have general authority to use regulatory
enforcement sanctions whenever an institution is " engaged in an unsafe or unsound practice"
or is " violating a law, rule or regulation . " Section 8 of the FDI Act contains only general
regulatory enforcement authority. Under well-settled principles of statutory construction, the
specific enforcement sanction of the CRA statute controls over the general authority of
Section 8.
Even applying Section 8, however, a " substantial noncompliance" rating for CRA
performance does not constitute an " unsafe or unsound practice, " nor is it a " violation of law

14 CRA, Section 804( 2) .
16 The statute does contemplate one other " enforcement" mechanism using the court of
public opinion: the public disclosure of an institution's CRA rating and written evaluation . CRA,
Section 807.
10 123 Cong. Rec. S. 8961 , June 6, 1977.
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or regulation. " The CRA statute does not require an institution to maintain a satisfactory
CRA rating or any particular level of performance . The crux of the statute is that the " agency
shall assess the institution's record of meeting the credit needs of its entire community,
including low- and moderate-income neighborhoods, consistent with the safe and sound
operation of the institution " and that the agency shall " take such record into account in its
evaluation of an application for a deposit facility" ( emphasis added) . Receipt of a less
than satisfactory CRA rating does not constitute violation of a law or regulation .
Accordingly, Section 8 enforcement sanctions do not apply.
The statute does direct the agencies to publish " regulations to carry out the purpose
of the title" ( Section 806) . The purpose of CRA, as stated in Section 802 ( b) of the Act, is to
require the agencies to use their examination authority " to encourage institutions to help
meet the credit needs of the local communities in which they are chartered ... "
The
statute does not say that the agencies can force institutions to achieve a certain level of
performance.
Use of the Section 8 enforcement powers is also inappropriate because CRA
evaluation is such a subjective process. Severe penalties for subjective findings of failure are
inherently unfair.
IBAA does not dispute that the agencies have authority to use the full range of
enforcement sanctions against banks that violate anti-discrimination laws ( which are adverse
factors in the CRA performance record) . But this enforcement authority is derived from those
laws ( e.g., Equal Credit Opportunity Act, Fair Housing Act) , not CRA.
The current CRA Questions and Answers adopted by the FFIEC recognize the
appropriate sanctions that are available to the agencies under CRA. The answer to Question
29 states that the agencies can deny a corporate application for poor CRA performance; they
can use enforcement powers to ensure compliance with the requirements of the regulation
( currently, preparation of a CRA Statement, maintenance of a public comment file, and
posting of a CRA Notice) ; and they can use enforcement powers to ensure compliance with
antidiscrimination and fair lending laws. This is appropriate, since there are objective ways to
determine a bank's compliance with these requirements. This is not true of CRA ratings
themselves.
Incentive vs. Sanction
Use of enforcement sanctions is inconsistent with the statutory intent for the agencies
to encourage institutions to help meet local credit needs. In our opinion, a better way to
encourage CRA compliance, and one that is more consistent with statutory authority, is to
use positive incentives--the carrot rather than the stick. Such incentives could include
rewards for an " outstanding " rating , such as reduced examination requirements, less frequent
exams, and insulation from protest of an application.

17 CRA, Section 804.
18 Moreover, the purposes of the CRA and the findings of Congress as stated in the statute do
not provide authority for the agencies' enforcement powers, since it is well-settled that purposes
and findings clauses do not have the force of law.
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SERVICE AREA

The proposed rule defines service area as the geographic areas surrounding each office
or group of offices in which a retail institution ( including a small institution) makes most of its
direct reportable loans . A rebuttable presumption would exist that the institution's service
area is acceptable if it is broad enough to include low- and moderate-income areas , and does
not arbitrarily exclude low- and moderate-income areas. Reportable loans means home
mortgage loans , consumer loans ( closed-end only) , and loans to small businesses ( businesses
with gross receipts of up to $ 10 million or up to 500 employees) and small farms ( annual
gross receipts of less than $ 500,000) .
In enacting CRA, Congress found that:
1 ) regulated financial institutions are required by law to demonstrate that their
deposit facilities serve the convenience and needs of the communities in which
they are chartered to do business;
2 ) the convenience and needs of communities include the need for credit
services as well as deposit services;
3) regulated financial institutions have a continuing and affirmative obligation to
help meet the credit needs of the local communities in which they are
chartered.1 ( emphasis added)
IBAA believes that the " service area " proposed in the regulation is a much narrower
area than Congress intended for CRA. The focus on " service area" rather than " community"
is troublesome. Compounding the problem is the focus on only " direct" " reportable " loans
made within an area around the office or group of offices. This definition not only fails to
consider deposit services, it totally excludes other types of lending, indirect or nonreportable
loans, in which an institution may engage for the purpose of satisfying its community credit
needs.
The proposal suggests that certain types of " reportable" loans warrant CRA credit,
while other nonreportable loans do not. The legislative history for CRA does not support
disregarding nonreportable loans. The issue is whether these nonreportable loans are serving
a credit need of the bank's community.
Using the service area definition could unnecessarily constrain a bank's ability to serve
the credit needs of its local community. The statute requires the agencies to assess an
institution's record " of meeting the credit needs of its entire community, including low- and
moderate-income neighborhoods..." 20 ( emphasis added) . Again , Congress intended for the
agencies to look at the entire community, not an artificially drawn service area based on
" reportable" lending activities.
The term " community" is not defined by the statute except for those financial
institutions serving primarily military personnel where " entire community" may be defined to
include their entire deposit customer base without regard to geographic proximity. As stated

19 CRA, Section 802.

20 CRA, Section 804( 1 ) .
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in the findings clause, financial institutions are required to serve the credit needs as well as
the deposit needs. We believe that it is reasonable to conclude that the proposed service
area definition is not an acceptable basis upon which to evaluate a bank's CRA performance.
The current regulation requires a bank to delineate the local community or
communities that it serves. The interagency guidelines suggest two methods for making this
delineation. First, the institution can consider using widely recognized existing boundaries
such as Metropolitan Statistical Areas ( MSAs) or counties. The agencies have noted that
such boundaries are " frequently a reasonable approximation of an institution's

The overriding concern of correctly delineating the local community " is to ensure that
low- and moderate-income neighborhoods are not arbitrarily excluded from the delineated
area. " As drafted , the proposed test could cause such areas of a bank's community to be
arbitrarily excluded , either because it is an area in which an institution does not make most of
its loans or the loans are either indirect or nonreportable.
IBAA recommends that the agencies rewrite the definition of service area, broadening
it to ensure that it reflects the entire community that the bank serves and giving
consideration to all lending activity. To satisfy the Congressional intent that deposits drawn
from the local community be used to meet the credit needs of that community, the service
area must also consider where the institution draws its deposits and how this relates to its
lending.

Multiple Service Areas
IBAA concurs that an institution's CRA rating should reflect its performance in all of
the local communities in which it is doing business. As recommended above , it is critical that
the definition of service area be broadened to reflect the entire community or communities
that an institution serves. While we recognize that larger institutions will have multiple
service areas, we want to emphasize our concern that rural areas not be blended with urban
service areas. In addition, it is understandable that the regulators will not be able to examine,
as part of each CRA examination , every service area of a large bank. We believe this gives a
tremendous advantage to larger institutions , particularly those competing against small,
stand-alone banks.
Even with the streamlined examination , smaller banks will receive an annual ( or
possibly 18-month) examination, while their competitor across the street may never be
" sampled. " Therefore, IBAA requests that the agencies establish an examination schedule for
a large bank's multiple service areas that reflects a sampling of both urban and rural areas,
and provides for all of an institution's service areas to be examined within a 3-to-5-year
period. Otherwise, it is conceivable that, with random sampling, some service areas may
never be examined . Those service areas that receive " needs to improve" or " substantial
noncompliance" ratings should be reexamined as part of the next examination cycle in
addition to the new sampling.

21
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FFIEC Interagency Policy Statement " Community Reinvestment Act," June 17, 1992 , p. 3.
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20
LENDING TEST
As proposed, large banks will be evaluated on the basis of their performance under
three tests: the lending test, the investment test and the service test . The lending test will
form the primary basis for the composite rating of a retail bank.
IBAA has serious concerns about the lending test which , in our opinion , render it
unworkable. In particular, the market share portion of the lending test is likely to lead to
contradictory conclusions and misplaced incentives for banks that could undermine safety
and soundness . The market share test is an artificial, arbitrary and unworkable measure of a
bank's performance . In many cases, it is not likely to lead to an accurate and valid
conclusion about the bank's CRA performance. In addition , the lending test could be
criticized as forcing credit allocation-- something , as discussed previously, the Congress
clearly did not intend.
The GAO noted that the proposed market share test will not be meaningful when
financial institutions ( 1 ) do not have low- or moderate-income areas in their service area, ( 2)
are the only reporting institution in the market or are located in markets where the
nonreporters comprise a significant share of the market, and ( 3) have service areas that only
partially overlap with other financial institutions ' areas.22 We concur with this GAO
assessment and believe that these problems render the market share test meaningless.
Competition for Ratings
As delineated in the proposal, the market share test is structured so that institutions
are in direct competition with each other for outstanding CRA ratings. To achieve an
outstanding rating , a bank's market share of reportable loans in low- and moderate-income
( " low/mod " ) areas must significantly exceed its market share in the other parts of its service
area. A satisfactory rating requires roughly comparable market shares in the two areas. This
means that, in order for one bank to receive an outstanding rating , another bank must receive
a below satisfactory rating , regardless of its CRA efforts or performance.
IBAA believes it is inappropriate to treat CRA performance as a zero-sum game or to
grade institutions on a bell curve where it is impossible for all banks to achieve satisfactory
performance. This is especially unfair when the agencies are proposing to impose the full
range of enforcement sanctions on banks that do not achieve satisfactory ratings.
We also note that as a practical matter, under certain circumstances, it might be
impossible for an institution to receive an " outstanding " rating, let alone a " satisfactory"
rating, under the proposed test. The South Shore Bank in Chicago is often cited as a bank
with an impressive community development record . In that community, a competing bank
would find it almost impossible to garner a comparable market share to do well under the
lending test. Similarly, when there is significant competition in a community it is much more
difficult to generate market share than when there is little competition . The test fails to take
this into consideration.

22 GAO Letter, p. 8.
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Safety and Soundness Concerns
The lending test has potentially negative implications for banks' safety and soundness
and creates unwise incentives for banks . To wrest market share from each other , banks may
engage in predatory, or below cost, pricing as they all attempt to chase the finite number of
available safe and sound loans in low/mod areas . Or banks may lower their credit
underwriting standards to levels that threaten safety and soundness in order to make loans in
the low/mod areas.
The CRA statute specifically states that the agencies are to encourage banks to help
meet the credit needs of their local communities, " consistent with the safe and sound
operation of such institutions " and that the agencies are to assess a bank's record in this
regard, " consistent with the safe and sound operation of such institution . " 23 The lending
test is not consistent with safe and sound operations.
Effect on Niche Lenders
The lending test could also lead large banks to " buy" good business away from banks
and other lenders that have long focused their efforts on otherwise underserved communities.
For example, minority banks may face withering competition from large institutions that will
make loans simply to get a good CRA rating . Carefully thought-out community development
plans could be disrupted by these efforts to gain market share at any price.
Artificial Markets
The market share test only measures loan activity of CRA- reporting lenders, namely
banks and thrifts over $ 250 million in size. By excluding the loan activity of non-CRAreporting lenders, the market share test fails to actually measure the true loan market and the
true competition among loan providers. This will lead to anomalous results and incorrect
conclusions in many markets where non-CRA-reporting lenders have significant market share.
Most, if not all , markets will be affected.
The vast majority of urban and suburban markets are likely to have non-bank lenders
with significant market share. Many rural markets are likely to have both non-bank lenders
and small bank lenders with significant market share. If these non-CRA-reporting lenders do
not have " roughly comparable" market shares in both high-income and low/mod income
areas, results for the CRA-reporting lenders will not accurately reflect their true market
shares.
The lending test also establishes artificial markets because it only measures the loan
activity of certain " reportable loans. " Several significant types of lending that can be very
important and beneficial to low- and moderate-income households are excluded from the
definition of " reportable loans. " Notably, automobile loans and credit card loans are excluded
even though they may constitute a very significant part of the credit needs of the community,
particularly for low- and moderate-income borrowers. For example, an automobile loan may
be of paramount significance to a low-income borrower who resides in a rural area where
there is no public transportation and needs a car to get to work.

23 CRA, Sections 802( b) and 804( 1 ) .
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Evaluation of a bank's CRA performance based on " reportable loans " also has
implications for credit allocation , because it willencourage a bank to make certain " reportable
loans" at the expense of other loans that may be needed by the community as well.

Inability to Monitor Performance
Another problem with the market share test is that since it relies on comparing one
bank's performance with others' , the bank will be unable to monitor its progress during a
reporting period. Since this is likely to increase, rather than reduce , uncertainty about how a
bank's CRA performance will be rated , it is contrary to one of the goals of the CRA reform
effort.
In addition, as the GAO noted, markets are constantly changing so that the number of
competing institutions within an institution's market and each institution's market share will
likely change from year to year.24 This will make it impossible to make any meaningful
annual comparisons of lending activity.
Special Problems for Rural Areas
The lending test will present particular problems in rural areas. In these areas,
geographic location is not a reliable indicator of economic status . In rural markets, high-,
moderate- and low-income households can vary on a house-by-house basis and can be
relatively well-dispersed across the census tracts or block numbering areas ( " geographies" ) in
a bank's market . As a result, only one or a few geographies may be characterized as
low/mod. Heightened scrutiny of these geographies would not constitute a meaningful
evaluation of a bank's CRA performance.
As an example, one community banker reported that, out of a market area containing
12,000 individuals and five block numbering areas, only one area with 450 people would be
defined as low/mod. In terms of absolute numbers, there are far greater numbers of low/mod
income individuals in the rest of the bank's market area, yet the bank's entire CRA
performance rating would hinge on its service to 450 people comprising 4 percent of the total
population of its market.25
Failure to Address the Quality of a Bank's CRA Performance
The lending test's principal emphasis is on quantity--the number of loans and dollar
volume of loans made. This emphasis ignores much of the time- and labor-intensive efforts
that banks make to facilitate lending to targeted or lower-income borrowers, such as
borrower counseling or home buyer seminars and other outreach programs to reach
underserved communities. Likewise, a community development project financed by a bank
may take a disproportionate amount of time and effort to bring to fruition, relative to the
dollars loaned out. A bank may also make loans available to its community by facilitating
lending by third parties through conduits such as the IBAA Mortgage Corporation, or available
government and state programs.
24 GAO Letter, p. 9.

26 Although less than $ 250 million in assets, this bank is subject to the lending test because it
is owned by a holding company that owns two additional small banks in other communities. The
holding company has aggregate assets exceeding $ 250 million.
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All of these activities contribute greatly to the quality of a bank's service to its
community. A bank should be encouraged to undertake these efforts as well and should
receive CRA " credit" for these activities. It appears that some of these activities are intended
to be reflected and given credit in the investment and service tests . However, it is the
lending test that forms the basis for the composite rating . The investment test only affects
the final rating positively if the investment rating is outstanding or high satisfactory . The
service test only affects the final rating if the service rating is outstanding . Therefore,
investment and service activities for banks that receive satisfactory ratings under these
categories essentially are given no credit at all. The final CRA rule must be revised to make
clear that these types of activities will be reflected in a bank's CRA rating on an equitable
basis.
Recommendation
In IBAA's opinion , the shortcomings of the lending test are so severe that the test
should be totally reworked to accommodate these concerns.

INVESTMENT TEST
The investment test would consider investment in community and economic
development activities. Banks would be evaluated on the amount of assets devoted to
qualified investments, compared to their risk-based capital . Assessing investment
performance against risk-based capital would penalize well-capitalized banks that would have
to maintain higher levels of investments to achieve satisfactory ratings than their lesscapitalized counterparts. Congress and the agencies have spent considerable time and effort
in the past few years encouraging banks to increase their capital levels as insurance against
bank failures. Many regulations give favorable treatment to banks with higher capital ratios.
In IBAA's opinion , total assets would be a more equitable and appropriate base against which
to measure a bank's commitment to CRA investments.

SERVICE TEST
The service test would evaluate retail banks primarily based on the percentage of
branches that are located in or are readily accessible to low/mod areas in its service area .
Consideration will be given to the limitations faced by banks with a small number of branches
and whether the bank provides other services that promote credit availability. The service
test is where banks will receive credit for activities such as credit, borrower or small business
counseling; home buyer seminars; and low-cost deposit or check-cashing services.
However, because the lending test forms the basis for a large bank's composite rating,
and because the six criteria form the basis for a small bank's rating , activities undertaken
pursuant to the service test may not receive the degree of credit that they deserve. In fact,
as mentioned above in the discussion of the lending test, these activities may not receive any
credit if a bank is " merely" satisfactory, because the service test only affects the composite
rating if it is outstanding . Many of these services are essential in order to increase the level
of lending in a community. It may take time before the results of these efforts are reflected
in hard and fast numbers as actual loans . Banks should receive credit for these activities on
an equitable basis with activities measured under the lending test.
Under the proposal , in a densely populated area a branch would be considered readily
accessible if it was " in easy walking distance . " In less populated areas, a branch would
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generally be considered readily accessible if it was in " easy or normal driving distance. " The
IBAA objects to these qualifiers to define readily accessible . Depending on the area of the
country, these terms could be interpreted with a wide variation . For example, in Western
states an " easy" drive could be a distance of 40-50 miles. At same time, in New York City,
" easy" walking distance is a matter of opinion . " Easy" is a very subjective term and subject
to wide interpretations.
More and more financial institutions are looking for alternatives to brick and mortar
branches to deliver financial services to their communities more cost-effectively and
efficiently. The goal is reasonable access for all customers to these services. IBAA
recommends that this test focus on the provision of financial services to all parts of a bank's
community.
STRATEGIC PLAN
Under the proposal , any institution , as an alternative to being rated under the small
bank assessment method or the lending , service and investment tests, could elect to submit
for agency approval a CRA plan with measurable goals against which its subsequent
performance would be assessed . The plan would be required to be publicly disclosed and
subject to public comment before approval . If the agency approved the plan , it would assess
the institution's performance to determine if the institution met or exceeded the plan's goals.
If the institution failed to meet or exceed the preponderance of the measurable goals set forth
in the plan, the institution's performance would be evaluated under the other applicable tests.
The IBAA believes that institutions should have the option to be assessed under the
strategic plan . We believe that the strategic plan could place a tremendous documentation
and paperwork burden on small banks . Therefore, we are unalterably opposed to mandating
that a bank prepare a strategic plan.
Many aspects of the strategic plan option require clarification . What are " measurable "
goals? If these goals are specific lending targets in specific areas, how can the agencies be
assured that the credit needs of the entire community are being served? Measurable goals
also suggests the possibility of credit allocation . How can the agencies prevent this from
occurring?
Banks will be evaluated based on whether they meet or exceed the plan goals. How
will the agencies factor in extraordinary occurrences in a community? For example, if a
principal employer of the area closes, increasing unemployment, and the bank fails to meet its
lending goals as a result, does it fail its plan? The agencies stated that amendments to a plan
will be considered on the grounds that a material change in circumstances has made the plan
no longer appropriate. Would the loss of a large employer require the bank to file an
amendment, even if it is uncertain about the impact on its goals? Is failure to file an
amendment a violation of the plan?
How can a bank exceed its goals? Would it be possible for banks to " game" the
system and put together a plan that appears difficult, but in reality, will be quite easy to
exceed? For example, in recent years, many large bank mergers have been accompanied by
announcements of " large" CRA investments over a specified time period. Upon closer
analysis, most of these CRA commitments represent a small fraction of the bank's total
lending activity; however, the number or amount sounded good.

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Plans require banks to solicit public comment. What happens if no group comments?
Conversely, what happens if a nonlocal organization offers comments that the institution
believes are not pertinent to its community? Can nonlocal comments be disregarded? Under
what circumstances can an institution disregard local comments?
How will the agencies determine that a plan is adequate? What measure will the
agencies use to determine that the plan is the best way for the institution to meet the credit
needs of its entire community?
Most community banks have indicated that they have little interest in the strategic
plan option. However, if this is to remain an option , we strongly believe that the agencies
need to be more explicit about the requirements for a strategic plan .
PUBLIC FILE, DOCUMENTATION AND DISCLOSURE
According to the proposal , an institution would have to make available for public
inspection a file with all signed , written comments from the public received over the last two
years; its performance data for that period ; maps of its service areas and lists of census
tracts or block numbering areas that make up each service area; and a copy of the public
section of the most recent CRA performance evaluation .
The IBAA requests that the agencies clarify that banks do not need to keep in the file
the correspondence related to any written complaints that have been satisfactorily resolved
for the consumer. Since small banks are not subject to the data collection requirements and
yet could be located in an MSA, IBAA requests that the agencies clarify that these
institutions need maintain only the maps of their service areas and not the accompanying
census tract data or block numbering area data .
The proposal also requires a small bank to include in the public file its loan-to-deposit
ratio computed at the end of the most recent calendar year. A year-end snapshot is not
necessarily a reliable indicator of a bank's loan-to-deposit ratio. Particularly for agricultural
banks, the loan-to-deposit ratio is seasonal and will fluctuate significantly ( as much as 20
percentage points or more) during the course of the year. IBAA recommends that the
requirement to include the year-end loan-to-deposit ratio in the public file be deleted .
IBAA also requests that the agencies delete the requirement for a bank with a less
than satisfactory rating to include in its public file a description of current efforts to improve
its performance . We object to this requirement because it compromises confidentiality. A
bank's plan to improve its CRA performance could contain confidential information about its
strategic business planning that should not be available to the public.
PUBLICATION OF EXAMINATION SCHEDULE AND PUBLIC COMMENTS
The agencies propose to publish a list of banks which are scheduled to undergo CRA
exams in the next calendar quarter. Members of the public would be invited to submit
comments to the agencies regarding the CRA performance of banks on the list. Comments
received prior to the exam would be taken into consideration during the exam . IBAA requests
that the final rule be amended to clarify that only pertinent comments related to the specific
institution under examination and received from members of the bank's own community be
considered during the exam.

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As is the case with " legitimate, bona fide complaints, " small institutions are concerned
that large advocacy groups with agendas not related to the local community or the local bank
will file comments in order to hold a small bank hostage to the CRA process and try to " make
an example" ofthe bank as part of a large advocacy organization's CRA campaign. ( See
discussion, supra, at p. 13.)
COMPOSITE RATINGS
The assessment criteria include terms like " roughly comparable, " " substantial, "
" significant, " " very significant, " " most, " " few , " etc. IBAA recognizes that, in using words of
this nature, the agencies have attempted to balance the need for flexibility against the desire
for certainty and consistency in examinations. We oppose the imposition of fixed ratios.
However, to avoid inconsistent application and to ensure fair and reasonable application of
these terms, the agencies have a responsibility to ensure that examiners receive
comprehensive guidance and training and that bankers understand what is necessary to
achieve a specific rating.
Outstanding Ratings for Small Banks
The proposal is vague about how a small bank electing the small bank assessment
method can achieve an outstanding rating . The agencies must apply criteria for an
outstanding rating so that it is an achievable goal . In assessing whether to assign an
outstanding rating for a small bank, the proposal states that, at the bank's option , the
agencies will take into account its record of making qualified investments and providing
services that enhance credit availability or meet the needs of low- and moderate-income
persons. Flexibility to consider the full range of activities that can enhance credit availability
and promote community development is paramount in order to avoid a presumption that small
banks which meet the six tests are " merely" satisfactory.
All of the activities that we recommend be given appropriate credit in the lending,
investment and service tests for large banks should also be given credit for banks that elect
the small bank assessment method ( e.g., time- or labor-intensive efforts to facilitate lending
to targeted or lower-income borrowers or to community development projects; credit,
borrower or small business counseling; home buyer seminars; low-cost deposit or checkcashing services) . ( See discussion , supra, at pp. 22-23.)

Downgrading to Substantial Noncompliance
The agencies propose to automatically downgrade to " substantial noncompliance" a
bank that would otherwise be rated " needs to improve" if the bank has received ratings of
" needs to improve" on its two previous examinations. IBAA opposes this because it is a
rigid, inflexible provision that fails to take account of the individual circumstances of the
bank . If the bank has been making a good faith effort to improve its performance, but has
not yet been able to achieve the satisfactory level, it should not be penalized and essentially
given a lower rating than it deserves. Arbitrarily downgrading banks in this manner is
especially objectionable if a " substantial noncompliance " rating carries the potential for
enforcement sanctions, as is proposed.

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DATA COLLECTION AND REPORTING
The agencies have proposed significant new data collection requirements . Banks that
do not elect the small bank assessment method would be required to collect and report data
on the geographic distribution of their home mortgage , consumer, small business ( including
small farm ) loan written applications, denials , originations and purchases. The IBAA strongly
opposes this data collection requirement. There is no statutory basis for this requirement. In
fact, the contrary is true . Congress has considered, and rejected several times, small
business reporting requirements of this nature . As part of the FDIC Improvement Act
( FDICIA) , Congress imposed new reporting requirements for small business and small farm
loans as part of the Call Report. The extent of the data collection envisioned by this proposal
goes beyond that required for the Call Report and would be incredibly burdensome and costly,
greatly offsetting any perceived benefit.
Broadening of HMDA Data Collection
The proposal states that institutions not now covered by HMDA would have to collect
and report the summary home mortgage data required under the new rule. In essence, the
agencies are nullifying the statutory exemption from HMDA by regulatory fiat. The IBAA
strongly opposes this extension of the HMDA reporting and the associated burden it will
impose primarily on small banks.
TRANSITION PERIOD
The proposal provides that the data collection and reporting requirements shall take
effect July 1 , 1994, for all institutions that are required under the regulation to collect and
report data. Data collected from July 1 , 1994, though December 31 , 1994, would be
required to be reported to the agencies no later than January 31 , 1995.
The IBAA opposes this time frame for the data collection . It is unrealistic to expect
institutions to be able to assemble the new data and prepare the appropriate reports in the
allotted time frame. At a minimum, the agencies should provide a transition period of six
months from the adoption and publication of the final rule for banks to begin to collect the
data. In addition , banks should have until March 1 to report the previous year's data to the
agencies. This date is consistent with the March 1 filing date for HMDA pursuant to Section
203.5( a) . It is unrealistic to expect banks to file these reports by January 31 in addition to
the numerous other year-end reports institutions are required to file. There is no justification
for this additional burden.
The proposal states that evaluations based upon the new assessment standards could
begin by April 1 , 1995. The IBAA believes that this time frame is unrealistically short . Banks
should be evaluated under the new program beginning at least six months after the
publication of the final rule and the completion of the examiner training. It is critical that the
effective dates be linked to the completion of the examiner training . To do otherwise could
cause banks to be evaluated by examiners who are not knowledgeable on how to assess a
bank under the new rules.
IBAA recommends that the agencies provide for an adequate transition period for
implementation of both the new examinations and reporting requirements. IBAA requests
that, at a minimum , there be at least a six-month transition period from the adoption and

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publication of the final rule and the completion of examiner training prior to applying the new
rules to the industry.
EXAMINER TRAINING
Examiner training will be critical to the successful implementation of this revised rule.
Under the new rule, examiners will be required to exercise a considerable amount of
discretion and judgement. To do this effectively and judiciously, IBAA believes that a
significant amount of training is required.
Consistent and appropriate implementation of CRA depends on how examiners apply
the standards they have been given to work with when they come into the bank. And in
order to apply the standards appropriately, examiners must receive proper training.
In particular, the proposal states that, for streamlined examination , " the burden of the
examinations will be shifted largely from the banks being examined to the examiners. " For
this burden shift to take place, examiners will need to be trained on how to conduct these
examinations without shifting that burden back to the banks. This is critical if the proposal is
to realize the goal of reducing burden on small banks.
The agencies must also take steps to reconcile the conflict that develops between
CRA exams and safety and soundness exams. Too often bankers make what they believe are
good " CRA loans" ( which, in fact, may be favorably cited in a CRA exam) only to have the
safety and soundness examiner later classify the loans. Examiners must be " cross-trained " in
compliance and safety and soundness in order to minimize this situation.
We recognize that evaluation of CRA performance requires examiner judgement. This
is necessary so that examiners can take adequate account of the differences among
communities and the banks that serve them . However, in a review of the proposal, the GAO
noted that there are numerous areas in the proposed regulations where examiners will be
required to use discretion to determine an institution's performance. The GAO concluded
that, in addition to the need for specific guidance " on how and under what circumstances
examiner discretion will be used, " " comprehensive training programs for all examiners will be
important to emphasize the guidelines for using discretion. " 20
IBAA requests that all examiners receive comprehensive training on the new CRA rules
prior to their imposition on the banking industry.
EXAMINATION GUIDELINES
The IBAA requests that the agencies, jointly or independently, publish for public
comment the examination procedures that will be used to implement the revised CRA rule.
We recognize that seeking public comment on examination procedures is not a standard
agency practice; however, the magnitude of change proposed by the revised CRA rules
warrants a departure from usual and customary procedures.
To avoid any unintended consequences from these new standards, and to ensure that
small banks face no additional documentation burdens, the agencies need to take every step
to ensure that the banking industry and examiners are fully aware of how the CRA rule will

20 GAO Letter, p. 10.
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be implemented. Further, by providing the industry the opportunity to comment on the
examination procedures, the agencies have a better chance of ensuring that the rule is
implemented in the correct manner.

APPEALS PROCESS
The IBAA believes that an effective appeals process is very important to the
successful implementation of the revised CRA rule. In general, community bankers are
dissatisfied with the current appeals process. Most bankers are unsure how to pursue an
appeal , while others have expressed concern about the lack of objective decision- makers in
the process.
We offer the following recommendations to help implement an effective and fair
appeals process for the revised CRA rule. Most importantly, the appeals process should
provide a definitive course of action for institutions to appeal a CRA rating without resort to
courts and without fear of retribution from examiners or the agencies. Bankers should know
that a process exists allowing them to dispute an examination conclusion . For example, an
ombudsman specializing in CRA matters could be an effective solution.
OFFICIAL COMMENTARY
The IBAA strongly recommends that the agencies create a commentary to this
regulation. As the agencies have done with other complicated regulations, we believe that a
commentary would provide an ideal vehicle for the agencies to issue official staff
interpretations of the regulation . Good faith compliance with the commentary should afford
institutions protection from enforcement actions.
MISCELLANEOUS
Basis for Assessment
The preamble to the proposal states that the emphasis of the CRA assessment should
be on " evaluating each institution's record in light of its business strategy and community. "
It also states that " the regulations would not require institutions to offer specific loan
products, to make specific loans or investments or to make loans or investments that are
expected to result in losses or are otherwise inconsistent with safe and sound banking
practices. " We wholeheartedly agree with these statements.
We recommend that this language be added to the regulation itself so that it does not
become " lost" in the preamble and ignored when the regulation is implemented . Subsection
( c) of the section entitled " Assessment standards summary" contains only the language
regarding " loans or investment that are expected to result in losses...," etc. This subsection
should be expanded to include the language from the preamble regarding business strategy,
community, specific loan products, and specific loans and investments.
Applicability of CRA to Bankers' Banks
The IBAA requests that the final rule explicitly exempt bankers' banks from the
regulation.

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Affiliates
Because the CRA is specifically aimed at the provision of credit by banks, affiliate
activities should be used to adjust an institution's CRA rating upwards, if the activities of the
affiliate help the institution meet credit needs of the local community ( service area) . Only the
activities of an affiliate in the local community should be used to affect the CRA performance
of an institution.
Many banks are affiliated with entities that provide credit or credit-related services to
the public. The use of affiliates in the lending process is integral to extending credit by many
institutions and should be recognized in the CRA evaluation process. These affiliates can be
related to the bank in several ways. They can be a subsidiary of the bank, a sister entity that
is owned by the bank's holding company, or contractually affiliated . An example of a
contractual affiliate is IBAA Mortgage Corporation , which acts as an intermediary to allow
small banks that do not have the resources to originate and hold mortgages to provide their
customers with access to a mortgage provider. This enhances the ability of the small bank to
provide credit services to its community.
Positive CRA credit is a means of encouraging the use of affiliates, which enhances
the flow of credit to the community. Care must be taken not to do anything that will restrict
the use of affiliates by small banks.
Rebutting the Presumptions
At several places in the proposal, the agencies establish rebuttable presumptions that
a bank will receive particular ratings if it achieves described levels of performance. However,
the proposal is vague about how and when the presumptions can be rebutted. IBAA
recommends that the final rule make clear that a bank can rebut a presumption at anytime
during the examination process and at anytime during any appeal of a CRA rating . We also
request that the final rule clarify that the ability to rebut a presumption is the bank's only and
that others, such as community or consumer groups, do not have the ability to rebut a
presumption in an attempt to lower a bank's rating . The CRA rating ultimately is a matter
between the bank and its regulator. It is the bank that must live with the rating and its
attendant consequences.
Weight of Ratings During Application Process
Pursuant to the CRA statute, a bank's CRA rating is taken into account when an
agency reviews the bank's application for a deposit facility ( e.g., branch, merger, acquisition
or conversion application) . In our view, an outstanding rating should be entitled great weight
in the application process. As proposed , the rule only says that an outstanding rating
" generally...is consistent with approval" and will receive " extra weight. " This is insufficient.
IBAA recommends that the agencies establish a rebuttable presumption that an
outstanding rating will result in approval of the CRA aspect of an application . Under the
rebuttable presumption, the burden should be on any protestant to show that the application
should not be approved on CRA grounds. The rebuttable presumption for an outstanding
rating is appropriate where potential protestants have an opportunity to provide comments to
the agencies during the examination process. It is also particularly appropriate since it
appears that, under the present proposal, an outstanding rating will be difficult to achieve.
Accordingly, a bank that achieves an outstanding rating should be duly rewarded .

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Establishing a rebuttable presumption in favor of an outstanding rating during the corporate
application process is one way to reward outstanding banks. It should also help to reduce or
eliminate the time and costs incurred by a bank that must defend itself against a frivolous
protest.
REGULATORY FLEXIBILITY ACT
The proposed rule gives small banks three options with regard to CRA evaluation . One
of these options could result in a significant economic impact and the other two options will
result in a significant economic impact on small banks. Therefore , we believe that a
regulatory flexibility analysis must be conducted by the agencies before a final rule is
adopted.
A " significant economic impact " could be imposed under the alternative assessment
method when a small bank fails to meet one or more of the criteria necessary for receipt of
the presumption of " satisfactory. " The resulting economic impact should be examined
because the agencies have provided no basis to conclude that a " substantial number" of
small banks will not be affected in this manner.
The next option available to a bank under the proposed rule is to adopt a CRA
strategic plan. Doing so could be costly and, therefore, could have a significant economic
impact on any bank that chooses this option . The agencies have provided no basis to
conclude that there will not be a " substantial number" of small banks that will avail
themselves of this option, thereby suffering a " significant economic impact. "
The final option for small banks is to be assessed under the " lending test. " It is clear
that use of this test will impose a " significant economic impact " on any entity that uses it.
It would appear that the agencies have merely assumed that all small banks will use
the " alternative assessment method" and that they will meet the presumption of
" satisfactory" performance when making the Regulatory Flexibility Act certification . In view
of the foregoing, the assumption is unwarranted and the analysis needs to be conducted .
CONCLUSION
IBAA strongly supports a tiered system for CRA with streamlined examination
procedures for small banks. A tiered system will recognize the very real differences in the
circumstances under which large and small banks operate. IBAA commends the agencies for
proposing a streamlined CRA examination system . We greatly appreciate the agencies'
concern, evidenced in the proposal, about the ever growing and crushing regulatory burden
that community banks face. A tiered system with real regulatory relief for community banks
will allow them to return their focus to what they do best--serving their communities.
We appreciate this opportunity to comment and would be pleased to discuss any parts
of this letter in further detail.

Sincerely,
Shivers
John
John Shivers

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November 15, 1994

Mr. Robert E. Feldman
Acting Exec. Secretary

Subject: CRA Regulatory Proposal - Comments
Dear Mr. Feldman:
We are pleased that the regulators chose to reconsider their December 1993
proposal on CRA in regard to the concerns which were raised by the banking
community. Of significance was that the 60% loan to deposit ratio was
dropped since it could have encouraged banks to unwisely relax lending
criteria and to the extent that examiners are going to make more of an
attempt to emphasize performance rather than documentation is a vast
improvement over the existing system.
There are areas in the new proposal which give pause for concern. The
collection of data concerning the race, gender and ethnicity of commercial
borrowers would be overly burdensome and expensive for banks. Further,
there is no foundation in the Community Reinvestment Act itself mandating
the collection of such data, therefore this aspect of the proposal exceeds the
scope of the law. Additionally, requesting and collecting this kind of data
may not stand a legal challenge under Regulation B, the Equal Credit
Opportunity Act, as it now stands. Finally, it is unclear how this data will be
used or to what standard it will be compared to, to judge compliance.

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The proposal is unclear as to how a bank is to determine if a business is
minority owned
. For example, in the case of an interracial couple ( or even a
Caucasian husband and wife) , how would that business be classified? Other
areas ofconcern regarding the CRA regulatory proposal are as follows:
Under the lending test, " an institution would be evaluated based on the
number, amount, complexity and innovativeness of its community
development loans" . This language is vague at best and open to broad
interpretation by examiners. It also leaves unclear how this definition will fit
in with prudent lending standards.
Defining a bank's " Service Area" becomes ambiguous and unclear. Previous
definitions have relied upon where a bank collects deposits ( which appears to
be the intent of the Act itself) . However, this proposal requires those
geographies in the local areas where deposit taking ATM's are located and
other geographies equi- distant from its branches and ATM's, which confuses
the delineation of trade areas. The newly proposed definition relies almost
exclusively on where a bank makes its loans, but the tracking of loans by
census tract raises customer privacy concerns. If a bank has only one or two
loans in a single tract, it may be relatively easy for an outsider to ascertain
the identity of an applicant or borrower.
The Tier system is extremely important and, while the threshold of $ 250
million is considered realistic, it should be increased to a level which is more
indicative of the market that most independent community banks lend
themselves to which are community based loans. Stratification by asset size
is an unfair measure. A $ 500 million bank in Madison, Wisconsin is a large
bank; while a $ 500 million bank in the New York metropolitan area is a
small bank. Perhaps utilizing SMSA data to include or exclude banks from
the streamlined examination would be more appropriate.
The appropriate threshold should probably be $ 500 million and even more.
As a $ 460 million bank within the greater metropolitan area of New York
City, we are still engaged in small business lending and will be unfairly
burdened by having to gather race and gender coding of small business loans.
We therefore find ourselves put in a class with multi billion dollar
organizations who are the predominant banks that we compete against.
If a bank inadvertently violates the spirit of CRA, is it a criminal offense or a
civil matter with penalties and cease and desist orders? Allowing the
imposition of civil money penalties as a result of a poor CRA examination is
without statutory authority and should not be considered.
Under the proposed CRA, it will be extremely difficult to legislate equity for
all borrowers who will have to be qualified within the parameters that are

2

422

prescribed by regulation. There will be no advantage as to whether a
customer borrows from a local community bank or a megabank since
everyone will be judged by the same standards. The personal relationships,
personalities and affinities that make each institution different will no longer
exist since the discretion will be taken away from the lender. This is the
reverse of what we had during the era of Regulation Q where banks were
governed by regulation as to deposits. The industry fought for deregulation
and the beneficiary, ultimately, has been the consumer. Consequently, after
deregulating liabilities, we want to put a hammerlock on assets.
In a recent speech by Federal Reserve Chairman, Greenspan entitled: " New
Horizons for the Basic Business ofBanking" , given at the American Bankers
Association National Convention in New York, Chairman Greenspan
highlighted why the regulation of assets does not work. One of the issues
that he raised was that risk-based loan pricing would reduce the " sometimes
disruptive rationing of credit that occurs especially during economic
downturns" . Chairman Greenspan goes right to the heart of the reason why
we are losing business to other financial intermediaries- not only on the
commercial side, but on the consumer side. In his speech, the Chairman said
as follows: " Banks are inviting competitive incursions by offering only one
interest rate per facility for borrowers of widely varying risk. A single
interest rate for credit, or even two or three rates, suggests that some
individual borrowers are being overcharged in relation to their riskiness and
some are being undercharged. Indeed, informed observers say just that. The
highest quality borrowers are being charged loan rates that are higher than
actual loss experience indicates; meanwhile, the riskiest borrowers probably
are not being charged sufficiently high rates to cover their significantly
higher risk of default and loss in the event ofdefault" .
Under Regulation B, it is very difficult, if not impossible, to vary your
interest rate according to the quality of the credit. We are forced to charge
interest on " a one size fits all" basis for a customer, whether or not he is a
good credit or a marginal credit. If the rate for a 10 year consumer credit
home equity loan is 8%, that 8% applies to both the good and the marginal
customer. While we may try to justify rate differences, it is still subject to
examiner criticism. On the other hand, competing companies such as Money
Store, Beneficial Finance and Champion Mortgage, can vary their rates
based upon the grading of the credit quality.
There is, for a similar
maturity, " A" , " B" , " C" and even " D" paper and the rates charged could run
anywhere from 8% to 16%. Not being subject to the same regulatory
requirements, these institutions are not only able to provide a service to the
community, but they are taking all of our business. This is also one of the
areas where we lost out to automotive financing because we could not
discriminate on rates nor have we had the flexibility.

3

423

Under the Fair Lending Policy Statement on disparate treatment and
disparate impact, it appears that to risk price loans could have a " disparate
effect on borrowers from a protected class" ; and that the bank would have to
provide a credible and legitimate non - discriminatory explanation .

Chairman Greenspan's speech, clearly makes a case that Fair Lending and
the revised CRA can't work since it will create a disadvantage to consumers
whose credit accommodation would have been granted on a judgmental basis
and, in the end, affect the competitiveness and profitability of banks as well.

Very truly yours,

Anthony S. Abbate

ASA:gh

424

REGULATORY BURDEN

The Cost To

COMMUNITY BANKS

A STUDY PREPARED FOR THE
INDEPENDENT BANKERS ASSOCIATION OF AMERICA

By
GRANT THORNTON

January 1993

IBAA
ASSOCIATION OFAMERICA

GrantThornton &
Accountants and
ManagementConsultants
The U.S. MemberFirm of
GrantThornton internationa

425

PREFACE

This study was prepared for the Independent Bankers Association of America ( IBAA) by Grant Thornton.
The IBAA is the only national trade association that exclusively represents the interests of the nation's
community banks.

Grant Thornton is an international accounting and consulting firm , providing audit, tax and consulting
services through 47 offices in the United States and operations in 70 countries worldwide. The firm has an
extensive financial institution practice consisting primarily of commercial banks and thrifts.
The principal authors were M. Scott Reed , Audit Partner and Chairman of the National Financial Institutions
Industry Service Committee; M. Molly Curl , Financial Institutions Management Consulting Senior Manager:
Denese C. Olson, Audit Manager specializing in financial institutions ; and John C. Koegel , National Director
of Marketing Research. Howard Groveman, National Director of Accounting and Auditing , participated
significantly in the study's preparation .

Other individuals making important contributions were Lori

Applegate, Raymond Wiggins, Judy C. Foster, Allison Fitzpatrick and Kathy Sbragia. Margaret H.
McCullough, Ph.D. , contributed as a consultant in the areas of statistical analysis and evaluation.
The IBAA provided significant input into the design of the study, including the surveys. The IBAA staff also
provided suggestions as the study progressed through its three phases. We appreciate the cooperation and
courtesies extended to the Grant Thornton staff by the IBAA staff , and also by the banks that participated
in the field cost studies, as well as those that took the time to complete the surveys , for without their
assistance this study could not have been completed.

IBA Gran: Thornton Study

426

TABLE OF CONTENTS
EXECUTIVE SUMMARY
Survey Design

1

7
7

Phase II- Field Cost Studies
Selection of Regulatory Areas for Study

11 10

14
18
222

Estimated Annual Compliance Cost Per Bank
Estimated Annual Compliance Cost for All Community Banks
Phase III- National Cost Survey
The Sample
Evaluation of Methodology

10
10
11
13

2295

32
36
Appendix ( provided separately)
A
National Opinion Survey
Cost Identification Model
B
C

National Cost Surveys

Exhibits ( provided separately)
Analysis ofthe National Opinion Survey of Community Banks

IBAA/GrantThornton Study

427

REGULATORY BURDEN
The Cost To
COMMUNITY BANKS

A STUDY PREPARED FOR THE
INDEPENDENT BANKERS ASSOCIATION OF AMERICA
BY
GRANT THORNTON

EXECUTIVE SUMMARY

BACKGROUND
The commercial banking industry is increasingly concerned about the mounting level of regulatory burden
affecting the operations of banks. Bankers have repeatedly voiced their concerns over escalating regulatory
requirements.
Community banks account for more than 80% of the commercial bank charters in the United States. Such
banks are significantly affected by the increasing level of regulatory burden . Furthermore, community
bankers believe that their ability to serve the needs of their local communities is hampered by the growing
regulatory burden.

In May 1992, the IBAA retained Grant Thornton to initiate a study of the impact of regulatory burden on
community banks. The study was conducted in three phases.
Phase I - National Opinion Survey of Community Banks ( June 1992)

The study's overall objective was to determine and document the cost ofcompliance with regulatory areas
deemed most burdensome by community banks. We believe the approach used and described in this study
effectively determined such costs.

BAA Gran: Thornton Study

1

428

SCOPE

The study focused on thirteen regulatory areas , with the objective of determining and documenting the cost
of complying with these specific rules. The study DOES NOT EXTEND to all of the other banking regulatory
requirements. The projection and estimation of the industry cost of these specific regulatory areas are
based ONLY ON COMMUNITY BANKS, as defined by the IBAA, and not on the U.S. banking industry as
a whole. In addition, this study did not consider any of the additional regulatory requirements imposed by
the Federal Deposit Insurance Corporation Improvement Act of 1991 .
The universe of community banks was determined by the IBAA to include 84% of commercial banks. IBAA
defines community banks as locally owned and operated institutions. These banks ranged in asset size from
less than $ 1 million to almost $ 5 billion. The average asset size of the community banks was $ 82 million
and the mean asset size was $ 42 million.
The breakdown of all U.S. banks as of September 30, 1992, is as follows:

Community
Banks
Numbers of Banks
Total Assets ( in thousands)

$

Banks
Not
Included
In Study

Total
Commercial
Banks

9.682

1.853

11.535

821.679.159

$ 2.505.730.286

$ 3.327.409.445

METHODOLOGY

Phase I
Phase I of the study used written questionnaires to obtain the community bankers' opinions about the
regulatory areas which are most costly. Phase I identified thirteen regulatory areas as most costly, or
aggravating and burdensome.

2

IBAA/Grant Thornton Study

429

Phase II
To more fully understand and document the cost of compliance with these regulatory requirements. in Phase
Il Grant Thornton senior personnel performed field cost studies at nine representative community banks
Extensive interviews of bank employees were conducted and Grant Thornton's cost identification model was
utilized to measure compliance costs in the following five categories:
1.
2.
3.
4.
5.

Direct Employee Hours
Direct Employee Compensation
Direct Employee Benefits
Direct Third Party Expenses
Associated Operating Overhead ( Exclusive of FDIC insurance assessments)

The results were then projected to the entire community bank population.
The FDIC insurance assessments were excluded from operating overhead because it was considered
inappropriate to allocate this direct cost as a factor for the thirteen studied regulatory areas.
Phase III
The field cost studies were then used to develop thirteen separate surveys covering each of the thirteen
regulatory areas. Each survey was sent to 200 community banks randomly selected from the IBAA's data
base of approximately 9,700 community banks; in total 2,600 banks received the survey. The survey
collected direct employee compliance hours and determined the annual compliance dollars based upon the
cost per employee hour determined in Phase II . The survey results were first aggregated for each asset
category, then weighted by the total assets of the community banks within the category to yield a composite
total . These surveys, along with the field cost studies, then formed the basis for estimating the annual
compliance cost for the thirteen regulatory areas. The data were divided into three asset-size categories.
Phase III also asked banks to rate regulations for redundancy, necessity and inefficiency. The respondents
were asked to distinguish between those regulations that were necessary for safety and soundness or
prudent banking and those that were not. Each of the thirteen regulatory areas was then graded on a
" RUIN" scale.

IBAA Gran: Thornton Study

3

430

FINDINGS
The composite annual compliance hours and cost estimated by the national cost survey are as follows
ESTIMATED ANNUAL COMPLIANCE COSTS

Annual Compliance
Hours
Cost
Community Reinvestment Act - Regulation BB
Truth in Lending Act - Regulation Z
Formal Written Policies
Loans to Insiders - Regulation O
Equal Credit Opportunity Act Regulation B
Real Estate Settlement Procedures
Call Reports
Appraisal Requirements
Bank Secrecy Act
Geocoding-Geographic Loan Coding
Expedited Funds Availability Act · Regulation CC
Home Mortgage Disclosure Act - Regulation C
Sum Of All Studied Regulations

14.424.380
6.829.165
3,174,803
5,483,790
1.898.145

$

584,128.349
326.254.089
323.879.398
300.437.736
233.759.476
106.821.882

5,160.636
1.624,764
1,613.098
1,100.663
2.083.003
1.777.882
1,917,889
420.939
47.509.157

1.032.466.852

$

94.107.924
65.399.930
59.660.479
56.789.106
47.644.344
17.473.692
3.248.823.257

The annual cost to community banks for complying with the thirteen regulatory areas is estimated to be nearly 48
million employee hours or approximately 22,800 full-time employees. The estimate of annual compliance hours was
determined based on statistical analysis of the survey responses for the individual regulatory areas and contains an
error rate of ± 5%. Community banks ' annual compliance cost for the thirteen regulatory areas is estimated at $ 3 2
billion.

These costs were analyzed in relation to total assets, equity capital, net income before tax.
Cost associated with each:
3,954
$
$ 1 Million of total assets
$ 45,186
$ 1 Million of equity capital
0.24
$
Dollar of net income before income taxes

BAA Grant Thornton Study

431

COMMUNITY REINVESTMENT ACT
The study identifies Regulation BB, the Community Reinvestment Act ( CA) , as the most burdensome
regulation . The total annual cost to community banks for this regulation is approximately $ 1 billion and
approximately 14.4 million employee hours or 6,900 full-time employees . CRA compliance costs
community banks $ 1,256.53 for each $ 1 million in total assets and approximately $ 0.08 for each dollar of
net income before taxes . The estimated cost of complying with CRA exceeded the next most burdensome
regulation by approximately $ 448 million or 77%.

TRUTH IN LENDING
Regulation Z, Truth in Lending , was the second most expensive regulation , costing approximately $ 584
million and requiring 6.8 million employee hours or approximately 3,300 full-time employees per year.
Truth in Lending compliance costs community banks $ 710.90 for each $ 1 million in total assets and
approximately $ 0.04 for each dollar of net income before taxes .
COMPLIANCE COST FOR SMALLER BANKS
The study reveals that smaller banks face the highest compliance cost in relation to total assets , equity
capital and net income before taxes . For each $ 1 million in assets, banks under $ 30 million in assets incur
almost three times the compliance cost of banks between $ 30-65 million in assets . This increases to
almost four times when compared to banks over $ 65 million in assets . These findings are consistent for
both the equity capital and net income measurements.
VALUE AND EFFECTIVENESS OF REGULATORY AREAS

. ‫כ‬
z

The IBAA RUIN Scale is used to reflect the value and effectiveness of the regulatory areas included in the
study in four categories:
R
Redundant ( a regulatory area that asks for information that can be obtained from quarterly
bank Call Reports or from other existing sources) .
U
Unnecessary ( a regulatory area for which there is little perceived need) .

N

Inefficient ( a regulatory area that could be streamlined ) .
Necessary ( a regulatory area that is vital to the ongoing health and well-being of the
nation's banking system ) .

The higher the RUIN scale rating , the more favorable banks perceive a given regulatory area . In our study,
community bankers gave the highest ( i.e. most favorable) marks to regulatory examination and Call
Reports; at the same time, they gave the lowest marks to CRA.

BAA Grant Thomton Study

5

432

CONCLUSIONS
The results of the IBAA/Grant Thornton study on regulatory burden revealed that the annual cost for community
banks to comply with the thirteen studied regulatory areas is estimated at $ 3.2 billion , requiring 48 million estimated
annual compliance hours. Translating these hours into full-time equivalent employees, approximately 22.800
employees must dedicate their time to complying with these thirteen regulatory areas. The cost of complying with
the thirteen regulatory areas when expressed as a percentage of net income before taxes is a staggering 24%.
These numbers apply only to the universe of community banks, ( 9,682 banks ) . If the data is extrapolated to cover
all U.S. commercial banks , the cost is estimated at $ 11 billion for the thirteen regulatory areas.
This study substantiates the report by the Federal Financial Institutions Examination Council ( FFIEC) issued in
December 1992 , which concluded that " available evidence suggests that the annual cost of regulatory compliance
may be as high as $ 17.5 billion" . The FFIEC study also found that regulatory burden is greater for smaller banks.
Extrapolating the IBAA/Grant Thornton cost data to all U.S. commercial banks, it is clear that the FFIEC estimate
is low.

The study confirms the FFEIC finding that compliance burden significantly increases as the bank size decreases ( as
a percentage of total assets) . The relationship of cost to assets, equity and income is lower for larger banks. This
trend is consistent through the three asset size categories. The mean community bank in the IBAA data base has
assets of $ 42 million and an estimated 20 full-time equivalent employees. The annual cost for compliance is
estimated at approximately $ 178 thousand , requiring 3,137 compliance hours and 1.5 full-time employees , or 7.5%
of such banks' full-time work force. This is particularly significant since smaller banks are exempt from some
compliance requirements.
The cost for community banks of complying with the Community Reinvestment Act is estimated at $ 1 billion annually.
with compliance hours totaling more than 14 million . This high cost is directly attributed to the level of employee
involvement in CRA compliance . Truth in Lending is the second most costly regulation in both costs and hours.
probably because a large portion of community banks' lending is consumer-based, thus increasing related
compliance costs.
This study provides significant evidence that the regulatory burden imposed by only the thirteen regulatory areas
studied is enormous, both in terms of annual dollar costs and compliance hours. An overwhelming portion of
community bankers' time, and of the personnel and earnings of the banks' are being directed toward compliance
activities.

IBAA Grant Thornton Study

6

433

PHASE I - NATIONAL OPINION SURVEY

SURVEY DESIGN

The study commenced in June 1992 when approximately 10.000 community banks received the national
opinion survey. The survey was organized into the following eight categories:
•
Regulatory Reports
•

Lending-Related Regulations
Other Consumer Protection Regulations
Supervisory Policies
Informational Reporting

•
•
•

Safety & Soundness
Each of these categories listed five to eight individual regulations or regulatory areas for bankers to rank in
order ofthe most costly to their bank. In addition, we asked bankers to rank the same items based upon
the level of aggravation to their bank ( aggravating was not defined) . Finally, the bankers were to list,
regardless of category, which five regulatory items they considered the most costly and the most
aggravating to their bank.
THE RESPONSE

Over 20% of the community banks responded to the survey, representing a strong cross section of all
community banks. Of the more than 2,100 responses received, 1,915 were usable and tabulated in the
overall results. The following represents the profile of the respondents:
Type of community served:
1.385
72.32%
Rural
Suburban
300
15.67%
192
Urban
10.03%

•

Approximate population of the community served :
· Under 5,000
· 5,000 - 14,999
15.000 24,999
25,000 - 49,999
- 50,000 - 99,990
100,000 or more

IBAA Grant Thornton Study

957
342
147
137
97
197

49.98%
17.86%
7.68%
7.15%
5.07%
10.29%
7

434

·

Type of organizational structure:

·

•

a holding company
One-bank holding company
Chain bank
Multi-bank holding company

Total asset size:
. Under $ 25 million
· $ 25 million to $ 49 million
· $ 50 million to $ 99 million
· $ 100 million to $ 149 million
- $ 150 million to $ 199 million
· $ 200 million to $ 499 million
$ 500 million or more

•

Number of full-time employees:
Under 10
· 10-24
· 25-49
· 50-99
100 or more

655
1.007
22
192

34.20%
52.58 %
1.15%
10.03%

526
546
486
160
67
86
11

27.47%
28.51 %
25.38%
8.36%
3.50%
4.49%
0.57%

352
714
467
223
130

18.38%
37.28%
24.38%
11.64%
6.78%

673
490
288
212
189

35.14%
25.58%
15.03%
11.07%
9.86%

548
1.141
161
23

28.61 %
59.58%
8.40%
1.20%

Principal lending focus:
Agribusiness
Real estate
Commercial
Retail
Other
Primary Federal Regulator:
Office of the Comptroller of the Currency
Federal Deposit Insurance Corporation
Federal Reserve Bank
Office of Thrift Supervision

Responses were received from banks located in all fifty states.
IBAA Gran Thornton Study

8

435

The ten most burdensome regulations . as ranked by the respondents are as follows:

1

Community Reinvestment Act

3.

Real Estate Settlement Procedures Act

4. Appraisal Requirements
6. Bank Secrecy Act
7. Call Reports
8. Formal Written Policies
9. Loans to insiders; lending limits

The rankings were different for various size banks.
Exhibit A to this report presents a detailed analysis of the survey responses.

IBAA Grant Thornton Study

9

436

PHASE II - FIELD COST STUDIES

SELECTION OF REGULATORY AREAS FOR STUDY

Phase II involved visits to nine community banks selected by the IBAA. The results of Phase I formed the
basis for selecting the regulatory areas included in field cost studies. To accommodate the top ten concerns
of all size banks, the list was broadened to include the top thirteen regulatory areas. The following
regulatory areas were selected for such analyses:
1. Call Reports

Community Reinvestment Act - Regulation BB

13. Formal Written Policies
BANKS INCLUDED IN THE FIELD COST STUDIES
The IBAA selected nine banks from its membership that were believed to be representative of both the
IBAA's membership and community banks as a whole. All of the banks were believed to have a solid
compliance orientation. The banks ranged in assets from $ 16 million to $ 221 million , equity from $ 1.2 million
to $ 16.6 million, and had reported net income ( before taxes) ranging from $ 18 thousand to $ 1.8 million.
These ranges and other data are based upon the reports of the individual banks for their most recent fiscal
years. Other sample profile data for the nine banks are as follows:

Aggregated totals
Assets
Equity
Net Income ( before taxes)
Total Full-Time ( or equivalent) Employees
IBA Gran: Thornton Study

$
$

$

567,200.000
.49.300.000
6.516.000
373

10

437

Averages
Assets
Equity
$

$

Net Income ( before taxes)

S

•

63.000.000
5.500.000
724.000
41

Primary Federal Regulator

4
1
•

4 2 3

Banking Location
Rural
Urban
Suburban
COST IDENTIFICATION METHODOLOGY

The annual costs of complying with the identified regulatory areas were accumulated within the following
five categories:
1.

2.
3.
4.

Direct Employee Hours.
Direct Employee Compensation.
Direct Employee Benefits.
Direct Third Party Expenses.

5.

Associated Operating Overhead ( Exclusive of FDIC insurance assessments) .

Inquiry of the Chief Operating Officer ( COO) was used to identify the employees associated with each
regulatory area. Prior to commencing our field visits, we developed a Grant Thornton Cost Identification
Model ( Appendix B) which encompassed the expected processes and steps an individual bank's employees
would follow in complying with the regulatory areas . The identified time did not include " start up" cost for
compliance with the regulatory area, but did include the time necessary to deal with the amendments and
modifications to the regulatory area.
When regulatory compliance costs were transaction-based , such as those pertaining to expedited funds.
appraisal requirements or Truth in Lending, we determined a time allocation for each transaction by
interviewing the employees involved.
IBAA Grant Thornton Study

11

438

Direct employee compensation was determined by using actual compensation levels .
rates . either by specific individual or pertinent operating area.

^ ed to hourly

Direct employee benefits were calculated based on the percentage of total salary devoted to each bank's
total benefits . This percentage was then applied to the direct employee compensation cost to arrive at the
direct employee benefit cost.

Direct third party costs include the cost of such items as computer software to assist in Call Report
preparation , training manuals or outside training courses . These costs were individually studied and
aggregated for each regulation.
The operating overhead allocation factor was determined based on the ratio of each bank's adjusted
operating expenses to total salary cost. Adjusted operating expenses were determined by reducing the
bank's operating expenses by the following:

1.
2.
3.
4.
5.

Direct third party costs.
Board of directors fees.
FDIC insurance assessments.
Acquisition cost amortization.
Any other cost determined to be clearly unrelated to regulations.

The FDIC insurance assessments are not included in the overhead allocation. The FDIC insurance
assessment is a direct cost of maintaining deposit insurance. It is not appropriate to include this assessment
as a cost allocation factor for the thirteen studied regulatory areas.
The factor determined by the foregoing method was applied to the direct employee salary costs to arrive
at the overhead allocation.

At the completion of all preliminary field cost studies the following additional steps were taken to help assure
the reliability of the results:
1.

The results for each individual regulatory area for all field tested banks were compared. Any
significant variations were investigated and the results were revised if necessary.

2.

The completed cost identification model for each bank was provided to the bank's COO. All
questions or concerns identified were investigated and adjustments were made if necessary.

IBAA Grant Thornton Study

12

439

SUMMARIZED RESULTS
The results of the study have been stratified into three categories based on the banks total assets An
overview of the average annual compliance costs for the thirteen regulatory areas studied is presented in
the following table:
AVERAGE ANNUAL COMPLIANCE COST
Total Assets
Between
30-65 MM

Under
30 MM
Employee Related Costs:
Compliance Hours

5.326

2,820

Salary Cost
$

45,446
12,458

$

90,835
22,938

$

Total Cost

118,551

$

253,788

Overall
Averages

10,331
$

6.159
$

218,469
56,202

37.434
222.507

22,892
117.123

22.883
37,764

Direct Third Party Costs
Overhead Allocation

Over
65 MM

$

534.612

118.250
30.532

$

27.737
125,798
302.317

An overview of the analytical comparisons of the field test banks for each category is presented in the
following table:
ANALYTICAL COMPARISONS
STATED IN PERCENTAGES
Under
30 MM

Total Assets
Between
30-65 MM

Over
65 MM

Overall
Averages

Total Compliance Cost as a Percentage
of:
Total Assets
Equity Capital
Net Income before Taxes

0.55 %
5.45 %
33.27 %

0.68 %
7.09 %
39.37 %

0.41 %
4.87 %
25.08 %

0.47 %
5.34 %
28.25 %

Compliance Salary Costs as a
Percentage ofTotal Salary Costs

13.49 %

16.22 %

13.33 %

13.99 %

Percentage of Equivalent Compliance
Employees to Total Equivalent
Full-Time Employees

8.84 %

13.13 %

5.56 %

7.15' %

IBAA Grant Thornton Study

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440

ANALYTICAL COMPARISONS
STATED IN HOURS AND DOLLARS

Total Assets
Between
30-65 MM

Under
30 MM

Over
65 MM

Overall
Averages

Compliance Hours associated with each:

Compliance Cost associated with each:
$ 1 Million of Total Assets
$ 1 Million of Equity Capital
Dollar of Net Income before
Taxes

132
1,296

143
1,487

79
941

94
1,074

0.008

0.008

0.005

0.006

$ 5,540
$ 54,479

0.33'
$

6,798
70,869

$
$

$

0.39'

$
$

4,102
48,710
0.25'

$

4,670
$ 53,369
$

0.28'

'Income has been annualized for computational purposes.
These tables illustrate that banks in the $ 30-65 million asset size face the greatest burden in proportion to
their assets, capital and income.
Various other studies have used noninterest expense to project overall compliance cost to the banking
industry. We believe the use of that approach results in less consistent results due to the variability in this
expense category. The other categories are significantly more consistent over a period of time.
ESTIMATED ANNUAL COMPLIANCE COST PER BANK

The average cost per compliance hour was computed for each category by regulatory area. These rates
were applied to the average compliance hours determined by the field cost studies. An overview of the
estimated annual compliance cost on a per bank basis for each category is presented in the following table:
Estimated Annual Compliance Cost Per Bank - Phase II

Under
30MM

Total Assets
Between
Over
65MM
30-65MM

Composite

Community Reinvestment Act - Regulation BB

- Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
IBAA/Grant Thornton Study

$

$

521
13,089 $
3,693
9,101
9.801
35.684 $

799
17,662 $
4,339
4,042
20.971
47.014 $

1.424
42,404 $
11,771
10,819
42.654
107.648 $

915
24,385
6,601
7,987
24.475
63.448
14

441

Estimated Annual Compliance Cost Per Bank - Phase II . continued
Under
30MM

Total Asets
Between
Over
65MM
30-65MM

Composite

Expedited Funds Availability Act - Regulation CC
581
- Compliance Hours
5.170 $
$
- Salary Cost
1.117
- Employee Benefits
429
- Direct Third Party Cost
4.881
- Overhead Allocation
Total Cost
$
11,597 $

2,219
19,929 $
5,307
1,368
28.776
55,380 $

2.954
36.614 $
10.534
1,184
35.236
83.568 $

1.918
20.571
5.653
994
22.964
50.182

Regulatory Examination Process
Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

730
11,630 $
3,163
1,069
10.413
26.275 $

455
19,741 $
4,953
7,893
24.389
56.976 $

498
25,560 $
4,236
4,493
25.769
60.058 $

561
18,977
4,117
4,485
20.190
47.769

66
787 $
241
8,192
703
9.923 $

450
6,919 $
1,865
6,421
10.225
25.430 $

1,410
26,496 $
7,332
12,677
28.383
74.888 $

642
11.400
3.146
9.097
13.104
36,747

298
4,681 $
1,247
472
3.962
10.362 $

375
7,800 $
2,031
39
10.483
20.353 $

1,129
32,902 $
8,258
783
33.027
74.970 $

601
15.128
3.845
432
15.824
35.229

48
796 $
239
0
626
1.661 $

113
2,392 $
594
208
2.895
6.089 $

811
15,478 $
4,186
181
17.371
37,216 $

324
6.222
1.673
130
6.964
14.989

Truth in Lending Act - Regulation Z
- Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

$

$

$

$

FormalWritten Policies

- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

$

$

Equal Credit Opportunity Act - Regulation B
- Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

BAA Grant Thornton Study

15

442

Estimated Annual Compliance Cost Per Bank - Phase II - continued

Under
30MM
Appraisal Requirements
Compliance Hours
Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

$

$

Total Assets
Between
Over
30-65MM
65MM

Composite

188
4,373 $
1,305
167
3.202
9.047 $

228
4.421 $
1.121
115
5.425
11,082 $

278
8,638 $
2,285
57
9.136
20.116 $

231
5.811
1.570
113
5.921
13.415

130
1,102 $
291
256
1.028
2.677 $

268
3,307 $
831
234
4.082
8.454 $

757
9,313 $
2,706
274
9.029
21.322 $

385
4.574
1,276
254
4.713
10,817

175
2,242 $
679
2,772
1.781
7.474 $

99
2,591 $
441
1,874
2.836
7.742 $

234
4,525 $
1,179
2,510
4.520
12.734 $

169
3,119
766
2,385
3.046
9.316

22
522 $
171
233
406
1.332 $

116
3,668 $
851
83
4.048
8.650 $

44
4,531 $
315
83
5.027
9.956 $

61
2.907
446
133
3.160
6.646

26
495 $
140
110
454
1.199 $

134
1.212 $
305
0
1,533
3.050 $

435
5.332
1,542
833
5,235
12.942 $

198
$ 2.346
662
314
2.408
5.730

Bank Secrecy Act
$

- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
Call Reports
$

- Salary Cost
Employee Benefits
Total Cost
Loans to Insiders - Regulation O
- Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
Geocoding-Geographic Loan Coding
- Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

IBAA Grant Thornton Study

$

$

$

$

16

443

Estimated Annual Compliance Cost Per Bank - Phase II - continued

Total Assets
Between
Over
65MM
30-65MM

Under
30MM
Real Estate Settlement Procedures
Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

$

Home Mortgage Disclosure Act - Regulation C
Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
$
Total Cost
Sum Of All Studied Regulations
- Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

Composite

33
522 $
159
82
472
1,235 $

33
521 $
134
602
662
1.919 $

172
3.845 $
1.047
3.457
4,358
12.707 $

79
1.629
447
1.380
1.830
5.286

37 $
13
0
35
85 $

35
671 $
167
13
798
1,649 $

185
2,831 $
811
83
2,762
6.487 $

74
1,180
330
32
1,198
2.740

2,820
45,446 $
12,458
22,883
37.764
118,551 $

5.324
90,834 $
22.939
22,892
117.123
253.788 $

10.331
218.469 $
56,202
37,434
222,507
534.612 $

6.158
118.249
30.532
27.736
125.797
302.314

PROJECTED ANNUAL COMPLIANCE COST FOR ALL COMMUNITY BANKS

The projected annual compliance cost for all community banks was based on a relationship to total assets.
The determination was made on a regulation basis by multiplying the total assets for U.S. community banks
( 9.682) for that category bythe estimated annual compliance hours. These values were then weighted and
combined to yield the projection of annual compliance cost. The number of banks and total assets were
provided by IBAA from the Sheshunoff Call Report information as of September 30, 1992.
An overview of the projected annual compliance cost for all community banks for each of the categories is
presented in the following table:

IBAA Grant Thornton Study

88-882 - 95 - 15

17

444

Projected Annual Compliance Cost For

Under
30MM
Community Reinvestment Act - Regulation BB
1,465,274
-Projected Compliance Hours
-Salary Cost
$ 36.809,401 $
10.388.003
25.596.858
27,564,921

Total Assets
Between
Over
30-65MM
65MM

Composite

3.016.996
66.691.946 $
16.380,478
15.266,831
79,181,708

6.779,865
201,919,087 $
56.033.477
51,503,639
203,098,086

11.262.135
305.420.434
82.801.958
92.367.328
309.844,715
790.434.435

Expedited Funds Availability Act - Regulation CC
8.378.854
1.634.034
-Projected Compliance Hours
-Salary Cost
$ 14,540,797 $ 75,248,702 $
20,045,645
-Employee Benefits
3,141,679
1,203,708
5,159,428
13.728.294 108.658.111
$ 32.614.478 $ 209.111.886 $

14,064,217
174,305,690 $
50,138,482
5,646,785
167,790.169
397.881.126 $

24.077.105
264.095.189
73.325,806
12,009,921
290.176.574

2.053.045
1.718.118
32,710,774 $ 74,543,862 $
8,895,405
18,706,449
3,009,271
29,800,629
29.286,224
92.094.374
73.901.674 $ 215.145.314 $

2.371.029
121,685,104 $
20,167,088
21,408,139
122.677.945
285.938.276 $

6.142.192
228,939,740
47,768,942
54.218.039
244.058.543
574.985.264

185.612
2,214,823 $
680,095
23,038,978
1.980.100
27.913.996 $

1,699.228
26,121,365 $
7,048,398
24,246,491
38.611,127
96.027.381 $

6.712,848
126,152,890 $
34,935,601
60,377.158
135.150.513
356.616.162 $

8.597.688
154,489.078
42.664.094
107.662.627
175.741,740
480.557.539

838.082
13,162,551 $
3,508,810
1.330.098
11.140.321
29.141.780 $

1.416.023
29,448,209 $
7.668,658
140,968
39.583.806

5,374,994
156,620,705 $
39,341,334
3,723,155
157.241.231

7.629.099
199.231.465
50.518.802
5.194.221

Regulatory Examination Process
-Projected Compliance Hours
-Salary Cost
$

$
Truth in Lending Act - Regulation Z

$

-Salary Cost
-Employee Benefits
-Direct Third Party Cost
$
Formal Written Policies
$

$

IBA Grant Thornton Study

462.909.846

18

445

Projected Annual Compliance Cost For
All Community Banks - Phase II - continued

Under
30MM

Total Assets
Between
Over
30-65MM
65MM

Composite

Equal Credit Opportunity Act - Regulation B
134,996
-Projected Compliance Hours
$
2,238,898 $
-Salary Cost
674,077
-Employee Benefits
0
-Direct Third Party Cost
1,763.433
-Overhead Allocation
$
4.676.408 $
Projected Cost

426,710
9,036,047 $
2,241,391
789,421
10.925.018
22.991.877 $

3.861.532
73.718,462 $
19,918,877
868,736
82,716,086
177.222.161 $

4.423.238
84.993.407
22.834.345
1,658.157
95,404,537
204,890.446

Appraisal Requirements
-Projected Compliance Hours
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Projected Cost

528,729
12.295,881 $
3,671,310
469,446
9.003.738
25.440.375 $

860.891
16,690,608 $
4,229,039
437,001
20.482.646
41.839.294 $

1.323.581
41,140,859 $
10,859,201
248,210
43.498.857
95.747.127 $

2,713,201
70,127,348
18,759,550
1.154.657
72.985,241
163,026,796

365.626
3,099,549 $
818,522
722,225
2.888.900
7.529.196 $

1,012.009
12,489,762 $
3,143,586
888,098
15.407,799
31.929.245 $

3.604.014
44,367,593 $
12,906,936
1,303,104
43.002.436
101.580.069 $

4,981,649
59.956.904
16.869.044
2,913,427
61,299,135
141,038.510

492.196
6,307,432 $
1,907,878
7,794,012
5.007.427
21,016.749 $

373.847
9,783,177 $
1,663,422
7,076,592
10.713.566
29.236.757 $

1.113.844
21,532,244 $
5,584,732
11.976,147
21.532,244
60.625.367 $

1.979.887
37.622.853
9.156.032
26.846.751
37,253.237
110.878.873

61.871
1,468,524 $
481,483
656,021
1.143.523
3.749.551 $

437,987
13.857,151 $
3,214,070
310,130
15.280.928
32.662.279 $

209,738
21,594,297 $
1,489,262
372,315
23.952.295
47.408.169 $

709.596
36.919.972
5.184.815
1,338.466
40,376,746
83.819.999

Bank Secrecy Act
-Projected Compliance Hours
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Projected Cost

Call Reports
-Projected Compliance Hours
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation

$

$

$

$

$

$

Loans to Insiders - Regulation O

-Salary Cost
-Employee Benefits
-Direct Third Party Cost
$

Projected Cost

$

IBAA/Grant Thornton Study

19

446

Projected Annual Compliance Cost For

Under
30MM
Geocoding-Geographic Loan Coding
-Projected Compliance Hours
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Projected Cost

$

$

Real Estate Settlement Procedures Act
-Projected Compliance Hours
-Salary Cost
$
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
$
Projected Cost

Home Mortgage Disclosure Act
-Projected Compliance Hours
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Projected Cost

$

$

Total Assets
Between
Over
30-65MM
65MM

Composite

73.125
1.390.283 $
391.205
306.946
1.275.931
3.364.365 $

505.934
4.581,459 $
1,155.937
0
5.793.784
11.531.180 $

2.071.315
25.379.504 $
7,322.204
3,971,365
24.945.136
61.618.209 $

2.650,374
31,351,246
8.869.346
4,278.311
32.014.851
76.513.754

92.806
1,468,524 $
445,372
228,705
1.330.098
3.472.699 $

124,616
1,973,552 $
507,485
2,269,584
2.495.133
7.245.754 $

819.094
18,305,510 $
4,964,206
16,443,933
20.725.561
60.439.210 $

1.036.516
21,747,586
5,917,063
18.942,222
24.550.792
71.157.663

5.597
102,315 $
36,111
0
96.297
234.723 $

132.228
2,537,423 $
634,356
42,290
3.016.715
6.230.784 $

880.526
13,465,409 $
3,847,260
372,315
13.155.146
30.840.130 $

1.018.351
16,105.147
4,517,727
414.605
16.268.158
- 37.305.637

Sum Of All Studied Regulations

-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Total Projected Cost

7.930.993
20.103.441
49.186.597
77.221.031
$ 127,809,752 $ 343,003,263 $ 1,040,187,354 $ 1,511,000,369
35,039,950
86.638.914
267,508.660
389.187.524
86.427.463
64,356,268
328.998.732
178,215,001
106.209.207 442.244.715 1.059.485.705 1.607.939.627
333.415.177 $ 958.314.355 $ 2.545.396.720 $ 3.837.126.252

The detailed results of the field cost studies are presented in Exhibit B to this report and include the
following sections:
Section I
Section II
Section III
Section IV

IBAA GrantThornton Stua;

·
·

·

Averages by bank size based on stratifications
Aggregate by bank size based on stratifications
Overall analysis

Graphs
20

447

PHASE III - NATIONAL COST SURVEY

The study's final phase was the national cost survey of randomly selected community banks innsultation
with the IBAA. thirteen separate cost surveys were designed ( one for each regulatory area) based on
information obtained in completing Phase II of the study.
The survey's objective was to guide the respondent bank through a series of questions to enable it to
determine the number of annual personnel compliance hours needed to comply with the surveyed regulatory
requirement. As with the field cost studies in Phase II , the aim was to determine the recurring hours
necessary to comply with the specific regulatory requirements ( and not to include " start-up" costs for these
regulations) . Respondents were asked to include the time commitment necessary to comply with the
amendments and modifications to the regulatory areas.
In addition , the survey respondents were asked to evaluate the pertinent regulatory areas according tothe
IBAA RUIN Scale of Regulatory Burden . The IBAA's RUIN Scale reflects the value and effectiveness of major
regulatory areas in four categories, as measured by community bankers:

R

Redundant ( a regulatory area that asks for information that can be obtained from quarterly bank
Call Reports or from other existing sources) .

U

To create RUIN ratings, we asked the bankers to evaluate each regulatory area on a scale of 1 to 5 ( shown
below) . Thus, the " best" regulatory areas received 15 points, the " worst" received only 3 points.

Very Redundant
2
1
Unnecessary
2
1
Not Efficient
2
1

3

4

4

Very Efficient
5

221

IBAA Grant Thornton Study

3

Not Redundant
5
Essential
4
5

3

448

THE SAMPLE

off Call

The surveys were sent to 2.600 community banks randomly selected by the BAA using the

Report data base as of March 31 , 1992. Each of the 2.600 selected banks received one surve, inus each
of the thirteen surveys were sent to 200 banks. Consistent with Phase II the sample was stratified into three
categories by asset size . The following table presents some selected data for the 2.600 sample banks and
those responding to the survey:
SELECTED SAMPLE DATA
Total Assets
Between
30-65 MM

Under
30 MM

Over
65 MM

Total

Total Banks Receiving Surveys:
( $ in thousands)
•
•

Total Assets
$

Number ofBanks

•

$

Average size in Assets

$

17,198.933
936
18,375
$

37,626,504
817
46,054

$ 170,945,582
847
201,825
$

12,064,975
268
45.019

$

$ 225,771,019
2,600
86.835
$

Survey Respondents:
( $ in Thousands)
•
•
•
•

Total Assets
Number of Banks

$

5,405,442
290
18.639

$

$
$
Average Size in Assets
Percent Responding to the Survey
31.43 %
Total Assets
30.98 %
Number of Banks
Percent of U.S. Community Banks:
Total Assets
Number of Banks

IBAA Gran: Thornton Study

8.12 %
8.85 %

$

35.098,535
250
140.934

$
$

52.568.952
808
65,061

32.07 %
32.80 %

20.53 %
29.52 %

23.28 %
31.08 %

8.54 %
8.52 %

5.64 %
7.56 %

6.33 %
8.31 %

22

449

EVALUATION OF METHODOLOGY

The Phase III national cost survey best estimate of annual compliance hours , with an er:
the individual regulatory areas was determined based on statistical analysis of the surve

= 5%, for
ses.

Each survey collected total annual compliance hours for the single specific regulatory area being surveyed.
While each survey was sent to 200 sample banks, responses varied from a high of 85 ( Call Reports) to a
low of 50 ( Loans to Insiders) . When the different strata ( created by asset size) were examined, sample sizes
were considerably smaller and varied widely for the different surveys. These small sample sizes limited the
ability to generalize from the accumulated data, and necessitated statistical analysis to obtain an estimate
of compliance hours in which reasonable confidence could be placed.
To take into account the variability in activity associated with the different size banks, asset size was chosen
as the basis for stratification. This, however, still resulted in considerable variability in reported compliance
hours within strata relative to the sample sizes. To decrease such variability, and to more meaningfully
describe activity within each bank, a " compliance factor was computed ( based on the number of
compliance hours for each thousand dollars of assets held by the individual bank in the sample) .
The mean compliance factor for each asset category was calculated, as well as a 90% confidence interval
about this mean. Multiplying the average asset value for each stratum with this compliance factor mean and
the high and low boundaries of the confidence intervals yielded a mean number of compliance hours and
a confidence interval for each stratum.

The mean number of annual compliance hours for each category was then weighted by the total assets of
the community banks within the asset category ( nationally, not the number of banks sampled) to yield a
composite mean. This mean reflects the best estimate of the average number of hours community banks
spend complying with each regulatory area. In addition, the 90% confidence interval was computed, yielding
a range of annual compliance hours about this " best estimate" , providing reasonable confidence that the
" real" average would fall if all community banks had provided information.

IBAA/Grant Thornton Study

23

450

The best estimate of annual compliance hours for each regulatory area is presented
"lowing table.
The data is sorted from highest to lowest.
ANNUAL COMPLIANCE HOURS
Total Assets
Under
Between
Over
30 MM
30-65 MM
65 MM
site
Regulatory Area
C
·
806
675
1,505
995
Community Reinvestment Act - Regulation BB
651
406
1,048
702
Truth in Lending Act - Regulation Z
396
482
506
461
Equal Credit Opportunity Act - Regulation B
728
460
227
426
Formal Written Policies
213
208
334
252
Regulatory Examination Process
230
266
73
190
Bank Secrecy Act
·
171
216
146
178
Expedited Funds Availability Act Regulation CC
135
250
98
161
Geocoding- Geographic Loan Coding
123
124
206
151
Loans to Insiders - Regulation O
136
188
Call Reports
105
143
117
237
141
68
Real Estate Settlement Procedures
123
85
100
103
Appraisal Requirements
Home Mortgage Disclosure Act - Regulation C
Total hours

3,020

72
3,363

47
5,548

41
3.978

COMPARATIVE ANALYSIS OF PHASE II AND PHASE III

The design of the national cost surveys incorporated information obtained during the field cost studies.
These studies were based on extensive field interviews and on transaction tests and analyses in certain
regulatory areas. We cannot , however, be certain of the methodologies used by the banks to complete the
surveys. Accordingly, we believe that some of the factors which would contribute to the difference between
the Phase II and Phase III results would be:

BAA Gran: Thorntor Study

24

451

Comparative Annual Compliance Cost Phase II and Phase III
Field Cost Study
Hours
Cost
Community Reinvestment Act - Regulation BB
Total Assets:
1,465,274
Under $ 30 Million
Between $ 30 - $ 65 Million
3.016.996
6.779.865
Over $ 65 Million
11.262.135
Overall Composite

Truth in Lending - Regulation Z
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

185,612
1,699,228
6.712.848
8.597.688

Regulatory Examination Process
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

2.053,045
1,718,118
2,371,029
6.142.192

FormalWritten Policies
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

838,082
1,416,023
5.374.994
7.629.099

Loans to Insiders - Regulation O
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

61.871
437.987
209,738
709.596

Equal Credit Opportunity Act - Regulation B
Total Assets:
134.996
Under $ 30 Million
426,710
Between $ 30 - $ 65 Million
3.861,532
Over $ 65 Million
4.423.238
Overall Composite

IBAA Grant Thornton Study

Nat
Hours

$ 100.359,183
177.520.963
512.554.289
$ 790,434.435

2.929.586
2.218,554
9.276,240
14.424.380

27,913,996
96,027,381
356.616.162
$ 480.557.539

2,238,657
1,116,184
3.474.324
6.829.165

73,901,674
215,145.314
285.938.276
$ 574.985.264

705,193
653,951
1,815.659
3,174,803

$

29,141,780
76,841,641
356,926,425
$ 462,909.846

747,623
1,367,953
3.368.214
5,483,790

3,749.551
32.662,279
47.408.169
83.819.999

401,557
411.909
1,084,679
1,898.145

4.676,408
22,991,877
177.222.161
$ 204.890.446

1,304,640
1,463,248
2.392,748
5.160.636

$

$

$

$

$

Survey
Cost

$

200.646.143
130.564.532
701,256,177
$ 1.032.466.852

$

336,562.871
63,083,166
184.482,312
584.128.349

$

$

25,368,154
81,902,390
218,983,545
326.254.089
$

$

25.994.081
74.247.829
223.637.488
323,879.398

$

$
$

$

$

24.302.872
30.716.921
245.417.943
300.437.736

45.145.081
78.843.385
109.771.010
233.759.476

25

452

Comparative Annual Compliance Cost Phase II and Phase III - conti

Field Cost Study
Hours
Cost

Nation
Hours

Real Estate Settlement Procedures
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

92.806
124.616
819,094
1,036,516

3,472,699
7,245,754
60,439,210
71,157,663

184.107
411,204
1,029,453
1.624,764

Call Reports
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

492,196
373,847
1.113.844
1.979.887

21,016,749
29,236,757
60.625,367
$ 110.878.873

331,502
430,235
1.613.098

Appraisal Requirements
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

528,729
860,891
1.323.581
2.713.201

25,440,375
41,839,294
95,747,127
$ 163.026.796

252,719
339,733
508.211
1,100.663

Bank Secrecy Act
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

365.626
1.012.009
3.604.014
4.981,649

7,529,196
31,929,245
101.580.069
$ 141,038,510

240,321
847,359
995.323
2.083.003

Geocoding-Geographic Loan Coding
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

73.125
505.934
2,071.315
2.650.374

3,364,365
11.531,180
61.618.209
76,513.754

404,205
389,213
984.464
1.777.882

$

32,614,478
209,111,886
397.881.126
$ 639.607.490

530,053
654,374
733.462
1.917.889

$

Expedited Funds Availability Act - Regulation CC
Total Assets:
1,634,034
Under $ 30 Million
8,378,854
Between $ 30 - $ 65 Million
14,064,217
Over $ 65 Million
24.077.105
Overall Composite

IBA Grant Thornton Study

$

$

$

$

$

$

$

$

vey
.ost

$

$

$
$

$
$

$

$

$

$

6.885.212
23.922.264
76.014.406
106.821.882

14,167.647
33,649,054
46,291,223
94.107.924

12,157,454
16.507.350
36.735.126
65.399.930

4,947,241
26.727.526
27.985.712
59.660.479

18.633.405
8.866.885
29.288.816
56.789.106

10.580,597
16.338.187
20.725.560
47.644.344

26

453

Comparative Annual Compliance Cost Phase II and Phase III - continued

Field Cost Study
Hours
Cost
Home Mortgage Disclosure Act - Regulation
Total Assets:
5.597
Under $ 30 Million
132.228
Between $ 30 - $ 65 Million
880.526
Over $ 65 Million
1,018,351
Overall Composite
Sum Of All Studied Regulations
Total Assets:
Under $ 30 Million
Between $ 30 - $ 65 Million
Over $ 65 Million
Overall Composite

7,930,993
20,103,441
49.186.597
77,221,031

$

234,723
6,230,784
30,840,130
37.305.637

11,375
225,267
184.297
420.939

333,415,177
958,314,355
2,545.396.720
$ 3.837.126.252

10,281,538
10,529,184
26.698.435
47.509.157

$

$

vey
Cost

Nation
Hours

$

$

$

481.484
10.600.792
6.391,416
17.473.692

725.872,242
595,970,281
1.926.980.734
$ 3.248.823.257

Although there was a substantial difference in estimated annual compliance hours, there was a much smaller
difference in total estimated annual costs. A closer review of the survey data reveals that when compared
to the field cost studies it is likely the respondents miscalculated their hours.
The overall difference between the total hours estimated by the field studies and the cost survey is
29,711.874 hours, of which 84.57% or 25,126,605 hours is represented by two regulatory areas: Expedited
Funds Availability Act - Regulation CC and the Regulatory Examination Process. These two regulatory areas
were given considerable attention during the field cost studies.
The single largest difference ( 22,159,216 hours) occurred with Expedited Funds Availability Act - Regulation
CC. Compliance with the requirements of this regulation involves a significant number of operational
activities. On more than one occasion during the field studies, bank employees reported low transaction
time: however, after further investigation , including actual transaction tracing through the bank's operations .
the actual time was considerably higher than the employees had originally estimated . The cost survey
design attempted to guide banks to look closely at the transaction time. However, the responses indicated
that the design of the survey did not succeed in achieving that objective. Accordingly, we believe it is likely
that the survey respondents have significantly underestimated the hours necessary to comply with this
regulation. It should be noted that the difference in compliance hours is significantly larger than the
difference in compliance cost, because this compliance function is predominantly performed by operational
employees whose overall composite hourly salary cost is the lowest in the bank.

IBAA Grant Thornton Study

27

454

The second largest difference ( 2.967,389 hours) occurred with the compliance hu
regulatory examination process. As with Regulation CC. during the field
..es ban
underestimated the amount of time spent on the examination process . During the field s
probing disclosed substantial additional hours in excess of the initial estimates . According
survey respondents were too conservative in their estimates in this area.

ted to the
'nitially
onal
-at

The Phase III national cost survey best estimate of the annual compliance hours, with a error rate of

5%.

for the individual regulatory areas was determined based on statistical analysis of the survey responses
ESTIMATION OF ANNUAL COMPLIANCE COSTS

Phase III of the study requested respondent banks to provide direct annual personnel compliance hours with
respect to the specific regulatory area covered in the survey completed by the bank. For purposes of
converting this data to an estimated dollar cost we employed the following approach.
Phase II of the study gathered actual cost data from the test banks in the following four categories:
1. Direct Employee Compensation
2. Direct Employee Benefits

3. Direct Third Party Expense

4. Operating Overhead ( Exclusive of FDIC insurance assessments)
The average cost per compliance hour was computed for each cost category by regulatory area. These
rates were applied to the best estimate of annual compliance hours determined by the national cost survey
to arrive at the annual compliance cost for each regulatory area. An overview of the estimated annual
compliance cost on a per bank basis for each category is presented in the following table:

IBAA Gran: Thornton Study

28

455

Estimated Annual Compliance Cost Per Bank - Phase III
Under
30MM

Total Assets
Between
Over
30-65MM
65MM

Community Reinvestment Act - Regulation BB
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

806
20.253 $
5.716
14.086
15,166
55.221 $

675
14.927 $
3.666
3.416
17,722
39.731 $

1,505
44.822 $
12.447
11.439
45.078
113,786 $

კვი
6-579

Truth in Lending Act - Regulation Z
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

651
7,755 $
2,375
80,747
6.928
97,805 $

406
6,243 $
1,680
5,792
9.222
22.937 $

1,048
19,697 $
5,451
9,424
21.102
55.674 $

702
11.232
3,169
31,988
12.417
58,806

227
3,561 $
947
358
3.015
7.881 $

426
8,870 $
2.311
43
11,919
23.143 $

728
21.199 $
5.318
502
21,279
48,298 $

460
11.210
2.859
301
12,071
26.441

Regulatory Examination Process
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
$
Total Cost

213
3.397 $
923
311
3.041
7,672 $

208
9.014 $
2,262
3,604
11.135
26.015 $

334
17,154 $
2,844
3.014
17.291
40.303 $

252
9.855
2.010
2.310
10.489
24.664

Loans to Insiders - Regulation O
- Best Estimate of Compliance Hours
$
- Salary Cost
Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

123
2,930 $
959
1.307
2.278
7.474 $

124
3.934 $
913
90
4,342
9.279 $

206
21,229 $
1,476
390
23.552
46.647 $

151
9.364
1.116
596
10.057
21.133

Formal Written Policies
- Best Estimate of Compliance Hours
$
- Salary Cost
Employee Benefits
- Direct Third Party Cost
Total Cost

IBA Gran: Thornton Study

29

456

Estimated Annual Compliance Cost Per Bank - Phase III continuec

Under
30MM

Total As
Between
30-65MM

Over
65MM

e

Equal Credit Opportunity Act - Regulation B
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

396
6.562 $
1.971
0
5.161
13.694 $

482
10,209 $
2,537
887
12.355
25.988 $

506
9.669 $
2.613
111
10.849
23.242 $

-61
8.813
2.374
333
9.455
20.975

Real Estate Settlement Procedures
- Best Estimate of Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

68
1,080 $
329
169
976
2.554 $

117
1,854 $
477
2,141
2.355
6.827 $

237
5,304 $
1,445
4,770
6.014
17.533

141
2,746
750
2,360
3.115
8.971

Call Reports
- Best Estimate of Compliance Hours
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

105
1,345 $
407
1,663
1.069
4.484 $

136
3.552 $
604
2.569
3.888
10.613 $

188
3,640 $
949
2,020
3.637
10.246 $

143
2,846
653
2.084
2.865
8.448

Appraisal Requirements
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
$
Total Cost

85
1,967 $
587
75
1.440
4.069 $

100
1,929 $
490
50
2.367
4.836 $

123
3,827 $
1,013
26
4.048
8.914 $

103
2.574
697
50
2.618
5.939

Bank Secrecy Act
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

73
618 S
163
143
576
1,500 $

266
3.280 $
824
231
4.049
8.384 $

230
2.831 $
822
83
2.746
6.482 $

190
2.243
603
152
2.457
5.455

IBAA Gran: Thornton Study

30

457

Estimated Annual Compliance Cost Per Bank - Phase III - continued
Total Assets
Over
Between
30-65MM
65MM

Under
30MM
Geocoding-Geographic Loan Coding
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost

-

135
1.219 $
307
0
1,543
3.069 $

250
3.059 $
883
477
3.002
7.421 $

087
5.008

Expedited Funds Availability Act - Regulation CC
171
- Best Estimate of Compliance Hours
$
1,517 $
- Salary Cost
327
- Employee Benefits
126
- Direct Third Party Cost
1.432
- Overhead Allocation
Total Cost
$
3.402 $

216
1.937 $
515
134
2,797
5.383 $

146
1,803 $
519
58
1.736
4.116 $

178
1.752
454
106
1.988
4.300

Home Mortgage Disclosure Act - Regulation C
- Best Estimate of Compliance Hours
$
- Salary Cost
- Employee Benefits
Cost
- Direct Third Party
- Overhead Allocation
Total Cost

67 $
24
0
64
155 $

72
1,373 $
342
26
1.633
3.374 $

47
719 $
206
21.
702
1,648 $

41
720
191
16
800
1,727

3.020
52,924 $
15,257
99,401
42.863
210.445 $

3.363
68,341 $
16,928
18,983
85.327
189.579 $

5,548
154,953 $
35,986
32,335
161.036
384.310 $

3.978
92,072
22.725
50.241
96.408
261.446

26-

SA

98
1.872 $
529
416
1,717
4,534 $

Sum Of All Studied Regulations
- Salary Cost
Employee Benefits
- Direct Third Party Cost
- Overhead Allocation
Total Cost
$

$

The estimated annual compliance cost for all community banks was based on a relationship to total assets.
The determination was made by multiplying the total assets for all community banks for each category by
the best estimate of annual compliance hours. These values were then weighted and combined to yield the
best estimate of annual compliance cost . The number of banks and total assets were provided by IBAA
from the Sheshunoff Call Report information as of September 30 , 1992. ( Total community banks of 9.682) .
An overview of the estimated annual compliance cost for all community banks for each of the categories
is presented in the following table:

BAA Grant Thornton Study

31

458

Estimated Annual Compliance Cost For
Under
30MM

Total Assa
Between
Over
30-65MM
65MM

Community Reinvestment Act - Regulation BB
2.218.554
2.929.586
-Best Estimate Of Compliance Hours
$ 73.588,709 $ 49.056.853 $
-Salary Cost
20.769,987
12.052.761
-Employee Benefits
11,221,050
51,181,679
-Direct Third Party Cost
55,105,768
58,233,868
-Overhead Allocation
$ 200.646.143 $ 130.564.532 $

9.276.240
39c
276.258.074 $
76.696.986
109.5 : 734
132.894.457
70,491,728
277,809,389
391,149.025
701.256.177 $ 1.032.466,852

Truth in Lending - Regulation Z

$ 336.562,871 $

1.116.184
17.169,899 $
4.623,749
15,929,380
25.360.138
63.083.166 $

3.474.324
65,279,311 $
18,057,300
31,212,446
69.933.255
184.482.312 $

6.829.165
109,135.424
30,854,229
325.005.859
119.132.837
584.128.349

705,193
11,230,599 $
3,051,401
1,029,171
10.056.983
25.368.154 $

653.951
28.376.852 $
7,118,882
11.347,922
35.058.734
81.902.390 $

1,815,659
93,202,971 $
15,451,092
16,381,880
93.947.602
218.983.545 $

3.174.803
132.810.422
25.621.375
28.758.973
139.063.319
326.254.089

747.623
11,748,193 $
3,123,623
1,179,634
9.942.631
25.994.081 $

1,367,953
28,461,433 $
7.414,915
140,968
38.230.513
74.247.829 $

3.368.214
98,167,177 $
24,634,873
2,295,945
98.539.493
223.637.488 $

5.483.790
138.376.803
35.173.411
3.616.547
146.712.637
323.879.398

401,557
9,527,352 $
3,117,605
4.249,090
7.408.825
24.302.872 $

411,909
13.025.440 $
3.016,715
296,033
14,378.733
30.716.921 $

1.084.679
111,694,639 $
7.756.572
2,047,735
123.918.997
245.417.943 $

1.898.145
134.247.431
13.890.892
6.592.858
145.706.555
300.437.736

2,238,657
26,686,214 $
8,173,180
277,864,033
$

Regulatory Examination Process
-Best Estimate Of Compliance Hours
$
-Salary Cost
-Employee Benefits
$
Formal Written Policies
$

$
Loans to Insiders - Regulation O
-Best Estimate Of Compliance Hours
$
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
$

BAA Gran: Thornton Study

32

459

Estimated Annual Compliance Cost For
All Community Banks - Phase III - continued
Under
30MM
Equal Credit Opportunity Act - Regulation B
1,304,640
-Best Estimate Of Compliance Hours
$ 21.630.639 $
-Salary Cost
6,500,025
-Employee Benefits
0
-Direct Third Party Cost
17.014.417

Total Assets
Between
Over
65MM
30-65MM
1.463,248
30.970.663 $
7,696,851
2,692,488
37.483.383

2.392.748
45,670,697 $
12,348,463
496,421
51,255,429

184,107
2,912,974 $
884,726
457,409
2,630,103
6.885.212 $

411,204
6,498,623 $
1,677,519
7,499,496
8.246.626
23.922.264 $

1.029.453
23,021,506 $
6,267,310
20,663,508
26.062.082
76.014.406 $

1.624.764
32.433,103
8.829.555
28.620,413
36.938.811
106,821,882

331,502
4,249,090 $
1,287,968
5,254,187
3,376,402
14.167.647 $

430.235
11,263,341 $
1,917,164
8,147,949
12,320,600
33.649.054 $

851,361
16,443,933 $
4,281,628
9,121,729
16.443.933
46.291,223 $

1,613.098
31,956,364
7,486,760
22.523.865
32.140.935
94.107.924

252.719
5,880,115 $
1,751,396
222,686

508,211
15,761,355 $
4,157,523
124,105
16,692,143
36.735.126 $

1.100.663
28.224.674
7.586.438
515.953

12.157.454 $

339.733
6,583,204 $
1,677,519
169.162
8,077,465
16.507,350 $

240,321
2,040,286 $
535,650
469,446
1.901.859
4.947.241 $

847,359
10,459,823 $
2,622,004
733,033
12,912,666
26.727.526 $

995,323
12,224,358 $
3,536,997
372,315

2,083.003
24.724.467
6.694.651
1.574.794
26.666.567
59.660 479

999
98.
26.545,339
3.188.909
105,753,229
233.759.476

Real Estate Settlement Procedures Act

-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Total Cost

$

$

Call Reports
-Best Estimate Of Compliance Hours
$
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
$
Appraisal Requirements

-Salary Cost
-Employee Benefits
-Direct Third Party Cost

$

Total Cost
$

Bank Secrecy Act
-Best Estimate Of Compliance Hours
$
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
$

BAA Gran: Thornton Study

27.985.712 $

65.399.930

33

460

Estimated Annual Compliance Cost For

Under
30MM
Geocoding-Geographic Loan Coding
-Best Estimate Of Compliance Hours
$
-Salary Cost
-Employee Benefits
-Direct Third Party Cost
-Overhead Allocation
Total Cost
$

Total Asses
Between
Over
30-65MM
65MM

404,205
7,691,696 $
2,172,694
1.709,266
7.059,749
18.633.405 $

389.213
3.524,199 $
888,098
0
4.454.588
8.866.885 $

984.464
12,100,253 $
3.474.944
1,861.577
11.852.042
29.288.816 $

23. 1-6
6.58 736
3.570.843
23.366.379
56.789.106

Expedited Funds Availability Act - Regulation CC
530.053
-Best Estimate Of Compliance Hours
$
-Salary Cost
4,718,537 $
-Employee Benefits
1,017,134
391,205
-Direct Third Party Cost
4.453,721
-Overhead Allocation
Total Cost
$ 10.580.597 $

654,374
5,878,364 $
1,564,744
408,807
8.486.272
16.338.187 $

733.462
9,059,676 $
2,606,208
310,263
8.749.413
20.725.560 $

1,917,889
19,656,577
5,188,086
1.110,275
21.689.406
47,644,344

Home Mortgage Disclosure Act - Regulation C
11,375
-Best Estimate Of Compliance Hours
-Salary Cost
$
210,649 $
-Employee Benefits
72,223
0
-Direct Third Party Cost
198.612
-Overhead Allocation
481.484 $

225,267
4,313,620 $
1,071,357
84,581
5.131.234
10.600.792 $

184,297
2,792,366 $
806,684
62,053
2.730.313
6.391.416 $

420.939
7,316.635
1.950.264
146.634
8.060.159
17.473.692

Sum OfAll Studied Regulations

26.698.435
47.509,157
781,676,316 $ 1.179.373.683
180,076,580
285,876.470
558.120.380
344.007,806
155,441,705
58,670,869
147.291.771 268,374,820
809.786.133 1.225.452.724
$ 725.872.242 $ 595.970.281 $ 1.926.980.734 $ 3.248.823.257
10.281.538
10.529.184
$ 182,115,053 $ 215,582,314 $

An overview of the analytical comparisons for all community banks for each category is presented in the
following table:

IBAA Grant Thornton Study

34

461

ANALYTICAL COMPARISONS

Total Assets
Over
Between
65MM
30-65MM

Under
30MM
Total Annual Compliance Cost as a Percentage
of:
1.21
Total Assets
11.86
Equity Capital
72.43
Net Income before Taxes
Compliance Hours associated with each:
$ 1 Million of Total Assets
$ 1 Million of Equity Capital

-

0.42 %
4.41 %
24.49 2 %

0.31 %
3.69
18.99 2 %

171
1,680

75
778

43
511

58
661

.010

.004

.003

003

%
%
%

23.92

Compliance Cost associated with each:
$

$
Taxes
$

$

12,060
118,605

0.72 12
$

$

4,278
44,073

0.24 2

3,105
36,876

$
$
$

0.19 2

S 3.954
$ 45.186
S

0.24

'The cost associated with each dollar of income is significantly higher than the
amounts reflected in Phase II . This results from the substantial higher
annual compliance hours reported by banks under $ 30 million in Phase III
'Income has been annualized for computational purposes.
The detailed results of the national cost survey are presented in Exhibit C to this report.

BAA Grant Thornton Study

35

462

IBAA RUIN SCALE OF REGULATORY BURDL
The respondents to the survey rated the thirteen regulatory areas according to the RUIN sca
of 5 being the most necessary and beneficial and 1 being the least beneficial and useful . The fc
reflects the respondents ratings.

ว

The regulatory areas have been sorted from worst to best.

Regulation
Regulation BB - Community Reinvestment Act
Home Mortgage Disclosure Act ( HMDA)
Geocoding Geographic Loan Coding
Regulation CC - Expedited Funds Availability Act
Real Estate Settlement Procedures Act ( RESPA)
Regulation Z - Truth in Lending
Bank Secrecy Act
Regulation B Equal Credit Opportunity Act
Regulation O - Loans to Insiders
Appraisal Requirements
Formal Written Policies
Call Reports

A Grant Thornton Study

RUIN
Rating

1.64
1.92
1.93
2.17
2.25
2.30
2.48
2.49
2.56
2.76
2.79
3.16
3.19

336

463

JohnShivers
President
Richard
L.Mount
President-Elect
Leland M. Stenehjem.
Jr.
VicePresident

IBAA

February 2 , 1995

James R.Chairman
Lauffer
Guenther
Kenneth
A.
Executive Vice President

Honorable Ricki Tigert Helfer
Chairman
Federal Deposit Insurance Corporation

Honorable Lawrence Lindsey
Governor
Board of Governors of the Federal Reserve System

Honorable Eugene Ludwig

Mr. Jonathan Fiechter

Dear Lady and Gentlemen:
As the agencies finalize the Community Reinvestment Act ( CRA) regulation. the Independent
Bankers Association of America ( IBAA) reiterates our strong support for the adoption of a revised
CRA rule that incorporates a meaningful tiered system whereby small banks would undergo
streamlined examinations . We recognize that the effectiveness of the tiered approach in reducing
regulatory burden will depend on how the revised rule is implemented by examiners. We urge you
to consider this fact in your deliberations.
We believe that the examination procedures warrant a close review before they are
implemented to determine if they are consistent with the goal of reducing regulatory burden. We
note that the banking industry has not had the opportunity to comment on any examination
procedures for the proposed CRA rule.

WASHINGTON OFFICE. ONE THOMAS CIRCLE NW SUITE 950, WASHINGTON, DC. 20005-5802 202 659-8111

464

2
For example, it is our assumption that examiners will have extensive data bases at their
disposal during the CRA examination. With the use of computers during an examination, the level
of analysis can be quite detailed--down to a particular census tract or block numbering area.
Depending on how the data is aggregated and analyzed, a real possibility exists that it could be used
to micromanage a bank's lending.
We request that the new examination procedures to be used with the revised CRA rule be
shared with the industry, preferably prior to their implementation. Examination procedures must be
carefully drawn to avoid creating any possibility of credit allocation because of conclusions drawn
from the data by overzealous examiners. In addition, the examination procedures should be carefully
analyzed to ensure that no unintended consequences flow from implementation of the revised CRA
regulation, and to ensure that small banks face no additional documentation burdens.
We appreciate your efforts to make CRA less burdensome for community banks and more
performance focused.

Sincerely,

Jahn
John Shivers

Shivers

465

GOV

ERN

ORS

FED

SYSTEM

OF

BOARD OF GOVERNORS
OF THE

ERA

LRESERV

LAWRENCE 3. LINDSEY
MEMBER OF THE BOARD
February 16 , 1995

Mr. John Shivers

Independent Bankers Association
of America
One Thomas Circle , N.W.
Suite 950
20005-5802
Dear Mr. Shivers :
Thank you for your letter of February 2 , in which you
request that the examination procedures currently being developed
by the regulatory agencies to implement the revised CRA
regulation be shared with the banking industry prior to their
adoption . In this regard , you note a number of concerns about
how new examination procedures might be used by examiners in a
manner inconsistent with our shared goals of reducing the
regulatory burden for community banks and avoiding credit
allocation . I can assure you that the Federal Reserve recognizes
the importance of developing examination procedures for the new
CRA regulation that are consistent with these goals .
While we appreciate your concerns on the potential
importance of the new CRA examination procedures , the Federal
Reserve has not historically published any new examination
procedures for comment prior to their adoption . Nonetheless , we
appreciate receiving your thoughts and guidance on this matter
and will keep them in mind as we move forward with the other
agencies in the development of the new examination procedures .
In addition , I would point out that the Federal Reserve's
examination procedures relating to consumer affairs , including
CRA, are published in a handbook that is available to the banking
industry as well as the general public . Once the new CRA
examination procedures are finalized and adopted , they will be
incorporated into this handbook .
Again , we appreciate receiving your thoughts on this
important matter .

Sincerely,

Lany Lundary

466

FDIC
Federal Deposit Insurance Corporation
Washington, DC 20429

Office ofthe Director
Division ofCompliance and Consumer Affairs

к

February 27 , 1995

Mr. John Shivers , President
of America
One Thomas Circle , N.W. , Suite 950
Washington , D.C. 20005-5802

Dear Mr. SHIVers
Thank you for your letter dated February 2 , 1995 wherein you
express your support for a revised CRA rule that incorporates a
tiered examination process . Your letter also requests that
examination procedures be shared with the industry , preferably
prior to their implementation .
The FDIC shares your observations about the importance of the
examination procedures to the success of the CRA reform . In order
for any change in the regulations to be effective , examiners must
be given appropriate guidance for application of the regulations .
The agencies are working to ensure that the procedures will be as
effective as possible .
It is our practice to make examination procedures available to all
interested parties . However , we do not publish examination
procedures for notice and comment by the general public during the
development process . As with any of our examination procedures , we
welcome and encourage you and other interested parties to comment
once the procedures are released .
Again , thank you for your letter and for your support for this
reform effort .

Sincerely,

Paul L. Sachtleben
Director

467

E
OFFIC

ERVISION
PE
SU

THRIFT

Office of Thrift Supervision
Department of the Treasury
1700 G Street. N.W.. Washington , D.C. 20552 • ( 202) 906-6590

Director

1989
March 2 , 1995

John Shivers
Independent Bankers Association of America

Suite 950
20005-5802
Dear Mr. Shivers :
This responds to your letter dated February 2 , 1995 ,
expressing your support for the adoption of a revised Community
Reinvestment Act ( CRA ) regulation that incorporates a tiered
system of examinations . Specifically , you strongly support a
streamlined CRA examination for small institutions . Your letter
asks that the examination procedures developed by the agencies
in connection with the revised CRA rule be shared with the
industry prior to their implementation .
Your observations about the importance of the examination
procedures to the success of the CRA reform are well taken . The
agencies are working to ensure that the procedures will be as
effective as possible . Since examination procedures are for
internal use , the agencies do not publish them for notice and
comment by the public . It is our practice , however , to make the
procedures available to all interested parties . Moreover , we
will welcome any comments you may have on the CRA examination
procedures once they are released .
Thank you for your expression of support for this reform
effort .

Sincerely,

th &

Dielle

Acting Director

468

Comptroller of the Currency
Administrator of National Banks

March 9, 1995
John Shivers

Independent Bankers Association of America
One Thomas Circle, N.W. , Suite 950
Dear Mr. Shivers:

John
Thank you for your letter of February 2, 1995 , and for your strong support for the adoption
of a revised CRA rule that incorporates a tiered system whereby small banks would undergo
streamlined examinations . You asked that the new examination procedures , which are being
developed for use by examiners in connection with the new rule, be shared with the banking
industry prior to their adoption. In particular, you expressed concern that examinations
could result in micromanagement of banks' lending.

Thank you again for your letter and input in this important process .

Sincerely yours ,

‫سا‬
Eugene A. Ludwig
Comptroller of the Currency

469

Statement

of

Mark Milligan
Vice President and Secretary, State Savings Bank, Columbus , Ohio

on behalf of
America's Community Bankers

before the
Committee on Banking and Financial Services
Subcommittee on Financial Institutions and Consumer Credit

House of Representatives

March 9 , 1995

470

Good morning Madam Chairwoman and Members of the Subcommittee. My name is Mark
Milligan and I am Vice President and Secretary of State Savings Bank, Columbus, Ohio.
State Savings Bank is a $ 1.8 billion institution with 36 branches serving central Ohio. State
Savings Bank carries an outstanding CRA rating because its Board and management
emphasize the importance of community lending and involvement every day in the
community we serve.
Through branch offices, our focus is primarily on home loans and, like most lenders, we
make mortgage loans that conform to government and secondary market guidelines. But we
also work to " fit-the-hard-to-fit" with various in-house programs if we deem the loan to be
safe.
We believe in community lending -- as a responsibility and an opportunity. We also believe
in a profitable operation and the need to make loans which, over time, prove to be prudent.
As several not-for-profit housing developers have said to me: " A track record of bad loans
doesn't help anyone."
It is my pleasure to appear today to testify on behalf of America's Community Bankers about
Community Reinvestment Act reform. ACB is the national trade association for 2,000
savings and community financial institutions and related business firms. The industry has
more than $ 1 trillion in assets, 270,000 employees and 16,000 offices. ACB members have
diverse business strategies based on consumer financial services, housing finance, and
community development .
ACB members are committed to the promotion of homeownership, removing needless
barriers to credit, and investing in our communities. State Savings and the other individual
members of ACB have built our businesses around our commitment to our communities. The
goals of the CRA are goals that ACB member institutions pursue daily as a matter of good
business practice. ACB's Board of Directors formalized this commitment in its 1993
Statement of Principles on HousingOpportunities. That statement accompanies this
testimony and I ask that it be included in the record in its entirety.
This commitment to communities provides the backdrop for ACB's comments on CRA
generally, and on specific provisions in the revised CRA regulatory proposal . It is our belief
that any final CRA rules must enhance the ability of insured lenders to continue to pursue
their commitment to their communities. Unnecessary or burdensome rules, no matter how
well intentioned, get in the way of producing results. I am confident that the Subcommittee
shares ACB's goal of eliminating such rules while furthering community lending.
The Subcommittee is to be commended for holding these very timely hearings. CRA is
being addressed currently in several legislative proposals in the context of regulatory burden
relief and on a stand-alone basis, and we understand that the regulatory agencies will issue a
revised final rule soon . In your assessment of CRA and the manner in which it is
implemented , I urge you to consider these elements of our stance:
1

471

Commitment to community investment is a function of day-to-day business for ACB
members. We believe it is good business that can be done in a safe and sound
manner.
ACB encourages and supports the creation and implementation of incentives, in
legislation, as well as regulation, as a way to reward solid CRA performers. I will
give a few examples later.
CRA was enacted to encourage insured lenders to meet the needs of their
communities. Congress and the regulators have created other statutes and regulations
that have specific enforcement sanctions . The Fair Housing Act and the Equal Credit
Opportunity Act are examples of laws enacted with specific goals and strong
enforcement measures and we do not believe that these laws or their implementation
should be confused with CRA, as has often happened. There is a tendency, even in
our industry, to confuse CRA and fair lending. While related, they are clearly
different for important reasons.
While the revised proposed regulation was an improved version of the earlier
proposal, many of the burdensome provisions were retained. ACBopposes the
imposition of additional data collection or reporting requirements for any institution,
and we believe that any final rule should reflect the current practices of lenders and
not impose additional requirements or contain wholesale changes.
Finally, ACB strongly urges Congress to apply CRA to certain types of large,
geography-based credit unions that are lending and taking deposits in the very same
markets where banks and savings institutions operate. This would not be a burden for
the credit unions -- it would be a shared opportunity.

General
I am here because I work with CRA every day and am familiar with how it is applied and
put into action by an insured lender. I meet regularly with community groups to ascertain
credit needs and help design products and programs to meet those needs. This is my chance,
as a street-level lender, to talk briefly about how our shared interest in community lending
and service can be best implemented . At the end of the day, CRA needs to be about loans
made and services provided with a healthy respect for risk and the marketplace. Serving the
needs of the entire community can be done in a safe and sound manner, and can be
rewarding for the lender financially. At State Savings, we have developed and implemented
a working knowledge of low-income housing tax credits in lending on income-eligible
apartment projects. Not only have hundreds of units been built this way, but we receive
market rates on loans we judge to be adequately safe.
ACB members, like State Savings, are community lenders, close to the diverse and varied
needs of consumers and businesses alike. Because our business success is tied directly to the
2

472

success of the areas in which we operate, ACB and its members have a great interest in
ensuring the vitality of the communities we serve, at all income levels. As community-based
lenders, we offer a full range of diverse programs, products, and services for the purpose of
" reinvesting" in communities, including credit counseling and " loan fairs" and are active in
both direct lending as well as indirect community development activities. We provide
support from loan applicant education to grants for community projects.
At the state and local level, ACB members actively participate in lending consortia to
leverage limited industry resources to further the goals of affordable housing and community
and economic development. Community-wide or state-wide consortia enable small- to
medium-sized institutions to invest in projects that are either too large, too complex, or too
risky for one institution to bear. ACB suggests that greater participation in state-wide
consortia lending would be achieved if Congress would specify that any consortium lending
that addresses affordable housing or economic development needs, no matter where in the
state it is located, would qualify as a community development loan for that institution. At
State Savings, for example, we have a program whereby smaller lenders can avail themselves
of the benefits of size and expertise of a larger lender by participating in the regular sale of
portions of income-eligible housing loans.
ACB members also actively participate in a number of state and local programs aimed at
bringing the dream of homeownership to a wider segment of the population. A substantial
portion of ACB members provide mortgage financing, in a manner consistent with safety and
soundness concerns, to borrowers whose loans are not eligible under traditional programs
using conventional loan underwriting for resale into the secondary market. These held-inportfolio loans of ACB members represent a significant portion of the assets invested in
nonconforming affordable home loans in this country. These " hard-to-fit" loans are
particularly embraced by State Savings, where we believe our local market knowledge and
sense of community may make us a better judge of risk than Wall Street.
At State Savings, we have created a downpayment assistance fund by marrying a grant from
the Federal Home Loan Bank of Cincinnati with a matching amount from two local
foundations and the City of Columbus. The fund will enable about 70 families to become
first-time homeowners and State Savings will make the mortgage loans.
I would like to cite just two of many examples of special approaches developed by ACB
members:
" First Place of Rochester, " a partnership among First Federal Savings & Loan of
Rochester, the City of Rochester, New York, and the North East Block Club
Alliance, was formed to develop affordable housing in a targeted area of Rochester
and also to create jobs for area residents and to provide job training for inner city
high school students. First Federal of Rochester is the developer and is providing the
construction financing as well as the permanent mortgages for the income eligible
households. The second part of the initiative is to provide jobs for local minority
3

473

contractors while construction is underway. The third part of the initiative is to
provide a Youth Job Training Program for " at-risk" city high school students.
Coast Federal Savings Bank in Los Angeles has introduced its Homebuyer's
Assistance Program to offer an affordable and prudent means to finance a home
mortgage using specially relaxed borrower qualifying standards. These standards
include: flexible income and debt requirements, plus consideration of alternate
documentation for applicants with no previous credit references. To reduce the
amount of out-of-pocket expenses incurred by an applicant, Coast waives the
customary fees for processing, documentation preparation and credit reports.

Incentives
As a general matter, we believe that incentives are far more important as sanctions. Insured
lenders should receive positive feedback as a mechanism to maintain good performance,
enhance satisfactory performance, or improve lower performance. We believe that insured
lenders that meet or exceed their obligations to their communities should be recognized and
rewarded. The decision to improve a CRA rating to an " Outstanding" is an expensive one,
especially in terms of management commitment. Providing more cost-effective requirements
for " Outstanding" performers is a positive way of encouraging heightened community
reinvestment by offering real-dollar compliance savings to institutions that excel . Such an
approach also is consistent with the reality that the vast majority of institutions have long
been achieving a satisfactory level of compliance.
ACB suggests that the focus of amendments to the statute or the regulations should be on
providing incentives rather than imposing additional requirements . For example, the revised
proposed rule provides that a small institution , as defined in the proposal , generally will be
eligible for a streamlined examination. But a small institution is defined as an institution
with total assets of less than $ 250 million by itself, or is an affiliate of a holding company
with total " bank or thrift" assets of less than $ 250 million . ACB supports expanding this
definition of small institution to include an institution with $ 500 million in assets. Moreover,
as a practical matter, we believe that reduced documentation and the streamlining of
examinations are meaningful goals for all sizes and types of institutions. The ability to
streamline examinations and/or reduce documentation requirements for institutions with
" Satisfactory" or higher ratings would provide an incentive that would encourage community
reinvestment in a manner consistent with CRA and its deposit reinvestment mandate in CRA.
ACB urges Congress to consider the following other incentives .
Application streamlining - The statute could be amended to provide a " safe harbor"
from deposit facility application challenges for institutions with two or more
sequential " Outstanding" ratings on CRA examinations. An expedited approval
process could be adopted for institutions that have received an " Outstanding" rating.

4

474

Service area delineation - The statute could provide specifically that institutions may
use any reasonable method to define their service area and streamline the designation
of multi-state or multi-service areas for large institutions.
Coordinated review - A unified safety and soundness and consumer compliance
examination procedure could be adopted to encourage greater coordination between
types of examiners. The career tracks for safety and soundness and consumer
compliance examiners could be unified.
Small institution treatment - Small institutions below specified asset levels could be
exempt from CRA or could have a streamlined examination procedure. The threshold
could be adjusted for inflation. For example, Congressman McCollum's proposal
provides small institution treatment we could support.
Data collection - Elevate to the level of statute the legislative history of CRA that
additional data is not to be collected.
Finally, on a related matter, we believe that funding and implementation for the Bank
Enterprise Act is an effective mechanism to encourage the development and offering of
products and services for all segments of the community. ACB would oppose any cuts to the
funding already appropriated for the Community Development Financial Institution Fund and
implementation of the Bank Enterprise Act. We support full funding and implementation.
Coordination with Fair Housing Act and ECOA
CRA was enacted to ensure that insured lenders meet the credit needs of the communities in
which they are located. The deposit reinvestment mandate contained in the CRA seeks to
address the concern that if credit demand exists with the community from which deposits are
drawn that the deposits are not disproportionately used for loans in other communities. We
believe that the CRA statute provides the agencies with the regulatory authority to
" encourage" community reinvestment. An institution's record of serving its community's
credit needs is one of the many items taken into account when the agencies evaluate an
institution's application to expand its deposit-taking facilities. The application process was
viewed as an excellent opportunity to " encourage" behavior without prescribing it.
ACB believes that the debate surrounding compliance with CRA is being confused with
compliance with laws enacted for a different purpose that have more explicit enforcement
provisions, e.g., the Fair Housing Act and the Equal Credit Opportunity Act. We believe
that CRA compliance must be viewed independently from the enforcement of the Fair
Housing Act and the Equal Credit Opportunity Act . In a recent letter dated February 21,
1995, to the banking trade organizations, Deval Patrick, the Assistant Attorney General,
Civil Rights Division, Department of Justice, answered an inquiry as to the role of CRA in
the enforcement by the Department of Justice of the fair lending laws.

5

475

" The responsibility for enforcing the CRA belongs to the regulatory agencies. If we
determine that a lender ( whether or not it is subject to CRA requirements) has
deliberately conducted its business in such a way as to avoid lending to persons
protected by the fair lending laws, we will consider that evidence of a pattern or
practice of lending discrimination. CRA performance may be relevant; but, it our
view, it is not dispositive. "
Although the response attempts to explain the rationale of the Department of Justice, we
believe that a further clarification is necessary to ensure that enforcement of the Fair Housing
Act and the Equal Credit Opportunity Act ( which are important for all of us) are nonetheless
is not combined with CRA encouragement .
Proposed Regulatory Changes
ACB recognizes and appreciates the work and good faith efforts of the agencies in amending
the revised proposal and although it is improved and reflects numerous industry and public
comments, it still falls short of achieving the level of flexibility necessary. The final rule or
any statutory changes must be flexible enough to reflect the diversity of communities served
by insured lenders. Let me highlight several areas of the revised proposal on which ACB
has commented:
Strategic Plan Option . ACB believes that, although the revised proposed regulation in this
area is generally an improvement, the proposed changes do not provide the flexibility
necessary to fit the diversity of communities and the magnitude of products and services
offered around the country. For example, although we certainly support the concept of the
strategic plan option for CRA, we do not believe that the plan should be open for public
comment prior to regulatory approval . The revision clarifies the role of community
involvement in the development of the plan and requires the institution to solicit public
comment formally on the plan for at least 30 days through publication in a local newspaper.
Only after the public comment period has expired is the plan eligible for submission to the
agencies for consideration. The formal publication requirement raises concerns over the
disclosure of confidential, business plan information. It also confuses what would be prudent
business practice instead of mandated process.
ACB has urged the agencies to delete the requirement for formal public comment. The
strategic plan is fundamentally a business plan that an institution must formulate after
considering all of the relevant factors, including CRA obligations and input from the
community.
Data Collection. Further, deletion of the proposed data collection requirements would aid
substantially in focusing institutions on actual lending rather than creating a preoccupation
with form over substance and paperwork over performance . The revised proposal still
contains the data collection requirements that ACB opposed in the prior proposal. The
proposal would require that banks and savings institutions collect and report information

6

88-882 - 95-16

476

regarding the race and gender of their small business and farm borrowers. We do not
believe the statute authorizes this sort of data collection.
For several reasons we believe that the collection and reporting of this information would be
problematic. For example, there are few safeguards to protect the personal privacy of
borrowers who provide the information . In addition, as many lenders would not be required
to report this information, the data inevitably would be incomplete and inaccurate and would
have different competitive consequences for lenders.
Perhaps the most troubling and burdensome portion of the revised proposal's data collection
requirements is the need to code loans for race and gender. The statutory basis for this type
of classification is unclear, and ACB has urged the agencies to delete this requirement. The
problems with race and gender classification have been widely expressed by the agencies
themselves and the industry in general.
Indeed, the volume of interpretation necessary to address every possible, or even likely,
variation would be substantial. Some possible questions suggested by the requirements and
definitions include the following: How are small businesses run by families to be categorized
with their 50/50 split? Does it matter who actually operates the business? For example,
what if the family-owned and operated business is primarily owned by the mother, but
operated by the children? Even the simplest case of the sole proprietorship is complicated
because of the potential division of ownership of the business. The complications are limited
only by the imagination but reality will reflect that kaleidoscope of images. This is simply
not an area amenable for regulation and is unworkable.
In fact, ACB believes that further data collection will actually divert CRA compliance
resources away from lending to low- and moderate-income borrowers. Each dollar spent on
compliance and the collection of data for which there is no stated purpose may be a dollar
diverted from use in credit outreach . Recordkeeping requirements should be kept at a
minimum in order to minimize the related costs. ACB members want to be in the business
of devoting their full energies to investing in their communities not to be in paperwork
purgatory, and we urge Congress to encourage, rather than discourage, lenders to meet the
credit needs of all segments of their communities . We want to be judged in our communities
and by our regulators by what we do not by analytical gameplaying .
Accordingly, as we mentioned above, ACB urges Congress to preclude the agencies from
imposing the data collection requirements.
Service Area Delineation. Another issue in the revised proposal that ACB cannot support is
the service area delineation. The revised proposal sharply constricts the flexibility of an
institution to draw its service area boundaries. The current rules provide institutions with
alternative methods for delineating their service area. Generally institutions are able to use

7

477

the areas surrounding their branches, their effective lending territories surrounding their
branches, or any other " reasonably delineated local area that meets the purposes of the
CRA. "
ACB notes that examiners have criticized institutions for using a method of delineation of the
service area that is similar to the method in the revised proposal. In general, the service area
must include geographies in the local areas around an institution's branches and deposittaking ATMs in which the institution has originated or had outstanding, during the previous
calendar year, a significant number and amount of home mortgages, small business and small
farm and consumer loans ( if the institution chooses to include consumer loans) , and " any.
other geographies equidistant from its branches and ATMs , taking into account political
boundaries or significant geographic barriers. "
It is possible that certain segments of a community that the institution currently designates
would no longer be included in the new definition of service area. There are census tracts in
which little or no housing exists, for any number of reasons including zoning, environmental
and geographical, that would be included in a service area using the " equidistant" language.
None of these anomalies is resolved by a hard and fast rule that permits little variation.
Removing flexibility in the definition of service area does not allow an institution to adapt to
the community which it serves. ACB urges a return to the more flexible current approach in
defining service area. Let each lender define its service area and defend its boundaries.
Logic and reasonableness should be required -- without presuming the actual process for New
York city and Coshocton, Ohio in the same sentence.

Although the revised proposal contains many improvements, ACB urges Congress to request
that the agencies move cautiously when adopting a final rule. Changes altering the manner
in which insured lenders do business, imposing additional requirements, or creating
uncertainty will undermine the efficient operation of the institutions and may perversely
decrease the flow of credit into the community.
Legislative Proposals
In addition to the incentives that I mentioned above that are included in regulatory burden
relief proposals, there are several stand-alone legislative proposals to amend CRA.
Congressman McCollum's bill ( H.R. 317) would provide for modified examinations for
institutions with total assets of less than $ 500 million and would provide for a safeharbor
from applications denial on CRA grounds for institutions that have received a rating of
" Outstanding" or " Satisfactory. " ACB would support these sorts of changes . These are
examples of incentives designed to motivate an insured lender to work for and to maintain an
" Outstanding" CRA rating.

8

478

Extend CRA to Unregulated Lenders
Finally, if the intent of the review of CRA is to determine how to maximize the privateindustry resources that can be directed to low- and moderate-income borrowers, then the pool
of funds for community reinvestment capital can be enhanced by simply focusing outside the
class of institutions currently subject to CRA. Banks and savings institutions hold just a third
of the nation's financial assets, compared with half when CRA was enacted. Clearly,
institutions covered by CRA cannot meet all the credit needs of the nation's communities.
In particular, we believe that CRA should be applied to geography-based or communitychartered credit unions and to credit unions serving multiple employer groups from one
metropolitan area. It is these " come-one, come-all" credit unions, where the common bond
has been severely, if not totally diluted, that application of CRA is needed to ensure that all
segments of the community are being served. There is no other way for these geographically
based credit unions to demonstrate that their lending programs benefit all segments of their
local communities. Credit unions with little left in the way of a common bond should be
required to reach out and serve all members of the communities in which they are located,
including low- and moderate-income consumers.
Continued growth and prosperity of our local communities depends on the commitment of all
depositories in the community to the principle of reinvestment to the community. Indeed, a
credit union that voluntarily decided, by a majority vote of its members, to become subject to
the requirements of CRA, submitted an application to the NCUA to change its charter and
become a federal savings association. The NCUA denied the application last week on the
basis, among other things, that the credit union had not included a chart comparing the costs
of regulators and insurance in its application.
Madam Chairwoman, we welcome these hearings and the opportunity to present our views.
As the regulatory agencies complete their changes to the proposed CRA regulations, we urge
you to maintain your interest in this important subject.

9

479

Savings & Community Bankers
ofAmerica
PAUL A. SCHOSBERG

Robert E. Feldman

Communications Division
Office of the Comptroller
of the Currency

Kathy Semone, Director
Information Services Division
Public Affairs

William W. Wiles, Secretary

Re:

Community Reinvestment Act Regulations
59 Fed. Reg. 51232 ( October 7, 1994)

Dear Ladies and Gentlemen:
Savings & Community Bankers of America ( " SCBA" ) welcomes this opportunity to comment
on the interagency, revised proposal amending the Community Reinvestment Act regulations.
SCBA is a national trade association representing an industry of more than 2,200 savings and
community financial institutions with more than 16,000 offices, 285,000 employees, and
nearly $ 1 trillion in assets. Its members focus on providing real estate finance and
community financial services.
SCBA members are committed to the promotion of homeownership, removing needless
barriers to credit, and investing in our communities. The goals of the Community
Reinvestment Act ( " CRA" ) are goals SCBA members pursue daily as a matter of good
business practice. SCBA's Board of Directors formalized this commitment in the Statement
of Principles on Housing Opportunities unanimously adopted on January 28, 1993 ( copy
attached) . The Statement of Principles underscores our industry's pledge to affordable
housing and reflects the views of the mainstream ofthe industry.
An example of this pledge is the participation of SCBA members in the Affordable Housing
and Community Investment Programs ( " AHP" and " CIP" ) of the Federal Home Loan Bank
System. In just five years, SCBA members and other institutions have used the AHP to
commit $ 277.3 million for the construction and/or rehabilitation of 72,734 units of affordable
housing representing total development costs of nearly $ 4 billion. Through the CIP, they

Savings &

Community Bankers ofAmerica

900 Nineteenth St., N.W., Suite 400, Washington, D.C. 20006

TEL ( 202) 857-3111

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have provided financing not only for housing but for development of the economic
infrastructure so vital to a successful community. Savings institutions and other bank system
members have deployed $ 5.5 billion through the CIP for the construction of 145,868 units of
housing, including more than 3,000 units dedicated specifically for the elderly. An
additional $ 216 million has been invested in non-housing projects to promote job creation and
economic development.
This commitment to communities provides the backdrop for SCBA's comments on the
revised CRA regulatory proposal ( " revised proposal" ) . It is SCBA's goal that the final CRA
rules enhance the ability of lenders to continue to pursue their commitment to their
communities. Our comments and suggestions are intended to remove any unintended or
unnecessary barriers to this commitment.
The Revised Proposal.
SCBA welcomes this opportunity to comment on the second revision to the CRA regulations
published by the four federal banking agencies ( " the agencies" ) . The issues embodied in the
first proposal¹ were complex and controversial. The revised proposal addresses many ofthe
issues raised in that first proposal, but includes new items and provides greater specificity to
others. SCBA's comments will focus on these additions.
The Lending Test - " Assessment Context."
One of the new features in the revised proposal is the " assessment context" evaluation. As
proposed, the banking examiners would prepare a community and institution " CRA profile"
that would include:
■

■

Demographic data on the community such as median income levels , distribution of
household income, the nature and type of available housing stock, average housing costs
and other data relevant to the community in which the institution operates;
Examiner-developed data on the credit needs of the community and the institution's
service area( s) based on information obtained from community based organizations, state
and local governments, economic development agencies and any information the
institution chooses to provide;
Product offerings and the business strategy of the institution;

1 58 Fed. Reg. 67466 ( Dec. 21, 1993) .

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Page 3
■

■

The " institutional capacity and constraints, " including the size ofthe institution, its
capital levels, the national, regional, and local economic conditions, and safety and
soundness limitations;

The institution's past performance and the performance of similarly situated lenders; and
The contents ofthe institution's public file and any information deemed relevant by the
examiners.2

There are several issues presented by the " assessment context. " SCBA recognizes that the
assessment context represents an attempt by the agencies to address the diversity of our
nation's communities. The credit needs of a rural town may be vastly different from those
of a central city. Regional and other historical differences contribute to the variety of
community needs.
It is, however, problematic to have examiners assess community needs. Examiners may or
may not be members of the particular community they must evaluate. Further, it is difficult
to judge a community and its needs accurately on the basis of an annual review. Such
assessments, to achieve a suitable level of sophistication, take substantial time and resources.

SCBA suggests that the institutions themselves, as members of their communities, are better
situated to determine the credit needs of their communities. No examiner can be expected to
understand fully the character of a community to judge whether one type of facility or
program better meets the community needs over another type of facility or program. Local
lenders have a better vantage point to assess the effectiveness and use of a facility or
program. This cannot be matched on a national or regional examiner level.
While the proposal would provide for institution input into the assessment context, examiners
are not required to use the information provided, nor are the examiners required to disclose
the results of their assessment to institutions. Given the limitations of resources, both
institutional and regulatory, SCBA urges the agencies to defer to the community needs
assessment of the institution itself, subject to subsequent examiner review rather than
examiner assessment de novo.
If independent examiner analysis is maintained, at a minimum, the assessment context should
be provided to the institution at an early stage of development. Otherwise, institutions will
be unable to predict accurately the assessment context under which their lending will be

2
See, eg , proposed 12 C.F.R. §§ 345.21 ( b) , 563e.21 ( b) ; 59 Fed . Reg. 51232, 51288 and
51306 ( Oct. 7, 1994) .

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judged.³ As the goal of regulation should be to promote compliance, advance disclosure is
necessary for an institution to understand the standards by which it will be measured and to
judge its ongoing progress to achieve those goals. To provide the assessment context after
the fact, or not at all, is to provide no guidance on how to comply.
Lastly, the assessment context would compare the performance of a particular institution with
that of " similarly-situated" lenders. As " similarly-situated" lenders can meet the credit needs
of the same community in different, but " innovative" ways, it is unnecessarily restrictive to
compare the activities of one particular institution to another. One institution may engage in
active outreach with the elderly; another may address the credit needs of immigrants. Both
institutions may be of equal size and capacity, yet the revised proposal would require
examiners to compare the substantially different types of lending performance. SCBA
suggests that this result is counterproductive to the purpose of " encouraging" lenders
embodied in the CRA statute.
In addition, " similarly-situated" lenders may include those entities not subject to CRA
obligations. This makes the comparison unduly harsh for the CRA-subject institution as the
universe employed for CRA purposes may be too narrow ( only CRA-subject institutions) or
inappropriate as the performance of a non-CRA lender may be enhanced by the use of
resources not diverted to CRA compliance paperwork.
The Lending Test.
Under the revised proposal, once the assessment context has been determined , institutions
would be judged on their lending in the following manner:
1. The geographic distribution of loans, including the proportion of the institution's total
lending in its service area( s) ;
2. The dispersion of lending throughout the institution's service area( s) ;

3. The number and amount of loans in low-, moderate-, middle-, and upper-income
geographies in the institution's service area( s) ;
4. Borrower characteristics , including the number and amount of home mortgage loans
made to low-, moderate-, middle-, and upper-income individuals;

3 This disclosure should be limited to the institution because ofthe proprietary information on
products and business strategies contained in the assessment. Publication would
inappropriately disclose to competitors the business plan of a particular institution.

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5. The number and amount of small business and small farm loans by the size of the loan;
and
6. At the institution's option, the number and amount of consumer loans to low-, moderate-,
middle-, and upper-income borrowers. "
An institution's record of community development lending, including the number and amount
of community development loans outstanding, their complexity and degree of innovation, and
the number and amount of lines of credit and commitments for community development
lending would also be evaluated within the context of the lending test. An institution would
receive more favorable ratings for using innovative or flexible lending practices to address
the credit needs of low- or moderate-income individuals."
There are a number of concerns about the lending test. First, it would appear to require
geocoding of all loans, not just those in an institution's service area. This is an increase in
expense that has not been justified by the revised proposal and seems beyond the scope ofthe
statutory purpose of CRA. Given the changes in the definition of service area discussed
below, there would appear to be no reason for expanding geocoding requirements in this
manner. Accordingly, SCBA urges that the requirement be deleted.
Further, the definitions of low- and moderate-income borrowers are not consistent with the
definitions used by the Federal Housing Finance Board ( " FHFB" ) . Under the AHP ( 12
C.F.R. Part 960) , " low- and moderate-income households" means " households for which the
aggregate income is 80 percent or less of the area median income. " This difference
between the revised proposal definitions which classify low-income loans as those below 50
percent of the median income is important, given the use by many institutions of the FHFB
Affordable Housing Program to further their community reinvestment efforts.

4

Small businesses and small farms are defined to be those entities with gross annual revenues
less than or equal to $ 1 million. Proposed 12 C.F.R. §§ 345.12( t) & ( u) , 563e. 12( s) & ( t) ;
59 Fed. Reg. 51232, 51288 and 51306 ( Oct. 7, 1994) .
See, eg , proposed 12 C.F.R. §§ 345.22( b) , 563e.22( b) ; 59 Fed. Reg. 51232 , 51289 and
51307 ( Oct. 7, 1994) .

Id.
7

12 C.F.R. § 960.1( g) .

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In addition, the Community Development Banking and Financial Institutions Act of 1994
defines " low-income" using the 80 percent of median income test. SCBA urges the
agencies to conform the definitions in order to facilitate more low- and moderate-income
lending programs and not impede the use of FHFB programs or community development
financial institutions.
Third, and most importantly is the extent to which the elements ofthe lending test
interrelate. The test requires an analysis of both the geography of where loans are made and
the income levels of the borrowers. Yet no guidance is given as to the relative weighting of
either element in arriving at the lending test score. This leaves institutions competing for
loans that would qualify under both sets of criteria with uncertain credit given to loans that
only qualify under one. This type of uncertainty may have the unintended consequence of
increasing competition for low- and moderate-income loans whose collateral is located in
certain census tracts while decreasing the availability of credit for low- and moderate-income
borrowers who wish to move out of certain census tracts. Much more guidance is needed
for institutions to understand how they would be evaluated.
Consortia Lending.
SCBA commends the agencies for revising the treatment of consortia lending as community
development loans eligible for consideration under the lending test." SCBA urged previously
that an institution participating in a consortium which invests or lends in an area that
includes, but is larger than the institution's service area, should receive CRA credit for the
full amount of the investment or loan . The revised proposal was amended somewhat to
reflect the concern that, otherwise, institutions might not continue to invest in community- or
state-wide consortia. These programs enable small and mid-sized institutions to invest in
projects that are either too large for the individual lender because of the institution's lending
limits, are outside its expertise, or are too risky for one institution to bear.
SCBA suggests that greater participation in state-wide consortia lending would be achieved if
the rule is modified to state explicitly that any consortia lending that addresses affordable
housing or economic development needs, no matter where it is located within the state,
qualifies as a community development loan. This type of consortia lending should not be
restricted by a definition more appropriately limited to a particular institution and limitations

8 Riegle Community Development & Regulatory Improvement Act of 1994, Title I,
" Community Development Banking & Financial Institutions Act of 1994, " § 103( 17) ; Pub. L.
No. 103-325, 108 Stat. 2160, 2166 ( Sept. 23, 1994) .
See, e.g., proposed 12 C.F.R. §§ 345.22( d) , 563e.22( d) ; 59 Fed . Reg. 51232 , 51289 and
51307 ( Oct. 7, 1994) .

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of small business size.10 Consortia lending projects are varied and achieve results that far
exceed the resources of a single institution. They should be encouraged, not inhibited by
needless limitations or rigid allocation requirements among participants. SCBA encourages
the agencies to be more flexible in their approach to affordable housing consortia.
SCBA also urges inclusion of certain types of third-party loans in the lending test. The
purchase of GNMA loans, for example, due to their low- and moderate-income borrowers ,
should be expressly permitted under the lending test. Purchases of these types of loans
within an institution's service area assist in the provision of credit under other governmental
programs and should be encouraged. To eliminate them from consideration unnecessarily
inhibits their use and harms one type of government-sponsored program at the expense of
another. Accordingly, SCBA urges the reconsideration of the use of governmentsponsored/insured, third-party loans in the lending test." 1

Assessment Factor.
Institutions would receive a higher lending evaluation for those " innovative" programs used
to promote low- and moderate-income lending. While innovation and imagination should be
encouraged, the heavy weighting of untried or unproven programs over existing programs
such as FHA or VA lending is misplaced . SCBA urges the agencies not to penalize those
institutions who pursue standardized , successful community lending programs. The fact that
a program is no longer new does not mean that it is no longer worth supporting. For FHA
loans in particular, given the complexity of the loan documentation, the agencies may wish to
consider granting additional credit to encourage the offering of this " tried and true" loan
program .
Service Area Delineation.
The revised proposal constricts the flexibility of an institution to delineate its service area.
The current rules provide institutions with alternative methods for delineating their service
area, including the use of the effective lending territory. Generally institutions are able to
use the areas surrounding their branches, their effective lending territories surrounding their

"

10 Indeed, the revised proposal already recognizes this type of exemption for wholesale or
limited purpose institutions. Expansion to all types of consortia lending merely applies to the
exemption to all institutions.
The issues surrounding third-party loans also call into question the handling of " table-funded"
loans or loan purchases made shortly after origination. SCBA urges the agencies to take a
flexible approach to the inclusion of these types of loans in the lending test.

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branches, or any other " reasonably delineated local area that meets the purposes of the
CRA. " 12 Multi-institution ATMs are not included.13
Under the revised proposal, an institution may not delineate its service area in a manner that
reflects illegal discrimination or arbitrarily excludes low-, and moderate-income geographies,
taking into account the bank's size and financial condition and the extent of its branching
network. Additionally, the service area must consist only of whole census tracts of block
numbering areas.14
Generally, the service area must -1. Include those geographies in the local areas around an institution's branches and deposittaking ATMs in which the institution has originated or had outstanding, during the
previous calendar year, a significant number and amount of home mortgages, small
business and small farm and consumer loans ( if the institution chooses to include
consumer loans) , and " any other geographies equidistant from its branches and
ATMs, taking into account political boundaries or significant geographic barriers. "
2. Not extend substantially across metropolitan areas or state lines unless the service area is
located in a multi-state metropolitan statistical area ( " MSA" ) . If the service area is a
multi-state MSA, separate service areas must be delineated for the areas in each state and
for those areas inside and outside of the MSA.
SCBA is concerned over the increase in the number of service areas and the potential
anomalies that the proposed new definition of service area causes because of the lack of
flexibility and clarity in the new definition. The use of the term " significant, " a broadening
of the current " substantial " modifier used to define " effective lending territory, " is intentional
and is designed " to include all geographies around branches and proprietary deposit-taking
ATMs¹ where an institution has made more than a handful of loans. " 16 This is a significant

12
See, e.g., 12 C.F.R. § 563e.3( b) ( 3) .

For example, 12 C.F.R. § 563e.3( b) .
14 See, e.g., proposed 12 C.F.R. §§ 345.41 , 563e.41 ; 59 Fed. Reg. 51232, 51292-51293 and
51310-51311 ( Oct. 7, 1994) .
15 ATMs included in the service area designation are only those that the institution runs for its
sole ( " exclusive" ) benefit ( proposed definition of " Automated teller machine" ) . It is not clear
whether an ATM that is connected with a " brick and mortar" branch that the institution owns
and operates, but is connected to an ATM network, is not included in the service area
designation because network access eliminates any " exclusivity" of use.

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expansion of the existing community delineation. Further, the flexibility of the current rule
with its three alternative methods that granted " substantial leeway ... so long as the
definition is reasonable, " 17 is removed in favor of greater coverage.
Because of the revised proposal's imposition of one test for non-limited purpose or customer
institutions, institutions are now legitimately concerned that the " service area" circle that is
drawn to include areas where " more than a handful of loans" are made will be so inclusive
that it will far exceed common sense. For example, an institution with a widely dispersed
branch network could conceivably face the inclusion of large portions of a state substantially
beyond the cities and towns surrounding each branch . The focus on lending in any area,
rather than where the branches are located, causes institutions to include many more
localities than currently contemplated by the existing regulation. This has the concomitant
effect of requiring the designation of separate service areas for each " community. " Given
the potential for making " more than a handful of loans" throughout a state or multi-state
area, an institution may face the need to consider each and every community in a state
separately as a service area. This result is simply too burdensome both for the institution
and the regulator. Common sense must prevail, otherwise institutions may be less willing to
expand into new areas if the generation of " even a handful of loans" triggers the application
of a new service area. Indeed, in those few instances where the service area concept has
been experimentally applied by an individual institution, the resulting delineation is too
large. 18
In addition, for those institutions whose service areas include multi-state MSAs, rather than
allowing an institution to consider the MSA as one service area, the proposal appears to
require a separate service area for each state that comprises the MSA. SCBA suggests that
this requirement unnecessarily promotes " paperwork over performance, " and urges the
agencies to allow an institution the option to use MSA boundaries, no matter if state lines are
crossed, as service areas.

16 59 Fed. Reg. 51232, 51246 ( Oct. 7, 1994) .

17

Board of Governors ofthe Federal Reserve System, Division of Consumer and Community
Affairs, Consumer Compliance Handbook, Chapter " Regulation BB, " page 76 ( Oct. 1990) .

18 See, e.g. , comment letter of David H. Wells, Jr. , President, Key Federal Savings Bank,
Owings Mills, Maryland, dated November 18, 1994.

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The preamble to the revised proposal states that the issues of multiple service areas will be
addressed via unspecified " examination procedures. " 19 SCBA suggests that the problems
created by the expansive definition of service area will result in case-by-case determinations
by the agencies regarding which communities each institution must include in its service
area( s) . This is simply too cumbersome to be workable for either the agencies or
institutions.
In addition, institutions are required to file their service area maps in the spring of each year.
This could be a substantial filing depending on the final determination of how many service
areas a particular institution has. SCBA urges the agencies to lessen the number and size of
filings required by limiting the number of defined service areas. This is consistent with Title
III of the recently enacted Riegle Community Development and Regulatory Improvement Act
of 1994 that requires the agencies to consider expressly the reporting burdens new or revised
regulations have on the industry."
SCBA notes that examiners have criticized previously the " equidistant" approach and the
resulting circular service area method. Examiners have instructed institutions explicitly not
to draw circles around their branches as a method of delineating their communities. Return
to this previously criticized method would cause compliance frustration and is potentially
inconsistent with existing community delineations. It is possible that certain segments of a
community that the institution currently designates would no longer be included in the new
definition of service area. There are census tracts in which little or no housing exists, for
any number of reasons including zoning, environmental and geographical, that would be
included in a service area using the " equidistant" language. None of these anomalies is
resolved by a hard and fast rule that permits little variation. Removing flexibility in the
definition of service area does not allow an institution to adapt to the community which it
serves. SCBA urges a return to a more flexible approach in defining service area.

19 " Questions ofhow many service areas should be examined during an examination and how
performance in different service areas should be weighed are more appropriately handled
through examination procedures than through regulatory language. The agencies have
therefore omitted from the revised proposal all discussion of examination treatment of
multiple service areas." 59 Fed. Reg. 51232, 51244 ( Oct. 7, 1994) .
20
See, Section 302, " Administrative Consideration of Burden with New Regulations," which
requires an express evaluation of regulatory burdens when establishing an effective date and
Section 303, " Streamlining of Regulatory Requirements, " which requires a review to eliminate
costly rules that may impede the provision of credit. Riegle Community Development and
Regulatory Improvement Act of 1994, Pub. L. No. 103-325; 108 Stat. 2160, 2214-2215.

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Affiliate Lending.
The revised proposal will allow an institution to elect to consider in its CRA lending
assessment the lending of an affiliate if the affiliate reports or collects HMDA data and small
business and/or farm loan data. The agencies may consider affiliate lending practices even if
the institution has chosen not to have the lending considered if the agency determines that
this lending is " integral to the business of the bank. " The revised proposal attempts to
make clear that both the institution and the affiliate may not count the same loan ( no double
counting) ; all the loans made in the service area( s) by the affiliate will be looked at, not just
those that are made to low- and moderate-income borrowers in the service area( s) . This
applies to any entity in the holding company structure, including the holding company itself.
SCBA urges the agencies to restrict the inclusion of affiliate lending to a voluntary basis
only. There are many reasons why separate corporate structures are used for differing types
of activities. Limiting an insured depository's exposure to risk is a reason often cited by the
agencies in support of moving certain types of activities out of the insured depository
institution itself into an affiliate or subsidiary. Given the recent history of class action law
suits filed against mortgage lenders, e.g. , Rodash and the many escrow accounting lawsuits
that resulted in the recent HUD rule, limiting an institution's exposure to the potential of
class action suits is a legitimate safety and soundness goal.
The ability of the agencies to " pierce the corporate veil" and include affiliate lending
unnecessarily weakens the corporate separateness that limits an institution's risk exposure
from its affiliate's activities. This is a precedent that could expand an institution's risk
exposure, not limit it. SCBA urges the agencies to reconsider their need to include affiliate
lending.
Further, inclusion of affiliate lending on a strictly voluntary basis aids the ability of
institutions to comply with the final regulations. In this manner, the joint compliance of
institution and affiliate( s) can be coordinated . To include affiliate lending after the fact poses
tremendous compliance and documentation concerns. CRA compliance will be difficult if
not impossible. Accordingly, SCBA urges the agencies to include affiliate lending on a
voluntary basis only.
Investment Test.
SCBA welcomes the expansion by the agencies of those items that will be considered in the
revised proposal's investment test and the elimination of the risk-based capital ratio.
Qualified investments have been broadened to include a wider variety of investments both in
and out of an institution's service area.

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Among other items included in the list of " qualified investments" are membership shares in
those particular credit unions that benefit low- or moderate-income individuals or address
affordable housing needs. The inclusion of credit union membership shares as qualified
investments for insured banks and savings institutions is particularly ironic given the current
debate surrounding the extension of CRA to credit unions. SCBA believes that those
geographic-based credit unions that are full participants in the financial services marketplace
should be required to comply with CRA. In certain states, & .g. , Massachusetts, they are
already required to do so.
Furthermore, the inclusion of deposits in credit unions within the range of qualified
investments should be explicitly restricted to credit unions that meet the new statutory
definition of a " community development financial institution, " plus any associated
implementing regulations. This would provide consistency with the Riegle Community
Development and Regulatory Improvement Act of 1994.
SCBA continues to urge that the definition of " qualified investments" in the revised proposal
be further clarified to include holdings of Federal Home Loan Bank ( " FHLB" ) System
consolidated obligations and stock, as well as holdings of FNMA and FHLMC debt. The
investment in FHLB consolidated obligations and stock have helped fund the System's
Affordable Housing and Community Investment Programs. These programs have been
leveraged to provide more than $ 2.6 billion in credit to low- and moderate-income
borrowers. Further, at a minimum, institutions holding FHLMC/FNMA stock or debt
should get proportionate credit for the affordable housing share of the GSE under the
Housing and Community Development Act of 1992. Alternatively, the agencies may wish to
encourage FNMA and FHLMC to develop specific low- and moderate-income loan securities
that would qualify under the investment test.

Service Test.
The proposal issued in December 1993 would have based an institution's service test
assessment on the percentage of its branches located in or readily accessible to low- and
moderate-income geographies. The revised proposal recognizes that the actual presence of
brick and mortar branches is not necessarily the sole or best indicator of an institution's
provision of " services" to its community. SCBA supports the inclusion of alternative
delivery systems in the service test, such as banking by telephone or computer, bank-at- work
and bank-by-mail programs.
SCBA notes , however, that the use of networked ATMs is given less weight in the service
test. As the vast majority of ATMs are networked, it would be the rare ATM that would be
considered under any criteria other than as an alternative delivery system. This may restrict
inclusion of those ATMs that an institution owns and services because networked ATMs are
not operated " exclusively" for the benefit of the owner-institution. This would be an

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unfortunate result. If an institution owns and maintains an ATM, it should receive more
consideration than a networked facility that is owned by another entity. SCBA suggests that
the term " exclusive" should be deleted from the definition of ATM and the concept of
maintenance substituted . In this manner, institutions that maintain an ATM whether or not it
is networked, would receive recognition under the service test.
In addition, SCBA suggests that the agencies consider, as an alternative service methodology,
the offering of debit cards. Debit cards provide the convenience of a checking account
without the need for further identification at the point of sale. Debit cards also provide
access to ATM networks, thereby increasing a depositor's ability to gain access to his or her
account and use a wider array of ATMs.

Community Development Services.
In addition to evaluating an institution's delivery of retail banking services, the revised
proposal's service test would also measure the degree to which an institution provides
" community development services. " These are defined to include services that " primarily
benefif low- and moderate-income individuals" 21 and small business and farms " and address
affordable housing . . . or other community economic development needs that are not being
met by the private market. " 22 This is new, and the preamble sheds little light on the types
of services envisioned by this portion of the service test. The agencies may well intend to
give institutions credit for counseling and other educational services provided as part of
ongoing outreach programs, a result that SCBA would support. However, it is not clear that
this is indeed the intention of this portion of the test, nor is it clear that activities of joint
ventures or similar entities that institutions use to provide outreach and counseling programs
would qualify.
SCBA suggests that this portion of the service test needs further refinement to avoid
unnecessarily excluding activities that should be encouraged . The use of the modifier,
" primarily, " is unduly restrictive. Additionally, ending the sentence after " community
economic development needs" would address joint venture and other institution-related entity
activities left out by the additional restrictive language . If these activities are to be
encouraged, they should be encouraged regardless of the type of business structure or
investment .

21
See, e.g., proposed 12 C.F.R. §§ 345.24( c) ( 1 ) ( i) , 563e.24( b) ( c) ( 1) ( i) ; 59 Fed. Reg. 51232,
51290 and 51308 ( Oct. 7, 1994) .

22 Id.

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Assessment Ratings.

Appendix A, " Ratings, " attempts to clarify how a composite CRA rating would be derived
after an evaluation of an institution's lending, service and investments. There is an attempt
in the rating process to prevent institutions from " buying" a rating through superior
performance in service and investment by more heavily weighting the lending performance.
SCBA suggests that few institutions will have the ability to " buy" a rating and that the rating
structure is unnecessarily restrictive in response to a concern that is more apparent than real.
In general, lending is weighted at twice the investment and service tests. This is reflected in
the numerical scores given each test. Lending is generally scored at twice the number of
either service or lending test -- an outstanding lending score is 12, an outstanding service or
investment score is 6. Additionally, another limitation is included that actually emphasizes
the lending score further. If the total of the points given for all three tests exceeds twice the
lending score, the composite score is limited to the number that is two times the lending
score. Such a limitation magnifies the bias in favor of the lending score. SCBA suggests
that the agencies have already reflected the emphasis on lending in the numbers assigned to
the ratings; a further limitation is redundant and unnecessarily discourages service and
investment. There is no need for the " twice lending cap" contained in Appendix A( b) ( 4) ( ii) .
Further, only the composite score is disclosed to an institution. SCBA suggests that
compliance would be encouraged by also disclosing to the institution, on a confidential basis,
the subscores that make up the total CRA rating. It is possible that an institution would not
know that its performance in a particular area such as service is in need of improvement
because its composite score is satisfactory. It is important that the subscores be
communicated if the agencies expect improvement. Otherwise an examiner may return the
following year to find no improvement because the institution thought its performance was
satisfactory. Such confusion can be eliminated by disclosing to the institution both its
composite and subscores.
SCBA also notes with some concern the potential over-emphasis on innovation and the need
to constantly improve performance. While institutions need to reflect changing community
credit needs, unlimited resources cannot be devoted to developing new and untried programs
that reflect neither the market or the actions of competitors. Nor should evolving needs
necessarily result in ever higher standards. Reasonableness needs to be applied in the rating
ofperformance .
Small Institution Streamlined Examination.
SCBA supports the changes made in the revised proposal to the small institution streamlined
examination. Elimination of the specific loan-to-deposit ratio is a positive reflection ofthe
diversity of smaller institutions and the variety of communities that they serve. A small

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Revised CRA Regulations
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Page 15
institution is defined as an institution with total assets of less than $ 250 million by itself, or
is an affiliate of a holding company with total " bank or thrift assets" of less than $ 250
million.

The revised proposal notes that there is a difference between small institutions and those
small institutions that are affiliates of a larger holding company as " [ t] he larger holding
company could be expected to provide support and assistance to a degree not available to a
small independent institution. " While holding companies may provide additional resources to
their subsidiary depository institutions, it is equally true that some do not. SCBA suggests
limiting the inclusion of the holding company assets to those situations where the holding
company provides substantial operational assistance such as data processing or other support
services rather than including those arrangements where the holding company acts more as an
investor.
SCBA notes, however, that reduced documentation and the streamlining of examinations are
meaningful goals for all sizes and types of institutions. The ability to streamline
examinations and/or reduce documentation requirements for institutions with " Satisfactory"
or higher ratings would provide an incentive that would serve to encourage community
reinvestment in a manner consistent with the CRA. SCBA urges the agencies to consider
these and other incentives discussed below as part of the revised proposal .
Strategic Plan Option.
The revised proposal provides more details concerning the strategic plan option . The
revision clarifies the role of community involvement in the development of the plan and
requires the institution to solicit public comment formally on the plan for at least 30 days
through publication in a local newspaper. Only after the public comment period has expired
is the plan eligible for submission to the agencies for consideration.
A submitted plan would be deemed approved if the agency failed to act within 60 days of
submission. The agency would consider the public's involvement in formulating the plan and
any response the submitting institution made to public comments received . Unanimity of
public opinion is not required. Rather, the agencies would evaluate whether the institution
adequately researched the needs of its community and whether, considering the information
that the institution received in the comments, the plan goals are appropriate.
The formal publication requirement raises concerns over the disclosure of confidential ,
business plan information. The revised proposal would allow institutions to submit additional
information to the relevant agency on a confidential basis; however, the publicly available
plan would have to be sufficiently specific to enable the public and the agency to fairly judge
the merits of the plan's goals.

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Revised CRA Regulations
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SCBA urges the agencies to delete the requirement for formal public comment. The strategic
plan is fundamentally a business plan that an institution must formulate after considering all
of the relevant factors, including CRA obligations. It is not a process that the board of
directors can delegate to the public. Directors have fiduciary duties that require the exercise
of informed business judgement. The results of this deliberation are proprietary business
strategies that meet the many goals ofthe institution, including the provision for profit.
Exposure of strategic plans in a " mini-rulemaking" exposes institutions to their competition,
including those not subject to CRA, notwithstanding the ability to " edit" certain types of
information from publication, and improperly changes the role ofthe institution from a
business involved in its community into a public utility. SCBA urges the agencies to delete
the 30-day publication requirement.
In addition, this requirement lessens the desirability of the strategic plan option. This is an
unfortunate consequence as the strategic plan offered the most flexibility to institutions to
meet the credit needs of their communities. SCBA agrees that the strategic plan could have
provided " more certainty and flexibility for those institutions that wish to meet their
obligation in a fashion that they believe may not be appropriately assessed by the standard
performance tests. " For that reason SCBA originally supported the strategic plan as a viable
option for CRA compliance; however, the publication requirement substantially diminishes
this result.
On a positive note, SCBA supports the extension ofthe life of the proposal from two to five
years. Again, this reflects the business plan nature of the strategic plan and reinforces the
need to provide a strategic plan option that reflects the business plan process. Formal public
comment periods are not a part of business plan preparation.
SCBA suggests that, to the extent that comment is solicited on strategic plans , commenters
be required to provide their name, address, and to indicate whether they are commenting on
behalf of any group or organization. Groups, businesses or organizations should be asked to
indicate where they are headquartered ; the nature of their business or activities; whether they
are for-profit or non-profit; how long they have been in existence; the number of members or
employees; and to provide a brief discussion of their mission or strategy. This type of
information would better enable the agencies to evaluate the strategic plan and its impact on
the particular community.
Further, SCBA suggests that the strategic plan contain a range of goals for each level of
performance. This would grant additional flexibility to allow institutions to adjust to
changing environments without the need for formal modification.

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Revised CRA Regulations
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Page 17

Wholesale Institutions.
SCBA supports the inclusion of wholesale or limited purpose institutions by all of the
agencies, including the Office of Thrift Supervision. Inclusion of this option recognizes the
variety of types of financial institutions and that CRA obligations can be met by a variety of
methods. Notwithstanding this recognition of limited purpose institutions, many of the items
suggested by the community development test may be outside the powers of such institutions.
SCBA urges more flexibility in determining how limited purpose institutions meet the credit
needs of their communities.
Data Collection Requirements.
The revised proposed rule expands the data collection process by including a provision which
mandates that race and gender data be obtained and reported to the regulatory agencies. The
data must also be reported, in aggregate form, to the public for small business and small
farm loans that were actually made and for denied applications when a written application is
taken. More specifically, the proposal would require that banks request small business and
farm loan applicants ( both successful and unsuccessful applicants who had provided a written
application) to specify the percentage of the businesses and farms that are owned by
minorities or women.
All institutions with assets of $ 250 million or more would be required to obtain this
information from all borrowers and applicants, except publicly traded companies, with loans
in the original amount of $ 1 million or less, or loans that are reported on the small business
and small farm portion of the Report of Condition. Unlike HMDA, however, the revised
proposal would require the institutions themselves, rather than the agencies, to provide
aggregate reports for dissemination to the general public.
SCBA opposes this new expansion of the CRA reporting requirements. SCBA has a number
of concerns including a borrower's expectation of financial privacy, the tremendous increase
in reporting burden , and the resulting incomplete and inclusive data. It is possible for a
small business loan applicant located in a specific census track to be identified through the
use of the information collected, notwithstanding any attempts to aggregate the data. The
information is specific enough to provide business competitors with sufficient data to reveal a
borrower's business strategies. This is not the type of result any of the agencies truly desire.
SCBA suggests that the data collected will be of little statistical use. HMDA data are
already misinterpreted by the public with rejection ratios inappropriately equating in the
public mind with illegal discrimination. Nothing could be further from the truth; however,
this public perception is not easily changed. Because of the public's current misinterpretation
of HMDA data, it is surprising that the agencies would consider adding to the public's
confusion with limited , if not misleading, additional data. Data collection becomes an end in

:

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Revised CRA Regulations
November 21, 1994
Page 18
itself, with no defined purpose or use. Further, given the data requested, no matter the type
of institution collecting, the data will produce no reliable conclusions due to any number of
reasons including increased specialization by reporting lenders.
SCBA believes that further data collection will actually divert CRA compliance resources
away from lending to low- and moderate-income borrowers. Each dollar spent on
compliance and the collection of data for which there is no stated purpose is a dollar diverted
from use in lending . Recordkeeping requirements should be kept at a minimum in order to
minimize the costs.
Further, as noted above, Title III of the recently enacted Riegle Community Development
and Regulatory Improvement Act of 1994, requires the agencies to consider the regulatory
burden imposed on financial institutions. Clearly, the new data collection requirements run
contrary to this statutory mandate.
Perhaps the most troubling and burdensome portion of the revised proposal's data collection
requirements is the need to code loans for race and gender. The statutory basis for this type
of classification is unclear and SCBA urges the agencies to delete this requirement. The
problems with race and gender classification have been widely expressed by the agencies
themselves ( See, Governor Lindsey's remarks before the Board of Governors of the Federal
Reserve System, September 26, 1994) .
Indeed, the volumes of interpretation necessary to address every possible variation would be
substantial. How are Mom & Pop businesses to be categorized with their 50/50 split? Does
it matter who actually operates the business? For example, what if the family-owned and
operated business is primarily owned by the mother, but operated by the children? Lenders
in community property states will have even more complications as they attempt to determine
which portion of the business is property of the marriage or the individuals prior to
marriage. Even the simplest case of the sole proprietorship is complicated because of the
potential division of ownership under community property laws. The complications are
limited only by the imagination. This is simply an area inappropriate for regulation.
Accordingly, SCBA urges the agencies to reconsider and eliminate the data collection
requirements.
Public File Requirements.
The revised proposal would change the requirements for maintenance of CRA public files.
Unlike the existing rule, the revised proposal would require a copy of an institution's CRA

497

Revised CRA Regulations
November 21, 1994
Page 19
public file at each branch. " This is an expansion not reflected in the current demand for the
CRA public file. Generally, most institutions report little, if any, interest in the CRA public
file. In addition, the revised proposal would increase the contents of the public file. The
public file under the revised proposal would include, in addition to the items currently found:

o List of geographies ( census tracts) that the institution considers to be in its service
area( s) ;
o List of branches and remote service facilities ( " RSF" ) , their addresses ( currently only
required for branches) , and a listing of those opened or closed by the institution
during the current and past two calendar years including addresses and geographies;

•

Number and amount of consumer loans if the institution chooses to report by
geography and income;

O Alternative systems for delivering retail banking services ( optional) ; and
O HMDA statement.
While the above would increase tremendously the burden on institutions to maintain accurate
and up-to-date materials, SCBA members have not experienced a demand for the CRA
materials. One SCBA member with 250 branches had received only 6 requests in a twelve
month period. Yet under the revised proposal, the institution would have to maintain an
extensive CRA public file at each of the 250 branches.
Rather than require each branch to contain a CRA public file, SCBA suggests that the
agencies allow an institution to maintain its file at its home office and supply it as requested
at the preferred branch within five to ten days of the request. In this manner, the most upto-date materials are supplied in a timely manner without the need for the institution to
coordinate distribution of the document to numerous branches.

23
The rule requires the file maintained at a minimum at one branch in a service area ( proposed
12 C.F.R. §§ 345.43( i) ( 2) , 563e.43( i) ( 2) ) . As the delineation of a service depends on the
location of each branch, it is possible that each branch would represent a separate service area
that may overlap with other branch service areas.

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Revised CRA Regulations
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Page 20
Enforcement.
SCBA continues to oppose the expansion of the full use of enforcement remedies and tools to
the CRA evaluation. As noted in our prior comment letter, the CRA statute provides the
agencies with the regulatory authority to " encourage" community reinvestment. An
institution's record of serving its community's credit needs is one of the many items taken
into account when the agencies evaluate an institution's application to expand its deposittaking facilities. The application process was viewed as an excellent opportunity to
" encourage" behavior. The CRA as enacted was intended to have a very limited scope and
to provide in the words of Sen. Proxmire, " a relatively weak sanction. " 25 For the agencies
to disregard the legislative history and the specific enforcement mechanism provided, is to
ignore the underpinnings of CRA, contrary to the intent and language of the statute, and
subject the agencies to legal challenge.
Rather than seek to add punitive remedies, SCBA urges the agencies to provide incentives for
CRA compliance. This would be consistent with the deposit reinvestment mandate in CRA
that sought to remedy the concern that deposits were not used for loans in the communities
from which they were drawn. Incentives, such as streamlined data collection or fewer
examinations " encourage" institutions to strive for improved CRA performance.

Appeals Process.
Because of the complexity of the revised proposal, and the continuing dialogue likely over a
number of the provisions such as the designation of service areas, SCBA urges the agencies
to provide an appeals process at each step of the CRA evaluation. In this manner, disputes
over service area designations or the inclusion of particular investments can be addressed in
advance of the final CRA evaluation in a timely and effective manner. The conclusion of the
examination is too late in the process for an institution to change its business strategy.
Compliance is furthered by an appeals process that gives institutions a timely opportunity to
address differences between examiners and institutions. This is consistent with the new
requirement for an " ombudsman" in the Riegle Community Development and Regulatory
Improvement Act of 1994. An appeals process furthers the agencies' compliance with the
ombudsman provision and provides institutions with a mechanism to address issues before
they result in supervisory or enforcement action.

24 Senate Committee on Banking, Housing and Urban Affairs, Hearings on S. 406, Community
Credit Needs, 95th Cong., 1st Sess . 132, 222 ( 1977) .
25 Id. at 154 ( statement of Sen. Proxmire) .

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Revised CRA Regulations
November 21, 1994
Page 21
Examiner Training.

The revised proposal would rely heavily on examiner training and discretion. SCBA has
supported the need for examiner discretion, yet suggests that, without the details of such
training, the revised proposal reveals a limited understanding ofwhat is expected of
institutions. What will constitute " innovative?" Under what criteria do lending programs
demonstrate " excellent responsiveness" as opposed to " good responsiveness?" When does an
investment program achieve an " excellent level of qualified investments" rather than a
" significant level?" What does " adequate" mean?
These are questions that will have to be addressed in a short time frame to permit both
lenders and examiners to understand what is expected of them. It is difficult to comment
adequately on a complex regulatory scheme if the " details" are that in the process of being
drafted. SCBA urges the agencies to provide an opportunity for comment on the examiner
guidance used to implement the revised proposal.
Incentives.
It is troubling that notwithstanding the statutory goal of " encouraging" reinvestment in
communities, the revised proposal continues to lack incentives for achieving " Outstanding"
ratings. As urged in our previous comment letter, an " Outstanding" rating should provide
additional benefits such as CRA examinations every 18 or 24 months as opposed to annually,
or provide a defense to frivolous complaints filed in the application process. Given the time
and care required for a " Satisfactory" and higher rating, institutions should be rewarded for
achieving these ratings.
Transition.
The agencies anticipate having in place the new recordkeeping requirements by July 1995
with full implementation of the revised rule in January of 1996. SCBA suggests that this is
too short a time to implement all of the changes that this proposal would mandate. A longer
transition period would benefit the industry, regulators and communities. In addition , a more
reasonable transition period would comply with section 302 of the Riegle Community
Development and Regulatory Improvement Act of 1994.26
In summary, SCBA urges the agencies to consider a number of clarifying changes to the
revised proposal. Modification of the service area definition and deletion of the data
collection requirements would aid substantially in focusing institutions on actual lending

Riegle Community Development & Regulatory Improvement Act of 1994, Pub. L. No. 103325, 108 Stat. 2160, 2214-2215, §302 ( Sept. 23, 1994) .

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Revised CRA Regulations
November 21, 1994
Page 22
rather than creating a preoccupation with form and paperwork over performance. SCBA
members want to be in the business of devoting their full energies to investing in their
communities not to be in paperwork purgatory, and we urge the agencies to modify the
revised proposal to encourage, rather than discourage, meeting the credit needs of all
segments of their communities.
Thank you for considering SCBA's views on this matter. Ifyou have any questions
concerning the above, contact Jay Harris at ( 202) 857-3123 or Dawn Causey at
( 202) 857-3106.
Sincerely,

Paul A. Schosberg
Attachment -- Statement of Principles on Housing Opportunities

501

Housing Opportunities: Building on Tradition

STATEMENT OF PRINCIPLES
◆

Savings & Community Bankers of America members are community-based
lenders and are well positioned to enhance the goal ofequal credit opportunity and
to assist in carrying forward government policies in a more coordinated and streamlined manner, efficiently meeting the goal offair access to credit for all people. In
working toward these goals, Savings & Community Bankers ofAmerica members
willbe assisting our communities with fair housing credit, affordable housing and
job creation.
◆

Savings & Community Bankers ofAmerica member institutions their managements and employees strongly endorse the goals of laws and regulations aimed
at combatting discrimination of any form in home mortgage lending or in the delivery of otherfinancial services or products.
◆

Savings & Community Bankers ofAmerica member institutions their managements and employees are committed to ensuring that credit is available to all
segments ofAmerican society on afair and equitable basis. Savings & Community
Bankers ofAmerica members support consumer education that informs consumers and credit applicants ofthe availability and requirements ofcredit products and
provides counselling where problems exist. Savings & Community Bankers of
America members support active outreach to the community as a whole-government, others involved in the credit process and community organizations- in
seeking to provide ongoing consumer education.
◆

Savings & Community Bankers ofAmerica member institutions are committed
to education ofemployees through better training and information on how to work
with applicants of all backgrounds and income levels. Savings & Community Bankers ofAmerica members are committed to ensuring that all applicants are treated
fairly and receive the same degree of assistance and support in seeking credit, regardless ofrace, gender, religion or national origin.

✦ Savings & Community Bankers ofAmerica is committed to working with others in govemment, the private sector and community organizations to assist in efforts to promote affordable housing, available to all qualified persons.

Members ofSavings & Community Bankers ofAmerica are called upon to endorse
and adhere tothese principles. SCBA will provide ongoing assistance to members
in meeting their goals of effectively serving their communities.
-Adopted bySCBA Board ofDirectors
January28, 1993

502

NATIONAL
COMMUNITY
REINVESTMENT
COALITION NCRC

Testimony of
John E. Taylor
President CEO
of the
National Community Reinvestment Coalition
before the
Subcommittee on Financial Institutions
and Consumer Credit
of the
Committee on Banking & Financial Services
ofthe

March 9, 1995

Madame Chairwoman, Members of the Subcommittee, I welcome the
opportunity to appear before you today to discuss the proposed pending
inter-regulatory agency rule governing CRA examination and evaluation.
I am President & CEO of the National Community Reinvestment
Coalition ( NCRC) , this country's largest trade association of community
organizations involved in trying to increase access to credit and basic
banking services to traditionally underserved people and communities urban and rural.
Along with my testimony I have submitted additional information
about NCRC.

I.
II.

Recent History of CRA Regulatory Reform

V.

Summary

Conclusions

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NCRC -John Taylor -Testimony · House banking Subcommittee

I. Recent History of CRA Regulatory Reform
The process to reform the Community Reinvestment Act ( CRA)
regulations began officially on July, 1993, when President Clinton invited
bank leaders, community groups, bank regulators and Members of
Congress to the White House South Lawn where he called upon the bank
regulatory agencies to reform the CRA evaluation and reporting
regulations and systems. Long before that meeting, lenders and community
representatives alike had called for regulatory reform . In fact, this is one
point in which all sides agreed on from the start - CRA regulations needed
revision. To be sure there were some major differences motivating lenders
and community leaders in their requests for reform. The lenders sought
clearer guidelines and a reduction in the amount of time and paperwork
necessary to comply with CRA examinations. Community leaders shared
the notion of the need for clearer guidelines, but emphasized the need for
greater lender accountability under CRA. They maintained that the current
system stressed and rewarded process ( marketing, outreach and public
relations efforts) over actual performance ( lending, branching,
investments) .
To the credit of the Federal Reserve Bank System, the Office of the
Comptroller of the Currency, the Office of Thrift Supervision, and the
Federal Depository Insurance Corporation, they took to heart the
President's request to revise the system of CRA evaluation and set to work
with all relevant parties in developing new rules and regulations.
The bank regulatory agencies ( hereinafter the regulators) held
hearings, from August to September of 1993, in Washington, DC , San
Antonio, TX, Los Angeles, CA, Albuquerque, NM, New York, NY,
Henderson, NC, and Chicago, IL. Hundreds of lenders and community
representatives provided testimony at these hearings. What was unique and
valuable about these hearings is that by expanding the hearing process
beyond the Washington, DC geographic boundaries, a more representative
sampling of testimony was gathered.
Acting collaboratively, the regulators released the initial version of
the proposed regulatory reform rule in December, 1993. The response
was historic. More written comments were received from lenders and
community leaders than for any other request for comment from the
regulators in the history of soliciting public comment. Over 6000 written
comments were received, primarily from the lending community and their
trade associations. As a result of this input the regulators redrafted the
2

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NCRC -John Taylor -Testimony - House banking Subcommittee

rule, and proposed a second revised rule on October, 1994. In that new
rule they responded substantially to the several of the criticisms leveled by
the lending community to the initial rule. In particular, the Market
Capture Ratio was eliminated and the presumptive ' screen' ( a loan-todeposit ratio) for small banks was dropped.
The second rule produced a second round of additional comments,
totaling nearly 2000. Again a majority of comments were received from
the lending community, however general community and public input
nearly equaled lender input. Comments to the first rule ran at a ration of 4
to 1 , with lenders out numbering the community comments . The second
round was nearly a 1-1 ratio, with the community comments equaling the
lender comments.
Overall, the majority of both sides of the issue agreed that the
regulators were on the right track and the proposed rule was an
improvement over the current evaluation and reporting system. Americas
Community Bankers ( then Savings and Community Bankers of America)
endorsed the main proposition of the rule that emphasized performance
over process. The majority of comments from lenders and obviously
community leaders endorsed this aspect of the rule.
The most contentious and divisive issues contained in the latest
proposed rule were twofold; lenders were unanimous in their opposition to
increasing enforcement powers of the regulators. Community groups
were equally adamant in their desire to have the rule include a provision
that required lenders to report small business lending by race, income, and
gender.
It now appears, as a result of a Justice Department legal opinion
given to the regulators, that the issue of increased enforcement powers is
mute. Attorney General Reno's staff has opined that such enforcement
powers are beyond the statutory authority granted the regulators in the
act.

Small business reporting, by race, income, and gender is not
resolved. NCRC believes that the regulators should include such a
provision in the final rule. As the new evaluation system will be based on
the actual lending performance of the bank, it appears that the American
public will have in actuality only a partial perspective on what a lender is
doing in a given community. The Home Mortgage Disclosure Act
( HMDA) data has been immensely valuable to elected officials, and other
community leaders in assessing a particular lender's commitment to a
3

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NCRC - John Taylor -Testimony - House banking Subcommittee

given neighborhood or population. Local governments when choosing
where to deposit their own local tax revenue will often consider a lender's
given performance in serving its neighborhoods. This process has become
known as the 'linked deposit' program or policy. Many of our major
cities, including Boston, Washington, DC, Chicago, Los Angeles and other
communities have such policies. Because HMDA data only gives a partial
picture of a lenders activities in a given community, it makes ultimate
sense that including small business data as well would better serve local
interests.

II. Why Community Reinvestment is important to America
The notion of insisting that all Americans be given a fair & equal
chance to procure a home, start a business, send a child to college, etc., is a
fundamental truth in our American system of governance and policy. Our
expectation is that in order to procure such items we must work hard, save
money, pay our taxes and be law-abiding. A decent job, housing and
children indeed have become synonymous with the so-called ' American
Dream '.
Indeed, immigrants from Ireland, Italy, England, Germany, Poland,
Spain, and from countries all around the world came to America with the
hope that in America you could have economic and political freedom. As
Marvin Olasky noted in his The Tragedy of American Compassion, this
shouldn't have meant freedom to get government support, but " rather the
opportunity to work and move up the economic ladder."
This is precisely the basis and the strength of the Community
Reinvestment Act and of community reinvestment lending in particular.
Potential borrowers may be poor, but they are working poor. In fact most
folks that benefit from community reinvestment type lending are actually
moderate income and from the lower-middle class of our economic
structure . We know this from an analysis of the HMDA data over the past
ten years, and we also know that most folks who benefit from community
reinvestment lending are Caucasian.
Indeed, it was only 1 and 2 generations ago for most Americans
that our ancestors elevated their families from working poor to middle
class through the acquisition of a home. The value of that home grew with
the American economy. The increased equity in a home allowed our

4

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NCRC - John Taylor -Testimony - House banking Subcommittee

ancestors to borrow money to send a child to college, often the first in
their lineage to do so..
It was the acquisition of the home and the growth of equity in it that
allowed our ancestors to borrow money and begin " the family business."
Hard work, self-reliance, frugality, law-abiding these qualities would
give you entree into the American Dream. Unless you were different.
Different was usually translated into race or gender. Hard working
and the other qualities did not allow you to realize the American
Dream. Centuries of discrimination, in particular economic
discrimination, against minorities and women have prevented too many
able Americans from getting a home or starting a small business.
Marvin Olasky makes note of how the Jim Crow laws thwarted
black entrepreneurs . The practice of " redlining" ( where bank officers
used a red pen to outline neighborhoods on a map and instruct loan
officers to not make loans in that area) was outlawed in 1977 for the
express purpose of ending discriminatory lending purposes. McMicheal
Appraiser's Manual - the bible of all appraisal courses up until 1975 ranked the value of a home according to the ethnicity of the families
living in the surrounding neighborhood. If your neighbors were of
English heritage your house was worth more. Northern Italian
neighborhoods were worth less than English, but more than Southern
Italians. African-American neighbors devalued your home more than
Southern Italians. but not as much as Mexican-Americans. And so it
went.
Today, the Jim Crow laws are gone. McMicheal's book is out of
favor and more minorities and women are getting access to homes and
small businesses than ever before.
Without exception the single greatest reason for this is a growing
shared, opinion, something that crosses partisan political boundaries, was
that people believe it is in the best interest of America to have as many of
its citizens as possible contributing to our nation's health and well-being.
A homeowner pays more taxes, contributes to local school systems and an
overall more stable community, regardless of race or gender. A small
business represents the typical American employer and is providing new
job growth faster than the large corporate sector in our economy. This is
true whether the business is owned by an African-American or a woman.

5

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NCRC - John Taylor -Testimony - House banking Subcommittee

No single law has done more to reinforce this shared opinion than
the Community Reinvestment Act of 1977.

III. The Effectiveness of CRA
For most of its history CRA was ignored by the banking industry
and the regulators charged with enforcing the law. Most lenders and
regulators will admit as much.
However, the application of CRA changed dramatically in the late
1980's when the press, the Federal Reserve Bank and others began to
examine the disparate lending treatment between minorities and whites.
When Congress passed the Financial Institutions Reform, Recovery &
Enforcement Act ( FIRREA) it included an important amendment to CRA;
it required and made public for the first time the written CRA evaluations
of lenders. Another critical step occurred at this time. President George
Bush, instructed his Justice Department to investigate unfair lending
practices and subsequently it filled the first fair lending case by the Justice
Department in American history. Subsequently, fair lending filings by
Attorney General Reno also served as a wake up call to the industry.
While debate continues as to what actually proves ' discrimination' in
lending, the dialog is shifting to a more constructive one, where lenders
and community folk focus on how to narrow the documented disparate
lending treatment between minorities and whites.
The Federal Financial Institutions Examination's Council ( FFIEC) in
analyzing the 1993 HMDA data noted that African- American loan
applications were rejected 38 % of the time, whereas their white
counterparts were rejected at a rate of 15%.
In an effort to narrow the gap, more lenders are experimenting with
lower down payment programs, alternative ways of viewing credit quality
and worthiness, taking advantage of Government Sponsored Enterprises
( Fannie Mae & Freddie Mac) , FHA & VA lending programs, the Federal
Home Loan Bank System's programs and other efforts.

6

88-882 - 95 - 17

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NCRC - John Taylor -Testimony - House banking Subcommittee

Today, banking leaders like Richard Rosenberg ( Bank of America)
and Hugh McColl ( NationsBank) boast about the profitability of community
reinvestment lending and of the new market opportunities in serving
traditionally underserved populations.

Myths about loaning to working poor people are being exploded
daily. Lenders with the greatest experience in community reinvestment
lending are singing the praises of strong CRA efforts. These lenders are
looking for new markets and opportunities, rather than running away from
low- and moderate-income and minority lending opportunities. Witness
the President of American Savings Bank, Mario Antoci who opened a
branch in riot torn South Central Los Angeles. While other lenders
avoided doing business in that area ( it has one of the smallest percentages
of branches of any major city neighborhood) Mr. Antoci opened a branch
and it is now the most profitable of the 160 branches in Mr. Antoci's
branch network.
Yet lenders with the least amount of CRA experience fear the law.
Ignorance does indeed breed contempt. Their common lament is that they
fear community reinvestment lending will force them to make riskier
loans. In spite of studies to the contrary, in spite of the success of many
lenders in serving this underserved market, such myths perpetuate. History
has recorded no Congressional or other bailout for community
reinvestment lending. The same can not be said for the deep pocket,
market rate borrowers who necessitated a $ 300 billion savings and loan
bailout.
Lenders, and others, who lack direct experience in community
reinvestment lending are not privy to the knowledge that community
advocates, lenders, and regulators all agree on one thing; that such lending
must always be done in a safe and sound manner. To not include this
aspect as part of your community reinvestment efforts is to undermine true
community reinvestment efforts.

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NCRC -John Taylor -Testimony - House banking Subcommittee

Finally, on the issue of the effectiveness of CRA, there is very recent
proof attesting to its effectiveness. In January, 1995 , NCRC completed a
four year study of lending performance in America's top twenty
metropolitan environments. This study provided an answer to the question;
what would happen if there was no CRA? Because we looked at the
lending records of both CRA-regulated financial institutions and non-CRA
regulated institutions ( Private Mortgage Companies) , we were able to look
at how each performed in meeting the credit needs of low-income,
moderate-income and minorities ( in the case of our study AfricanAmericans and Hispanics) . The results of this comprehensive study were
startling. Off the worst lenders, 65% were private mortgage companies,
and another 2% credit unions. CRA regulated institutions did a far better
job in meeting the credit needs of all Americans, regardless of race and
income. Would lenders serve these underserved populations if CRA did
not exist? Absolutely not. While there may be a few lenders who have
recognized the profit opportunities and new markets, most would go the
route ofthe mortgage companies and seek out only high-income
borrowers. Congress and the American public has the benefit of seeing
how a parallel mortgage market, without a CRA obligation would operate.
The private mortgage companies have made clear their performance in this
area. Absent an obligation they were three times more likely to not serve a
low- or moderate-income or minority borrower than were other
institutions.
They had a response to our study. The Chase Home Mortgage
Corporation stated in their marketing materials that they were targeting
high-income, jumbo mortgage borrowers. Absent an obligation, they
decided to serve only the wealthy. The response from the mortgage
bankers trade association was that they were under no obligation to serve
those communities so they hadn't violated any law. Precisely, and
therefore these mortgage brokers can ' cherry pick' communities in
suburban areas and consciously, and legally, avoid serving other credit
worthy and able-bodied borrowers in near-by communities.
Such a practice is antithetical to our national notions of fairness and
equal access to credit. Further, all American's suffer when other creditworthy working Americans are denied the ability to contribute more to the
economic pie. Congress should act immediately to correct this unlevel
playing field by extending CRA to cover private mortgage companies and
credit unions, both of which benefit from their ability to sell their loans to
the government sponsored secondary market.

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NCRC -John Taylor -Testimony - House banking Subcommittee

IV. Responses to the Subcommittee specific questions

1. Is the CRA fulfilling its original purpose of ensuring
that banks and thrifts are meeting the credit needs of their
communities, including low- and moderate-income

Looking from the perspective of nearly twenty years ago when the
" redlining" of minority and low- and moderate -income was a routine and
open business practice, the CRA has clearly contributed to a slow but
steady reversal of that trend. Across America we can point to examples
where lenders, as a result of the CRA and community advocacy, have
instituted programs to extend homeownership to low- and moderateincome and minority borrowers, increase the stock of affordable housing
through support of non-profit housing developers, finance small business
development, and provide credit for social services vitally needed in
distressed communities. Without the CRA, many lenders simply would not
have had the impetus to launch these programs, preferring to stick to old
habits and established ways of doing business.
While research is scarce on the total benefits of CRA, Federal
Reserve Governor Lawrence Lindsey recently estimated that nearly $ 60
billion has been profitably invested in low- and moderate income
communities. Further, Governor Lindsey estimates that some $ 4-$ 6 Billion
is now annually invested in low-income communities as a result of CRA,
without a huge bureaucracy. NCRC, in an analysis of 300 CRA agreements
negotiated between lenders and community organizations, estimates that
nearly $ 45 billion has been pledged by lenders to target unmet credit needs
in low- and moderate-income and minority communities. In addition,
scores of case studies exist which extensively document successful
reinvestment programs that have produced substantial benefits to the public
and profits for bankers.
Many lenders have discovered through CRA, often to their surprise,
that communities traditionally underserved by lenders represent an
important and profitable untapped market. As Richard M. Rosenberg,
CEO of Bank ofAmerica said at a CRA conference in Dallas in 1993, “ A
substantive CRA program, which targets affordable housing, small business

9

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1
-NCRC -John Taylor -Testimony · House banking Subcommittee

and consumer credit, is fundamentally a way to add business to the
portfolio. In fact, CRA should be approached as a business tool, not a
social program." Enlightened lenders across the country have realized this
as well, seeing the CRA as an opportunity, not a burden.
Yet, unfortunately, these examples of forward-thinking bankers are
the exception, not the rule. The problem of lending discrimination and
redlining is still a persistent and serious problem in our country.
Regrettably, we continue to see that minority individuals are denied loans
at disparate rates, lenders continue to avoid doing business in
neighborhoods because of the racial or housing characteristics, and
creditworthy low- and moderate-income borrowers are shut out of the
home mortgage market because of restrictive credit and underwriting
standards. Weekly we receive studies at our office that document these
practices. Included in the appendix is a list of some of the recent studies.

AJuly 1992 study by Arthur Anderson and National Small Business
United found that nearly half of all small business owners tried to get banks
loans in the past year, and nearly one in every four applicants was turned
down.
According to a 1993 study by the California Reinvestment

A 1992 study of 7,000 new firms in the Journal of Urban Affairs
found that, after controlling for management experience, age and other
characteristics, white males received more than $ 2 in bank credit for every
dollar of equity they put in their business, while African-American males
received less then $ .70 for every dollar of equity.
Statistics compiled by the National Association of Women Business
Owners show that over two-thirds of women-owned businesses surveyed
indicate barriers to working with banks. As a result, over two-thirds report
using business earnings or private sources for short-term and long-term
capital needs, and 76 percent financed their start-up with personal capital.
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As members of this committee are well aware, small business are the
key to economic growth and economic development of any country.
Approximately five years ago commercial lenders in America loaned
roughly $ 800 billion to businesses and individuals. At that same time they
purchased nearly $ 500 billion in government securities. In 1992 that
figure nearly reversed itself, with commercial lenders loaning only $ 500
billion and buying some $ 800 billion in government bonds and other
securities. While the necessity for that occurrence can be debated, the
accompanying credit crunch and recession can not be ignored. When
lenders turn off the spigots, the entire economy suffers. When lenders
disproportionately deny commercial credit to people of different races or
gender, their communities, and all Americans, suffer. We all should be
deeply concerned with these indications that small businesses are not
receiving the credit they need to prosper and grow.
Finally, while small businesses and low- and moderate-income and
minority home mortgage borrowers continue to face unequal access credit,
community-based organizations in distressed communities also have severe
difficulties accessing credit. In many impoverished communities, often the
only signs of hope are local community organizations like churches and
community development corporations that are rehabilitating abandoned
properties, constructing affordable housing, promoting economic
development, an providing critical social services. Yet these organizations,
many with a proven track record, are unable to obtain credit from lenders.
In sum, it is clear that while CRA has moved us closer to the goal of
fair and equal access to credit for all communities, we are still a long way
from that goal. Significant improvements could be made in CRA
compliance to address the problem. Specifically, we believe there are four
steps that could substantially improve the CRA system.
Enforce the CRA: No matter how comprehensive or well-designed a
CRA regulation , if the bank regulatory agencies refuse to enforce the law
and punish poor performers, we will continue to be plagued by the same
problems. The historical record of the agencies is dismal in this area.
Corporate applications of lenders with poor records are routinely given
rubber stamp approvals, despite substantive and serious issues raised in
public comments. In 1993. only two applications were denied by the
Federal Reserve Board.

Train Examiners : Every regulation will require a degree of
interpretation by individual bank examiners. The CRA rating system will

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continue to be unpredictable and inconsistent if examiners are not trained
with the same seriousness and effort that safety and soundness examiners
are trained. In addition, examiners need to understand the complexities of
community development lending if banks are to be fairly and competently
examined. Without comprehensive examiner training, CRA ratings will
continue to border on the threshold of meaninglessness.
Promote Public Participation: Community and consumer
organizations have played an essential role in the CRA system as watchdogs
and as critical sources of information. Yet the regulatory agencies in the
past have consistently been hostile to the inclusion of the public in the CRA
process. The public needs to be included in the process through more
public hearings on corporate applications, extensions ofcomment periods,
and increased formal comment opportunities.
Provide Essential Public Information: If data is lacking on a bank's
actual performance, CRA ratings will continue to be inadequate. In
addition, if the public is to continue its essential role as watchdog, Congress
and the regulatory agencies must make more public data available on small
business and other community lending by race, gender, and census tract.

2. Does the CRA overlap or conflict with other existing equal
credit and fair housing laws?
CRA requires lenders to affirmatively meet the credit needs of the
community, rather than simply refrain from discriminating against
protected individuals and groups, which are the basis for the Fair Housing
Act ( FHA) and the Equal Credit Opportunity Act ( ECOA) . In addition,
unlike the FHA and ECOA, CRA lacks the enforcement powers and
remedies that the fair lending statutes grant the enforcement agencies.
The example given earlier in this testimony of how the private
mortgage companies avoid central cities and rural areas, because of the
lack of a CRA law that requires them to affirmatively meet the credit needs
of all credit-worthy borrowers in a given geographic area, is
demonstrative of how vital is CRA. Mortgage companies could, and do,
decide to exclusively serve high income people and as long as they didn't
discriminate against a high income minority they would be immune from
meeting the credit needs of other less wealthy borrowers.
Further, the cases brought by President Bush & Clinton would have
been ineffective if only CRA was the basis ofthe complaint as it has no
statutory language allowing for punitive or other court ordered damages.
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NCRC -John Taylor -Testimony - House banking Subcommittee

Each ofthese laws serves a distinct purpose and compliment each
other.
3. Would the revised proposal address the problems lenders see
with the current system, which they believe is vague and
subjective and impose undue paperwork? Specifically, how
would the proposed race and gender reporting requirements on
small business and agriculture loans affect depository
institutions?
Both community and consumer organizations and lenders agree that
some aspects of the current regulations place undue emphasis on the
specific process a lender goes through to comply with CRA, rather than the
actual loans and investments a lender made to meet the credit needs ofthe
community. In addition, because the existing regulations provide no clear
standards or criteria to assess performance, a substantial degree of
subjective interpretation is required of individual examiners. With
lenders unsure how their performance will be judged, there is a tendency
to document more than is necessary, creating the perception of the alleged
" paperwork burden." However it should be stressed that under the existing
regulations banks are only required to maintain documentation that " is
useful to the institution's own management needs" ( 1992 Interagency
Documentation Guidelines)

Nevertheless , the banking industry -- which had been clamoring for
more objective assessment criteria throughout the process -- strongly
opposed the market share proposal. This is in no doubt due to the fact that
many institutions would have failed the test, rather than the more technical
objections that were raised against the proposal. For example, a recent

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NCRC - John Taylor -Testimony - House banking Subcommittee

study of Washington D.C. lenders by Community First -- an NCRC
member- indicated that seven out of fifteen banks would have failed the
test. Similar internal tests conducted by lenders no doubt convinced the
banking industry to mount a full scale lobbying effort against the proposal.

Equally important, however, is the fact that the proposed regulation
calls for the reporting by aggregate of small business lending by race and
gender. This is critical information to determine whether the credit needs
of small businesses are being met, as I have indicated earlier in my
testimony. Nevertheless, the regulation could be substantially improved in
this area by requiring the public disclosure of small business and farm
loans by census tract.
Census level reporting of small business lending is absolutely
essential to determine if lenders are truly meeting the credit needs of
small businesses and farms located in low-income and minority
communities. Reporting small business lending on an aggregate level
under the revised regulation, rather than by specific census tract,
does not allow neighborhoods and communities to determine how
well their particular community is being served by lenders. Imagine
a small neighborhood in Los Angeles, California trying to assess a
large statewide bank's small business lending record in their
community based on the aggregate data disclosed under the revised
regulation. It is simply not possible.

The central focus of CRA has always been on place,
neighborhood, and community. Small business and farm data must
reflect this founding tenet of CRA. Accordingly, we believe that any
meaningful CRA reform must include HMDA-like small business and
small farm reporting by race, ethnicity, gender, and by census tract.
Anything less is an abrogation of the regulatory agencies obligation
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NCRC - John Taylor -Testimony - House banking Subcommittee
to assess bank's record in meeting the credit needs of the entire
community.
The banking industry has responded in comments to the regulatory
agencies that reporting small business data would be burdensome. We
believe that this claim is groundless. Disclosure of small business loans by
census tract, race/ethnicity, and gender amounts to little more than adding
spaces to a loan form. In fact, as a result of CRA agreements with
community organizations, many banks are already collecting small business
data by race, gender, and income. Chase Manhattan Corporation, Suntrust,
Bank of America, and Barnett Banks currently collect this data.

In addition, a recent survey of banks by the Bank Insurance Market
Research Group indicates that 49% of banks surveyed currently collect
data on applications, denials, and approvals on small business loans in lowand moderate-income areas and 54% already geocode their small business
loans.
4. Since the original intent of the CRA was to meet community
credit needs, and not result in credit allocation, would the
revised rules meet that original goal?
The proposed regulations stipulate that lenders are not required to
" make loans or investments, or to provide services that are inconsistent
with safe and sound operations" ( Section 25.21 d.) . In addition, no level of
lending to low- and moderate-income geographies or borrowers is
mandated in the proposal nor are banks required to offer loan terms that
are below market rate. Given these parameters, it would be a stretch to
argue that the proposal amounts to credit allocation.

5. What are your views on recently
would give qualified small institutions
at least " satisfactory" a " safe harbor"
having an application denied on CRA

introduced legislation that
and those with ratings of
protecting them from
grounds?

NCRC strongly opposes H.R. 317. The legislation would
fundamentally change CRA in three ways, all of which would amount to
the de-facto repeal of the CRA. First, the legislation would establish a
" safe harbor" for applications covered by CRA for lenders that have
received a " satisfactory" or " outstanding" rating in the last two years.
This provision would exempt 94% of all banks from challenge by
community groups and local governments, eliminating public

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NCRC - John Taylor -Testimony - House banking Subcommittee

participation and review in the CRA process. As the regulatory
agencies have acknowledged, CRA ratings under the existing regulation
bear little relationship to actual performance in meeting the credit needs
of low- and moderate-income communities. Providing regulatory
benefits to banks based on CRA ratings that have little integrity would
therefore be a grave mistake.
Second, the legislation would exempt from CRA banks under
$ 100 million in assets and located in towns under 25,000 in population.
Covering roughly 70% of all lenders, the 57 million people residing in
rural communities would be especially impacted by this exemption.
Small lenders have not shown better fair lending performance than the
rest of the industry to merit this exemption, nor do their substantial
profits indicate that small lenders face a substantial regulatory burden.
In the first three quarters of 1994, small commercial banks under $ 100
million in assets earned nearly $ 1 billion in profits, and 95% were
profitable. In addition, small lenders will be evaluated under the new
CRA regulations according to a streamlined assessment procedure,
relieving any regulatory burden small banks face under the existing
system.
Third, the legislation would subject banks under $ 500 million in
assets and a CRA rating satisfactory or better to a weaker form of CRA
evaluation. Under this provision, approximately 94% of all lenders
would no longer be assessed on their actual performance in meeting the
credit needs of their community. Lenders would only need to show that
they have " internal policies" to lend fairly. This effectively allows
institutions to self-certify their performance under CRA, roughly
equivalent to allowing pharmaceutical companies to promise that their
drugs are safe or letting manufacturers pledge that their industrial waste
does not harm the environment.
In sum, these amendments would so weaken the CRA that it would be
effectively eliminate the law. We urge Congress to continue support the
principle of fair and equal access to credit and oppose the legislation.

V.

Summary and Conclusions

The American Public has struck a deal with our banking industry.
We have said to lenders; we're going to give you an advantage not afforded
any other industry, we will guarantee your business. We will promise
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NCRC - John Taylor -Testimony - House banking Subcommittee

anyone who walks in your banks doors that regardless of how well or how
poorly your bank business performs, regardless at how inept a certain loan
officer may be, regardless of downright poor business decisions on the part
of the banker, we, the American taxpayer, will guarantee that you will not
lose your investment, or your deposit in this bank. In exchange, the
American taxpayer wants something in return. We want you to serve the
credit needs of the communities from which you take deposits. We want
you to extend credit and services to the people in this community
regardless of what they look like or whether or not they are wealthy. We
expect you to make loans only that are safe and sound and to creditworthy
borrowers.
This is the American public's deal with American Bankers. And its
worked out well for them, bank stocks are way up. In fact, 1992, 1993 and
1994 were the three most profitable years in the history of American
Banking.
Recently, the American taxpayer was asked to hold up its end of this
deal. Congress allocated over $ 300 billion of our money to bailout this
industry. It is now time for Congress to look out for the interests of the
American taxpayer and do everything in its power to insure that the
lenders now live up to their end of the deal.
Our urban and rural communities are in dire need of credit and
capital. More lenders must be brought into the equation as the needs are
great. The new regulations which call for measuring the actual lending
performance of this industry in these areas must be strengthened and
released immediately. These regulations will let community people,
Congresspeople, Mayors, Governors and just plain citizens know the real
story of who is lending to our neighborhoods and who is not. As Congress
looks for ways to reduce the deficit, it should be very mindful of looking
for ways to revitalize and capitalize our neighborhoods. America's urban
and rural communities are asset poor, but rich with entrepreneurs, creditworthy potential home-buyers and communities looking to pull their
neighborhoods out of destitution. They seek to do this the old fashion way,
hard work, commitment and borrowing money. They need your help in
this endeavor.
CRA is not an unfunded regulatory mandate. There is no
Congressional line item to pay for the bank regulatory agencies. No
taxpayers funds go to regulating and overseeing this industry.

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NCRC -John Taylor -Testimony-House banking Subcommittee

The Contract with America calls for helping families reach the
American Dream. While we could debate whether you help families reach
this dream by cutting school lunch programs, housing development funds,
oversight of campaign contributions, education and other items, one thing
is crystal clear. You don't have enough money to help families realize the
American Dream. But you do have the power to do so.
If you believe nothing else that is said today, believe this. CRA has a
proven track record. It is not about credit allocation, nor is it about
affirmative action, but it is about spreading capitalism fairly to all
Americans. Access to credit under CRA is about self- reliance and
responsibility. CRA is this country's best hope for reversing dire
economic conditions in our urban and rural communities. It is time to put
partisan politics aside, recognize that the interests of the American public is
served by developing stable communities, with more home-owners and
business owners. You have served the banking industry well, they're in
good shape, America's neighborhoods and working class people now need a
similar commitment. Get these regulations out now, include small business
lending reporting, expand CRA coverage to mortgage companies and credit
unions , and help NCRC and others applaud those lenders who have made a
real commitment.
Thank you for listening to my comments. I respectfully request that
the full amount of my written testimony be entered into the official record.

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AMERICA'S

WORST

LENDERS !

National Community
Reinvestment Coalition

Washington , DC

January, 1995

CORRECTION

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522

NATIONAL
COMMUNITY
REINVESTMENT
COALITION NCRC
AMERICA'S WORST LENDERS

John Taylor
President & CEO
The National Community Reinvestment Coalition ( NCRC) has worked for years to
increase fair and equal access to credit for traditionally underserved people. Toward that end,
NCRC and its 440 plus member organizations, have forged strong working partnerships with
lenders, elected officials, regulators, secondary market leaders, academics and others. Alot of
good has resulted from those efforts. Families who may never have owned a home are now proud
homeowners, minority and/or women owned small businesses have become a reality, lenders have
opened branches in poor neighborhoods giving economic hope and stimulus where none existed.

forward to the time that such studies are unnecessary.

523

ABOUT THE AUTHORS

Chris Bohner is a research analyst at the National Community Reinvestment
Coalition. He holds a M.A. in Political Science from York University in Toronto, Canada and
a B.A. from The George Washington University. He has conducted a number of local HMDA
studies on bank lending patterns with community-based groups, including Washington D.C.
William Milczarski is Assistant Professor in the Department of Urban Affairs and
Planning at Hunter College. He holds a Ph.D in Urban and Regional Planning from The
University of Michigan. He has participated in many research projects and written several
papers using data collected under the Home Mortgage Disclosure Act ( HMDA) . He has
also consulted with a number of community groups to help them understand HMDA data so
that they could effectively use the information in community reinvestment efforts.

524

TABLE OF CONTENTS

Executive Summary

1

I. Introduction

3

A. Scope of Study
1. Fair Lending Performance Indicators
2. Scores, Ranks, and Grades

6889

B. Highlights and Findings of the Study

10

C. Recommendations

13

8
03
4

II. The Worst Lenders in America 1990 -- 1993

14

A. 1990 --- 1993 Data Tables by Lender
1. List ofLenders ......

16
17
19
21
23
25
27

A. 1990-1993 Tables by MSA

III. 1993 Data Tables
B. 1993 Tables by Lender

2. Marketing to Minorities
3. Denial Ratios

B. 1993 Tables by MSA
3. Denial Ratios ..........................
4. Minority Approval Rates .........

29
.... 30
.32
.34
. 36
38
40
42
44
45
49
53
57
.... 61
65

69
70
74
78
82

525

5. Low- and Moderate-Income Applications
6. Low- and Moderate-Income Approvals
IV. 1990-1993 MSA Grades and Rankings
A. Anaheim-- Santa Ana
B. Atlanta .......

I. Los Angeles -- Long Beach

N.
O.
P.
Q.
R.
S.

Philadelphia
Phoenix
Riverside -- San Bernardino
San Diego
St. Louis
Tampa St. Petersburg -- Clearwater

V. Aggregate MSA Data Tables
A. Median Income by MSA
B. Population by MSA
C. Aggregate Percentage of Applications by MSA
E. Minority Applications by MSA
F. Minority Approvals by MSA ......

86
..... 90
94
96
97
98
99
100
101
102
103
104
.... 105
106
107
108
109
110
111
112
113
114
115

116
118
119
120
120
121
121
122
....... 122

526

EXECUTIVE SUMMARY
This report America's Worst Lenders A Comprehensive Analysis ofMortgage Lending in
the Nation's Top 20 Cities, analyzes the performance of lenders in serving the credit needs of
minority and low- and moderate-income individuals. Produced by the National Community
Reinvestment Coalition ( NCRC) -- this country's largest CRA coalition, comprised of over 440
community-based organizations dedicated to increasing fair and equal access to credit for all
Americans the study examines over 2000 institutions over a four year period using Home
Mortgage Disclosure Act ( HMDA) data. HMDA is a 1975 law requiring detailed disclosure of
home mortgage lending by location, race, and income.
Utilizing a unique methodology for measuring fair lending performance, the study
examines whether mortgage lenders are actively marketing home loan products to minorities,
rejecting minority applicants at a higher rate than white applicants, and lending to blacks and
Hispanics at a reasonable level. In addition, the study evaluates the performance of lenders
in marketing and lending to low- and moderate-income individuals. To ensure that the
methodology fairly evaluates lenders, the performance of lenders is judged in the context of
local market conditions and in relation to the performance of other lenders.
The most significant findings on mortgage lending that are detailed in the report are:
Fifty two large mortgage lenders are identified in the study as consistently
underserving low- and moderate-income and minority individuals over a four year
period ( 1990-1993) .
Four institutions performed poorly in three or more metropolitan areas. These lenders
are The Prudential Home Mortgage Company, Chase Home Mortgage Corp, G.N.
Mortgage, and Margaretten & Company.
For the year of 1993, 126 lenders are identified in the study for their inadequate
performance in meeting the credit needs of minorities and low- and moderate income
individuals. Five of the lenders have poor records in five or more metropolitan areas,
including The Prudential Home Mortgage Company, G.E. Capital Mortgage Services,
Countrywide Funding Corporation, Chase Home Mortgage Corp, and American
Residential Mortgage.
Mortgage companies dominate the list of America's Worst Lenders. Of the 52 lenders
identified in the 1990-1993 period, 34 are mortgage companies ( 65%) , 17 are
commercial or savings banks ( 33%) , and 1 is a credit union ( 2%) . Similar patterns
exist for the worst lenders in 1993. Eighty eight of the 126 lenders are mortgage
companies ( 70%) , 37 are commercial banks or savings banks ( 30%) , and less than 1%
are credit unions. Mortgage banks are not covered by the Community Reinvestment
Act, a 1977 law prohibiting " redlining" .
In every metropolitan area in 1993, minority approval and application rates increased.
However, when examined over a four year period, sixteen out of the twenty MSAs in 1993
saw substantial decreases in minority application and approval rates when compared to
1990 data.

The National Community Reinvestment Coalition 202-986-7898

1

527

In 17 out of the 20 MSAs, application and approval rates for low- and moderateincome individuals increased from 1992 to 1993. However, over a four year period, 13
out of the 20 MSAs saw a significant decline, in low- and moderate-income application
rates and 12 out of the 20 saw reductions in approval rates.
In light of the findings of this study, NCRC recommends that the bank regulatory
agencies, the Department of Housing and Urban Development ( HUD) , the Justice
Department, Congress, and other government agencies charged with enforcing fair lending
laws, undertake a number of steps to ensure lenders are held accountable for their

The full report contains a detailed description of the methodology used in the study, a
discussion of the findings, a list of the worst banks with detailed data tables, and aggregate
data on each of the metropolitan areas.

2

The National Community Reinvestment Coalition⚫ 202-986-7898

528

SECTION I :

INTRODUCTION

The National Community Reinvestment Coalition 202-986-7898

3

529

I. INTRODUCTION
The American dream is based on the promise that through hard work and enterprise
all Americans can achieve economic self-sufficiency and success, including the ability to
purchase and own a home. Homeownership, apart from the benefits of tenure that it provides,
also can serve as a path out of poverty, providing an asset that can be leveraged to start a
business, send a family member to school, or even serve as an economic backup in times of
financial emergencies.
Unfortunately, for many working people the goal of homeownership is unattainable.
People of color, and other working Americans with moderate incomes, disproportionately find
the door to homeownership shut closed by lenders who fail to do business in low- and
moderate-income and minority neighborhoods. Similarly, many existing homeowners in
distressed communities are unable to get loans for needed improvements to their homes
( contributing to further decline of a neighborhood) , or to refinance their high interest mortgage
loans obtained during the tight monetary policies of the eighties. Denied access to the full
benefits of the mortgage credit markets, working Americans lose faith in the fairness and
justice of our economic and political system, contributing to the cynicism and despair that is
so prevalent today.
Past research of the mortgage lending industry indicates that lending discrimination
and " redlining" is indeed a serious and persistent obstacle to homeownership. Since passage
of the Home Mortgage Disclosure Act ( HMDA) nearly twenty years ago -- a 1975 law
requiring detailed disclosure of home mortgage lending by location, race, and income -analysis of HMDA data by community-based organizations, academic and research
organizations, and government bodies shows year after year that minority and low- and
moderate-income communities and individuals face unequal access to housing credit.1 These
studies suggest that the color of an individual's skin, and the income and racial/ethnic
characteristics of neighborhoods, play a large role in determining the allocation of housing
credit in our nation.
In response to this research, and years of advocacy by community and civil rights
groups, some public officials have acknowledged that lending discrimination and redlining is a
serious problem and have taken affirmative steps to address it. Unfortunately, this reflects
only a portion of the governing and regulatory community. For decades the federal regulatory
agencies the Department of Justice, the Department of Housing and Urban Development
( HUD) , and the bank regulatory agencies have routinely neglected fair lending laws like
the Community Reinvestment Act ( CRA) , the Fair Housing Act ( FH Act) , and Equal Credit
Opportunity Act ( ECOA) . Similarly, on many occasions Congress has threatened to repeal
existing fair lending laws.

1 Recent studies include: ACORN, Treading Water: Racial Disparities in Home Mortgage Lending in 23 Cities,
Washington D.C., 1993 .; Jonathan Brown, Racial Redlining: A Study ofRacial Discrimination by Banks and
Mortgage Companies in the United States, Essential Information, Washington, D.C., 1993.; Federal Reserve Bank
ofBoston, Mortgage Lending in Boston: Interpreting HMDA Data, Boston, 1992.

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Recently, however, the Clinton administration has taken important steps to address
the issue of lending discrimination. HUD and the Justice Department have begun to enforce
some of the fair lending laws, and the bank regulatory agencies have made efforts to create a
more objective and consistent CRA regulation. Yet the industry, with some exceptions, has
opposed these efforts, arguing that lending to minority and low- and moderate-income
communities and individuals has substantially improved. In a familiar refrain, banks and
mortgage lenders admit that there may be some problems, but that the data will improve
" next year" .
In light of these claims by the mortgage lending industry that their performance is
improving, the National Community Reinvestment Coalition ( NCRC) -- this country's largest
CRA coalition, comprised of over 440 community-based organizations dedicated to increasing
fair and equal access to credit for all Americans -- has undertaken a comprehensive study of
the performance of lenders in serving the credit needs of minority and low- and moderateincome individuals. Examining over 2000 institutions over a four year period, the study
concludes that 52 large mortgage lenders with a significant market presence have
consistently underserved low- and moderate-income and minority individuals. In addition,
126 lenders with poor records were identified for the year of 1993 ( the most up-to-date data) .
The study also shows that the performance of the lending industry as a whole is performing
poorly when examined over a four year period and compared to demographic data.
Contrary to the claims of the mortgage lending industry, the results of the study
indicate clearly that many lenders are not fairly serving the credit needs of low- and
moderate-income and minority individuals. This may be due to overt and conscious
discrimination by individual lenders, but it also may be the effect of institutional policies and
practices that have the unintended effect of underserving these groups. Nevertheless, the
results clearly underscore the need for more effective enforcement of CRA and fair lending
laws. Additionally, these results should aid elected representatives in shaping policies and
legislation that requires lenders, including mortgage companies, to be more accountable and
responsive to the needs of the American public.
While the study focuses on poorly performing lenders, it should also be stressed that
some lenders are doing a good job in meeting the credit needs of minority and low- and
moderate-income individuals. In addition, many institutions have aggressively instituted
policies to rectify past discriminatory practices and -- often to their surprise -- have found that
underserved markets represent an untapped and profitable opportunity to expand business
and market share. These are positive developments, but as the NCRC study shows, there
still is an unacceptably high number of large mortgage lenders that have yet to embrace the
principle of fair and equal access to credit.
The next three subsections provide detail on the methodology used to determine the
worst mortgage lenders in the study, discuss some of the highlights and findings in the study,
and offer recommendations to Congress, the Justice Department, HUD, and the bank
regulatory agencies that would advance the goal of equal access to credit. Following these
sections, detailed data is provided on the performance of lenders examined in the study.
Section II provides data on lenders that exhibited poor lending records over the last four
years, Section III provides data on the 1993 worst lenders, Section IV focuses on lenders in
each of the metropolitan areas examined, and Section V presents aggregate data on the
industry.

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A. Scope of Study
This analysis of fair lending performance of mortgage lenders is based on four years
( 1990 through 1993) of Home Mortgage Disclosure Act ( HMDA) data for the twenty largest
Metropolitan Statistical Areas ( MSAs) , as measured by 1990 Census population data ( see
Table V. B) . Data was provided by the Federal Financial Institution Examination Council
( FFIEC) .
Mortgage lenders examined in the study are evaluated in each MSA according to their
performance in five categories: marketing to minorities, minority-to-white rejection ratios,
lending to minorities, marketing to low- and moderate-income individuals, and lending to lowand moderate-income individuals.2 Lenders are awarded a rank score based on performance
in each of the categories, which are then averaged to provide an overall rank and grade. The
performance of lenders are judged in relation to industry averages for minority application and
approval rates, and industry averages for low- and moderate-income application and approval
rates.
The criteria developed in this study offer a fair and straightforward method for
evaluating a lender's performance in meeting the housing credit needs of low- and moderateincome and minority individuals. Under the NCRC methodology, an institution selected for
the worst lender list has the following characteristics: a small percentage of applications from
minorities compared to the rest of the industry, a relatively high minority-to-white denial rate,
a low approval rate for minority applications compared to the rest of the industry, and a low
percentage of low- and moderate-income applications and approvals compared to the industry.
Clearly such institutions with these characteristics are not meeting the housing credit needs
ofthe entire community.
More importantly, the methodology is fair because it judges lenders in the context of
local market conditions and in relation to the performance ofother lenders. In many respects
this may be too generous to lenders because the industry itself ( in a given MSA) may be
performing poorly in meeting minority and low- and moderate-income credit needs. In every
MSA but two ( Los Angeles and Riverside) , the percentage of minority applications received
by the entire mortgage lending industry was substantially below the minority population. For
example, in Atlanta blacks and Hispanics made up more than 27 percent of the population, yet
the industry received less than half that rate in minority applications ( 12.47%) . This result
holds true for most of the MSAs examined in the study. Consequently, many lenders that are
identified in this study are lenders whose performance is poor in relation to an industry that is
already underperforming.

2 The methodology for this study was influenced in part by: John Lind, Expanded Methodfor Analyzing HMDA
forthe Evaluation ofa Lender's Community Reinvestment, CANICCOR, San Francisco, 1993.; Peter Skillern and
Margrit Bergholz, An Analysis of 1992 Mortgage Lending Activity to African-American and Low Income
Households in North Carolina's Metropolitan Statistical Areas, Community Reinvestment Association ofNorth
Carolina, Durham, 1994.

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The study is also fair because it effectively addresses criticisms voiced by the lending
industry against previous HMDA studies that focused solely on minority-to-white denial
ratios to judge performance. High denial ratios may not indicate disparate treatment, but may
in fact be the result of aggressive outreach and marketing in minority communities. These
efforts may increase the number of applications, and the number of approvals, but also attract
a larger number of applications that cannot be approved because of very poor credit. This
would increase the denial ratio, but may not be a meaningful indicator of a lender's treatment
of black and Hispanic applications. Conversely, a lender may have a low denial ratio, but
make relatively few loans or solicit applications from minorities. A low denial ratio in this
situation also may not be meaningful.
Nevertheless, high denial ratios, without a significant increase in minority applications
and approvals, could suggest that minorities are subject to disparate treatment by lenders
and should raise a red flag for regulators and the public. In addition, even if a lender has a
high number of minority applications and high denial ratio, there still may be problems with
the lender. Ultimately, a close examination of loan files is required to fully determine if a
lender is discriminating. The strength of the NCRC methodology is that minority-to-white
denial ratios are evaluated in the context of minority applications and approvals..

Finally, the methodology is valuable because it not only looks at lenders at one
moment in time, but also evaluates performance over a four year period. This provides a more
comprehensive picture of how a particular mortgage lender is performing.
While the study is an effective method for judging the fair lending performance of
lenders, it nevertheless has a number of limitations. Rural areas, which are significantly
underserved by the lending industry, are not examined in the study. Community development
lending, small business, and consumer lending are not assessed in the study, other forms of
lending for affordable rental housing are not addressed, and the study lacks a geographic
analysis of lending. Additionally, some lenders may be receiving credit under the
methodology for forms of housing development which are detrimental to community
reinvestment ( such as financing rapid suburban expansion) .
Below is a description and explanation of each ofthe fair lending indicators, the
method for ranking banks and determining the worst lenders, and a description of the
parameters of the study.

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1. Fair Lending Performance Indicators
Marketing to minorities shows how each institution compares to the overall market
in the MSA in terms of the total number of applications received from minorities. It is referred
to as a marketing score because it is intended to show the degree to which an institution
strives to get applications from minority individuals and communities . For example, under
this test, if Lender A only received 5 minority applications out of 100 ( 5 percent) , yet the
industry as a whole averaged 15 percent minority applications, Lender A would receive a low
score on this test. Conversely, if Lender B received 25 minority applications out of 100 ( 25
percent) it would receive a high score because it would be significantly above the industry
average.
The minority to white denial ratio is a direct comparison of the percentage of minority
applications denied compared to the percentage of white applications denied. Under this test,
for example, if lender A rejects minority applicants 50 percent of the time, but only rejects 10
percent of white applications, the denial ratio would by 5 ( i.e. 5 to 1) . The lender would
receive a low score. A high minority-to-white denial ratio may indicate that a lender is
treating minority applicants unfairly compared to white applicants. However, a high denial
ratio may be justified if a lender is aggressively marketing to minority individuals and
communities. Additionally, the denial ratio may not be meaningful if a lender receives few
applications ( see above in the Scope of Study for more explanation) .
Lending to minorities is analogous to the marketing indicator. The difference is that
only applications that are approved go into computing the score. Under this test if Lender A
approved only 3 minority applications out of 100 ( 3 percent) , yet the industry as a whole
averaged a 13 percent minority approval rate, Lender A would receive a low score on this
test. Conversely, if Lender B approved 20 minority applications out of 100 ( 20 percent) it
would receive a high score because it would be significantly above the industry average.
Marketing to low- and moderate-income applicants and lending to low- and
moderate-income applicants are calculated and interpreted in the same way as the scores
for minority applicants. The difference is that they intend to detect an institution's level of
effort with respect to low- and moderate-income applicants.
For each of the five fair lending indicators, lender's are awarded a score. For every
indicator except the minority-to-white denial ratio, a score higher than 1.00 indicates that a
lender is above the industry average, while a score below 1.00 indicates a lender is below the
industry average. Conversely, a high denial ratio indicates poor performance because a
lender is rejecting minority applicants at a rate higher than white applicants.
2. Scores. Ranks, and Grades
For each MSA, a lender's score on each of the five indicators is averaged into an
overall rank score which is used to assign a letter grade from A+ to F-. Grades are
developed by dividing banks into quintiles based on their average score and the quintiles are
then divided into thirds to assign pluses and minuses. If lenders with identical scores fall on
the threshold between grades, the lender is given the benefit of the doubt and moved into the
higher grade.

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Lenders that average an F grade over three to four years in an MSA are selected for
inclusion on the list of the worst banks from 1990 through 1993 ( Section II) . Lenders that
received an F in 1993 are included on the 1993 poor performer list ( Section III) . Section IV
includes the scores and grades of all banks in 1993, and the grades for past years. It is
important to realize that a significant number of institutions consistently averaged a grade of
D overthe four year period. Although these lenders are clearly performing poorly, only F
averaging lenders were selected to ensure unambiguous results.
Only institutions that had at least one-half of one percent ( 0.5%) of the total
applications in the MSA were analyzed in the study and received a grade. For example, in
New York in 1993 there were 107,102 applications included in the analysis. Therefore, only
institutions with at least 536 applications were scored and ranked. Setting the threshold at
one-half of one percent ( 0.5%) of the total applications in the MSA ensures that only large
institutions with significant market presence were included in the study. While figures vary
according to each market, on average the selected institutions captured 78 percent of all
applications in each MSA in 1993 ( see Table V. C) .
In order to appear on the list of the worst banks from 1990 through 1993, a bank had to
meet the .5 percent threshold in 1993. Consequently, lenders that were in the market in
previous years but were acquired, merged, or closed by 1993, or did not have enough
applications, were not included on the list. In each MSA, lenders that meet the .5 percent
threshold in 1993 may not appear in the analysis in one or more of the previous years. This
may be due to the fact that the lender is new in the market or the lender did not receive
enough applications in the earlier years.
3. Parameters of the Study
Only completed applications are included in the database analyzed in the study.
Incomplete or withdrawn applications were deleted. All conventional and Federally insured.
applications for a new mortgage, refinancing, or home improvement for one to four family,
owner-occupied properties are included, while loans purchased by an institution are not part
of the database.
Only applications where the applicant is identified as black, Hispanic, or white are
retained for analysis. Applicants from other racial groups identified in HMDA data
( American Indian or Alaskan Native, Asian or Pacific Islander) are not analyzed in the study.
There are two reasons for this selection. First, most of the twenty MSAs have large black
and Hispanic populations. Although there are substantial numbers of the other racial groups
in some of the MSAs, there are not large numbers in all of the MSAs. Second, blacks and
Hispanics are the minority groups that have historically suffered serious discrimination in the
housing credit markets. This is not to deny that other racial and ethnic groups experience
lending discrimination and redlining.
Low and moderate income is defined as having an income less than 80% of the MSA
median family income. Table V. B shows the median family income for each of the MSAS
from 1990 to 1993. These figures were obtained from the FFIEC.
All HMDA reporters were analyzed in the study, including mortgage banks, credit
unions, savings banks, and commercial banks. For depository institutions, which are legally

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required to delineate a service area, the MSA is assumed to be a bank's de facto service.
This is based on the fact that a bank with .5% of all the applications in a MSA is a very large
lender with significant presence in the market. Problem of service area delineation do not
arise for mortgage banks which are not required to define a service are
B. Highlights and Findings of the Study
1. Worst lenders 1990 -- 1993
Fifty two institutions are identified in the study as consistently underserving low- and
moderate-income and minority individuals over a three to four year period. Four institutions,
two of which are bank-related mortgage companies and two of which are independent
mortgage companies, have consistently failing grades in three or more MSAS. Topping the
list is The Prudential Home Mortgage Company ( 10 MSAs) , followed by Chase Home
Mortgage Corp ( 5 MSAs) , G.N. Mortgage ( 3 MSAs) , and Margaretten & Company ( 3
MSAs) . Four institutions have failing in grades in two MSAS. These include G.E. Capital
Mortgage Services, GMAC Mortgage Corporation, Source One Mortgage, and Weyerhauser
Mortgage Co.
2. Worst lenders in 1993
For the year of 1993, 126 lenders received failing grades for their fair lending
performance. Five of the lenders have failing grades in five or more MSAs, including The
Prudential Home Mortgage Company ( 18 MSAs) , G.E. Capital Mortgage Services ( 8
MSAs) , Countrywide Funding Corporation ( 7 MSAs) , Chase Home Mortgage Corp ( 6
MSAs) , and American Residential Mortgage ( 5 MSAs) .
Six institutions have failing grades in three or more MSAS: First Franklin ( 4 MSAs) ,
BancBoston Mortgage Company ( 3 MSAS) , Colonial Mortgage ( 3 MSAs) , Franklin
Mortgage Corporation ( 3 MSAs) , Loan America Finance Corporation ( 3 MSAs) , and Source
One Mortgage ( 3 MSAs) .
3. Mortgage companies dominate the worst lender lists

Of the 52 worst lenders identified in the 1990 -- 1993 period, 34 are mortgage
companies ( 65%) , 17 are commercial or savings banks ( 33%) , and 1 is a credit union ( 2%) .
Nineteen of the thirty four ( 56%) mortgage companies are independent, while the remaining
fifteen ( 44%) are affiliated with commercial banks, savings banks, or bank holding companies.
Similar patterns exist for the worst lenders in 1993. Eighty eight of the 126 lenders
are mortgage companies ( 70%) , 37 are commercial banks or savings banks ( 30%) , and less
than 1% are credit unions. Of the 88 mortgage companies, 62 are independent ( 70%) and the
remaining 26 are affiliated with commercial banks, savings banks, or bank holding companies
( 30%) .

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4. Office ofThrift Supervision leads bank agencies with the worst lenders
Of the four banking regulatory agencies -- the Office of Thrift Supervision ( OTS) , the
Federal Reserve System ( FRS) , the Office ofthe Comptroller of the Currency ( OCC) , and
Federal Deposit Insurance Corporation ( FDIC) -- saving banks and thrifts regulated by the
OTS represented the largest share of depository institutions named on the worst lender lists.
For years 1990 through 1993, 11 of the 17 institutions were regulated by the OTS, 5 were
regulated by the FDIC, and 1 by the FRS. No OCC regulated banks appeared on NCRC's
worst lender list.
For 1993 alone, OTS regulated institutions also made up a sizable share of the
depository institutions named in the study. Of the 37 depository institutions, 22 are OTS
regulated institutions, 11 are banks regulated by the FDIC, 2 are FRS institutions, and 2 are
regulated by the OCC.

In 18 ofthe 20 MSAs the minority share of the population ( based on 1990 Census
data) significantly exceeds the percentage of minority approvals and applications for the MSA
in 1993, indicating that minorities are substantially underserved in those markets ( see Table
V G./H. ) . In Detroit, black and Hispanics constituted nearly 23% ofthe population, yet only
made up roughly 7% of all home mortgage, home improvement, and refinancing applications
and 6% of all approvals. Boston, Minneapolis--St. Paul, Philadelphia, and Baltimore also had
very high disparities between minority population levels and application and approval rates.
On the positive side, two MSAs actually had minority approval and application rates
higher than the minority share of the population. In Los Angeles, blacks and Hispanics make
up over 27% ofthe population, but constituted over 33% of all applications and 30% of all
approvals. In the Riverside--San Bernardino MSA, minorities captured 27% of all
applications and 26% of all approvals, yet made up only 19% of the population.
6. Minority share of applications and approvals increased from 1992 to 1993, but
most MSAs are still below 1990 levels.
In every MSA in 1993, minority approval and application rates increased from 1992 to
1993 ( see Table V. G./H.) . The most substantial increases occurred in Phoenix ( a 82%
increase in minority applications and a 96% increase in approvals) , Detroit ( 30% and 35%
increase in minority applications and approvals) , St. Louis ( 22% and 29%) and Riverside--San
Bernardino ( 20% and 28%) . Tampa and New York saw the slowest rate of increases in
minority application and approval rates.
While the increase in application and approval rates for minorities from 1992 is
encouraging, metropolitan areas do not perform well when examined over a four year period.
Sixteen out of the twenty MSAs in 1993 saw substantial decreases in minority
application and approval rates when compared to 1990 data ( see Table V. G./H.) .
Boston was the worst MSA showing a 45% decrease in minority applications and 39%
decrease in minority approvals over the four year period. New York ( -29% and -29%) ,
Nassau--Suffolk ( -37% and -35%) , Philadelphia ( -29% and -28%) , and Baltimore ( -27% and

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-30%) also showed significant declines.
However four MSAs did see increases in their minority application and approval rates.
Phoenix led all MSAs with a 19% increase in black and Hispanic applications and 23%
increase in approvals. Riverside--San Bernardino followed with an 8% increase in minority
applications and a 7% increase in approvals. San Diego ( +5% and +4%) and Houston ( +1%
and + 10%) also showed improvement.
7. Low- and moderate-income share of applications and approvals increased
from 1992 to 1993, but saw declines over a four year period.
In 17 out of the 20 MSAs, application and approval rates for low- and moderateincome individuals increased from 1992 to 1993 ( see Table V. E./F.) . Phoenix led all MSAs
with a 49% increase in low- and moderate-income applications and a 59% increase in approval
rates. Riverside-San Bernardino followed with a 50% increase in applications and 58%
increase in low- and moderate-income approvals. Minneapolis--St. Paul ( +42% and +47%) ,
Oakland ( +34% and +32%) and Philadelphia ( +31% and +36%) also showed strong increases.
Three MSAs decreased their share of low- and moderate-income applications and approvals
from 1992 to 1993. Washington D.C. saw a 3% reduction in low- and moderate-income
applications and 4% reduction in approvals. Boston ( -3% and -4%) and Chicago ( less than
one percent) also saw reductions.
Over a four year period, 13 out of the 20 MSAs saw a significant decline in low- and
moderate-income application rates and 12 out of the 20 saw reductions in approval rates ( see
Table V. E./F. ) . New York experienced the sharpest reduction, declining 40% in application
rates and 43% in low- and moderate-income approval rates. Nassau-Suffolk ( -33% and
-34%) , St. Louis ( -26% and -27%) , and Minneapolis-- St. Paul ( -21 % and -21%) also had
strong declines in low- and moderate-income application and approval rates.
More encouraging, four MSAs had a significant increase in low- and moderate-income
applications and approval rates from 1990. Anaheim-- Santa Ana had a 65% increase in lowand moderate-income application rates and a 80% increase in approval rates. Los Angeles
( +57% and +73%) , Riverside ( +50% and +66% ) , San Diego ( +37% and +64%) and Tampa
( +31% and +17%) also showed marked improvement.

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C. Recommendations
In light ofthe findings of this study, NCRC believes that it is imperative that
Congress, the Administration, the Department of Justice ( DOJ) , HUD, the bank regulatory
agencies, and state and local governments take serious steps to ensure that the lenders
named in this report are held accountable for their performance and that other systematic
improvements be made. Specifically we recommend the following actions:
The bank regulatory agencies should issue a revised CRA regulation that ties CRA
ratings to an institution's actual performance in lending to low- and moderate-income and
minority communities and individuals;
The Justice Department, HUD, and state attorney generals should aggressively
investigate all lenders named in this report for possible violations of the Fair Housing Act
and Equal Credit Opportunity Act;
Federal and state bank regulatory agencies should deny all corporate applications for
merger and expansion by lenders named in the study pending affirmative lending agreements
with community and civil rights groups;
Congress, and state legislatures, should immediately extend CRA coverage to all
mortgage banks and credit unions;
HUD should require all mortgage banks to enter " best practice" agreements;
Federal and state bank regulatory agencies should review the lending records of
mortgage affiliates of depository institutions in CRA examinations;
The Federal Home Loan Bank System should deny access to long-term advances to
all institutions named in the report;
Federal bank regulatory agencies should require lenders to disclose small business
lending by race, income, and census tract in the revised CRA rule;
Federal bank regulatory agencies should use cease and desist orders and levy civil
money penalties against poor performers under CRA;
HUD should continue to assess and ensure that reinvestment lending targets for
Fannie Mae and Freddie Mac are being met.

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SECTION II :

THE WORST LENDERS IN AMERICA
1990 -- 1993

DATA TABLES

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SECTION II
EXPLANATION OF DATA TABLES FOR 1990-- 1993
This section contains tables of data on the lenders selected as the worst performers
for the years 1990 through 1993. The data is presented in two different ways: by the name of
the lender and by the MSA. Each table presents data on each of the five indicators used to
measure lending performance for each of the four years ( marketing to minorities, denial ratios,
minority approvals, low- and moderate-income applications, and low- and moderate-income
approvals) . Below is a short description of each of the tables:
Table II. A.1: This table presents a list of the worst lenders alphabetically for the years
1990 through 1993. The third column AGENCY indicates which regulatory agency that the
institution reports its HMDA data to. 1 is the Office of the Comptroller of the Currency
( OCC) , 2 is the Federal Reserve System ( FRS) , 3 is the Federal Deposit Insurance
Corporation ( FDIC) , 4 is the Office of Thrift Supervision ( OTS) , 5 is the National Credit
Union Administration ( NCUA) , and 7 is the Department of Housing and Urban Development
( HUD) .
The next column TYPE OF INSTITUTION is a classification of the lender. A lender is either
an independent mortgage company ( regulated by HUD, not subject to CRA, and not affiliated
with a bank or bank holding company) , a commercial bank or savings bank ( subject to CRA
and regulated by one of the four bank regulatory agencies) , a credit union ( not subject to CRA
and regulated by the NCUA) , or a bank related mortgage company ( affiliated with a bank or
bank holding company and not subject to CRA)
Table II. A.2: This table presents data on minority applications to a lender. For each year,
the first column indicates the total applications received by a lender, the next column shows
the number of minority applications, followed by the percentage of minority applications by a
lender, and then the MSA industry average. The MSA industry average is what the industry
did as a whole, and is used as the standard against which individual lenders are judged.
Table II. A.3: Denial rates between white and minority applicants are displayed in this
table. For each year, the first column indicates the percentage of white applications denied,
the second column shows the minority rejection rate, and the third column displays the ratio
of minority to white rejections.
Table II. A.4.: Minority approval rates for each lender are shown in this table. It displays
the total approvals by a lender, minority approvals, the percentage of minority approvals by a
lender, and then the MSA industry average. The MSA industry average represents what the
industry did as a whole.
Table II. A.5: and Table A.6: These tables show low-and moderate-income applications and
approvals and follow the same format as the minority application and approval tables.
Table II. B 1-6 These tables are exactly same as the Tables A. 1-6, but lenders are
organized by MSA rather than alphabetically.

*** Asterisks mean that the lender did not have .5% of applications that year.

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SECTION II :

THE WORST LENDERS IN AMERICA
1990 -- 1993

DATA TABLES BY LENDER

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TABLE II. A.1

WORST LENDERS: 1990-1993

MSA

LENDER

Oakland
Atlanta
San Diego
Houston
Baltimore
Nassau-Suffolk
Los Angeles
New York
Washington
Chicago
Dallas
Baltimore
Philadelphia
Atlanta
Atlanta
Minnesota
Detroit
Tampa
Philadelphia
Boston
Riverside
St. Louis
Los Angeles
Oakland
Anaheim
Tampa
Dallas
Minnesota
St. Louis
New York
St. Louis
St. Louis
Tampa
Anaheim
Philadelphia
Minnesota
Tampa
New York
Phoenix
Dallas
Houston
Washington
Chicago
Oakland
Oakland
Chicago
New York
Baltimore

ALL PACIFIC MORTGAGE COMPANY
ALLATOONAFEDERAL SAVINGS BANK
AMERICAN RESIDENTIAL MORTGAGE
BARCLAYS AMERICAN MORTGAGE COR
B.F.SAUL MORTGAGE COMPANY
CHASE HOME MORTGAGE CORP.
CHASE HOME MORTGAGE CORP.
CHASE HOME MORTGAGE CORP.
CHASE HOME MORTGAGE CORP.
CHASE HOME MORTGAGE CORP.
CHASE U.S. CONSUMER SERVICES
CITIBANK F.S.B.
COUNTRYWIDE FUNDING CORPORATIO
EAGLE SERVICE CORP D/B/A ATLAN
ENTRUST FINANCIAL CORPORATION
FIRSTFEDERAL CAPITAL CORP
FIRSTNATIONWIDE BANK
FIRSTUNION MORT. CORP.
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GMAC MORTGAGE CORPORATION OF P
GMAC MORTGAGE CORPORATION OF P
GN MORTGAGE
GN MORTGAGE
GN MORTGAGE
GREENTREE MORTGAGE COMPANY LP
GUARDIAN MORTGAGE COMPANY
HEIGL MORT. & FINANCIAL CORP.
HOME FEDERAL SAVINGS BANK OFM
INDEPENDENCE SAVINGS BANK
JAMES B. NUTTER & COMPANY
KNUTSON MORTGAGE CORPORATION
LINCOLN SERVICE CORPORATION
LOAN AMERICA FINANCE CORP
MAIN LINE FEDERAL SAVINGS BANK
MARGARETTEN & COMPANY
MARGARETTEN & COMPANY
MARGARETTEN & COMPANY
MELLON MORTGAGE COMPANY
MERCANTILE BANK & TRUST
MITCHELL MORTGAGE COMPANY
NAVY FEDERAL CREDIT UNION
NBD MORTGAGE COMPANY
NVR MORTAGE
PIB MORTGAGE COMPANY
PRINCIPAL MUTUAL LIFE INS CO
PROVIDENT SAVINGS BANK
REISTERSTOWN FEDERAL SAVINGS B
REPUBLIC BANK
ROOSEVELT SAVINGS BANK
RSL MORTGAGE CORPORATION
RURAL AMERICAN BANK- BRAHAM
SHELTER MORTGAGE CORPORATION

New York
Anaheim
Riverside
Chicago

AGENCY TYPE OF INSTITUTION

The National Community Reinvestment Coalition⚫ 202-986-7898

7
4
7
2
4
1
1
1
1

4
7
4
7
4
4
2
7
7
7
7
3
4
3
7
7
7
4
3
7
7
4
7
4
7
7
7
2
4
7
5
2
7
2
7
4
4
3
3
4
4
3

Independent Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
BankRelated Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
BankRelated Mortgage Company
IndependentMortgage Company
BankRelated Mortgage Company
Commercial/Savings Bank
Bank Related Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Credit Union
Bank Related Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Bank Related Mortgage Company
Commercial/Savings Bank
Bank Related Mortgage Company

17

543

TABLE II.A.1

WORST LENDERS: 1990-1993

AGENCY TYPE OF INSTITUTION
MSA
LENDER
7 Independent Mortgage Company
Detroit
SOURCE ONE MORTGAGE
7 Independent Mortgage Company
SOURCE ONE MORTGAGE
Tampa
4 Commercial/Savings Bank
SOUTHERN CALIFORNIA FEDERAL SA
Anaheim
4 Commercial/Savings Bank
Phoenix
STATE SAVINGS BANK
4 Bank Related Mortgage Company
Oakland
SUNBELT NATIONAL MORTGAGE CORP
3
THE BRYN MAWR TRUST CO.
Commercial/Savings Bank
Philadelphia
3
THE COLONIAL BANK
St. Louis
Commercial/Savings Bank
2 Commercial/Savings Bank
THE NORTHERN TRUST COMPANY
Chicago
7 Independent Mortgage Company
Atlanta
THE PRUDENTIAL HOME MORTGAGE C
7 Independent Mortgage Company
Anaheim
THE PRUDENTIAL HOME MORTGAGE C
New York
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
Boston
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
Phoenix
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
Dallas
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
7 Independent Mortgage Company
Philadelphia
Houston
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
Oakland
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
Nassau-Suffolk THE PRUDENTIAL HOME MORTGAGE C
7 Independent Mortgage Company
Riverside
WEYERHAEUSER MORTGAGE CO.
7 Independent Mortgage Company
Anaheim
7 Independent Mortgage Company
WEYERHAEUSER MORTGAGE CO.

18

The National Community Reinvestment Coalition 202-986-7898

Black
/

Black
H/isp
.MSA
MSA
ALL
COMPANY Oakland
MORTGAGE
PACIFIC
ALLATOONA
BANK Atlanta
SAVINGS
FEDERAL
Diego
AMERICAN
MORTGAGE San
RESIDENTIAL
Houston
BARCLAYS
COR
MORTGAGE
AMERICAN
Baltimore
B.F.SAUL
COMPANY
MORTGAGE
Nassau
-S973
CHASE
.
CORP
MORTGAGE
HOME
30uffolk
Los
Angeles
CHASE
.
CORP
MORTGAGE
HOME
1928
65
York
New
.
CORP
MORTGAGE
HOME
CHASE
Washington
CHASE
.
CORP
MORTGAGE
HOME
Chicago
.
CORP
MORTGAGE
HOME
CHASE
CHASE
SERVICES Dallas
CONSUMER
U.S.
CITIBANK
F.S.B.
Baltimore
CORPORATIO Philadelphia
COUNTRYWIDE
FUNDING
EAGLE
D/BATLAN
CORP
SERVICE
Atlanta
ENTRUST
CORPORATIONAtlanta
FINANCIAL
CORP
CAPITAL
Minneapolis
FEDERAL
FIRST
BANK
Detroit
NATIONWIDE
FIRST
Tampa
FIRST
CORP
MORT
.UNION
Philadelphia
GE
SERVICES
MORTGAGE
CAPITAL
SERVICES
GE
MORTGAGE
CAPITAL Boston
GMAC
P
OF
CORPORATION
MORTGAGE
Louis
St.
Riverside
GMAC
P
OF
CORPORATION
MORTGAGE
Oakland
MORTGAGE
GN
Anaheim
MORTGAGE
GN
Los
Angeles
GN
MORTGAGE
COMPANY
LP
GREENTREE
MORTGAGETampa
COMPANY
GUARDIAN
MORTGAGE Dallas
FHEIGL
.MORT
CORP
& INANCIAL
Minneapolis
BANK
MFEDERAL
OF
HOME
SAVINGS St.
Louis
SAVINGS
BANK
New
York
INDEPENDENCE
CJAMES
& OMPANY
B.NUTTER
St.
Louis
CORPORATION
Louis
KNUTSON
MORTGAGE St.
925
LINCOLN
CORPORATION Tampa
SERVICE
CORP
FINANCE
LOAN
AMERICA
Anaheim
SAVINGS
BANK
MAIN
FEDERAL
LINE
Philadelphia
CMARGARETTEN
& OMPANY
Minneapolis
CMARGARETTEN
OMPANY
&
Tampa
& OMPANY
CMARGARETTEN
650
New
York
COMPANY
MELLON
MORTGAGE
Phoenix
TMERCANTILE
& RUST
BANK
Dallas

2431
148
1937
184
2901
124
520
7
51
670
147
5534
58
912
1235
56
1413
5
162
2518
35
738
230
6755
18
985
69
1891
241
1279
950
45
1052
39
545
3429
770
29
57
2111
34
3174
34
3051
118
1456
151006
33
18
450
101
1266
60
72
2066
21 1.62
1294
%

3.87
%15.03
6%2.95
.51

%
11.30
7.69
%951.03
16.36
235
2.46

1%4.53
22.46
133

4.74
%175.21
18
557
13.71
%2.50
%33.10 4304
15.89
3.77
%8.68 .
1%2.70
2.35 1373
101
%12.69
1.07
8.10
%290.81
26
8%1.49
4.29
68
8%3.57
7.29
53
84.00
%5.68
09
%182.50
7.98
16
81.23
%38
.86
23078
417
%133835
390
0.83
32.69
8%76
1.68
219
4.56
1665
%250.81
9.23
24
863
.33
9%13.48
12.35
%859

160
18.84
%217.15
051
35
72

•
37
15
1.11
2%847.29
983
81
3
9
12
54
26
68
35
42
11
.

NAME

/ispA
HBlack
.MS
oIndustry
Total
.
%f Hisp
Apps
AverageApps
15.21
%6.62
190 77
%12.46
6.41
056 58
1%27.72
3.35
324 139
53 33
%816.42
4.77
1%6.92
1.79
487 81
6561
%13.08
.86 46
414 35
3.37
%313.10
36.09
841
%270
20.81
9.50
%1476.80
240
11.35
%0S62.35
.78
39

20.20
%8.75
%6.82
0.64
.82
6%1.20
1%6.62
1.74
1%0.77
.48
85.58
%.40
5%2.25
%.14

1990

Black
/
HBlack
./isp MSA
Total
f Hisp
%oIndustry
.
Average Apps
Apps
6.47
%154.27
55 41
1%55.49
1.03
19 21
22.13
576 125
%15.98
266 8
190.59
%5.45
08 42
579 16
3%12.48
0.99
085 16
2181
%7.03
0.20
104
1%3.79
50
64.87
89
14.27
%2.59
3.97
740
9456.37
90 40
279 11
1%7.61
7.12
1.79
45410.59
78
76 51
2.66
%7182.22
.84
487
33
4.86
14 13
·
·
1%104
1.03
4.88
567
132
.00
10%0.35
501.69
.48
58
099
6.43
%575.27
.38
3196
1.69
718
812 87
4.44
1196
4.74
%83413
22.68
.40
7%8120
.84
3.40
.86
364
42166
2.77
328
24.77
17 3
.22
40
31.83
%421.50
3.50
084 49
3.65
%16854.82
543
.29
%272.64
15.22
96 139
%144.27
4.87
22 17
056 61
%14.62
1.74
32663
%15.40
0.99
002 341
8.40
%468 21
1%2.69
%71.30
52 27
1.48
%40.71
30 3
1%1.58
733
622.82
800 51
532 24
351 9
8%2.36
3.40
64 16
•
%114.84
70.58
084 6
2096 29
566 32
26.68
%30.20
47 30
740 43
34 7
1%31.28
1.30

12.80
%4.85
17.42
%3.01
4.63
%14.69
%33.42
1.47
%
4.04
3.94
%

%8.42

%
2.56

%
15.13
10.67
%14.69
10.67
%3.14
16.04
%
0.18
1%.87

24.50
%17.46
14.03
%7.04
12.99
%5.78
33.42
%17.03
3.59
%15.13
1%0.70
.87
1.27
9%.49
2%6.38
6.75
9%4.51
.49
%
9.49
%0.95
14.40
12.99
%
%10.67
0.55
%1.87
1.38
5.65
%10.95
%28.65
6.75
5.81
%9.23
%5.13
12.10

Black
/
Black
.H/isp
Total
Industry
o%f Hisp
.
Average Apps
Apps
127.04
%7.39
42 19
1%44.05
8.12
%38
6.04
68
•
•
·
•
·
•
•
84.91
%2.76
%
62 19 4.11
28.60
%16.75
970 159
1%7.26
49.24
89 39
%827 28
18.32
175 0
12.73
%
267 34
·
16.04
%322 20
942 63
286 1
1%4.80
1.73
133 42
1%4.18
20.95
44 10
1353
%40.67
7.02
075
%6.75
41.38
71 32
9%1.49
4.52
096 68848 213
568 46
·
•
•
%
14.49
%20.95
95 16 5.42
520 15
•
•
%
844 16 1.90
%
459 19 4.14
.
•
•
.
.
•
•
•
%
383 34 8.88
390
242 16
..
•
177 1
258 30
.

Black
/

Total
Hisp
.
Apps
1178
78
1561 100
245
3174
608
29
1677
116

1991

1992

1993

MSA
%of
Industry
Apps
Average

%17.85
7.79
%
17.31
12.76
%
%
16.24
%
16.24
%
10.81
%
35.61
29.47
%8.07
2%7.98
0.09
3.39
%20.55
%2.72
10.00
%
16.24
%
12.50
6.21
%17.31
%17.31
6.69
20.35
%.05
3.71
%8.77
%11.28
4.10
%12.50
8.66
%64.77
.39
6.20
%11.19
25.12
%25.20
%
17.79
1%8.10
4.33
35.61
%
%
11.28
%12.72
2.88
%
2.05
%
11.19
%
29.47
11.19
%
%
11.19
%
11.28
14.33
%
%1292.50
.31
21874
%1.39
26.05
16.61
%1.28
%
29.47
7%0.56
.84
12.72
%11.63

544

The National Community Reinvestment Coalition 202-986-7898

:MARKETING
1990--1993
LENDERS
WORST
MINORITIES
TO

.A.2
II
TABLE

19

1993

Apps
Apps

3263
206
750
44
1469
42
151
9380
53
695
1054
64
130
716

Total
Industry
%of .Hisp
Average
Apps
Apps Apps
2.60
325.03
%115
40
131
2%1423
248
4.87
9.31
3.97
%143
981
2.25
%14.69
94.27
01 50
1%8.71
4.27 765 85
13.97
%
1008 50
2%5.52
40.20
08 30
0.59
5321.79
51114 12
1%2.87
2.86
309
171.61
769
53129.38
%1.64
.69
%235
450.20
34
3336
6.53
7.63
0.81
483
1%6.07
109
1.74
7.41
1121
632
2.50
%937
22.64
154
18.16
%27.15 •
•
•
13.97
%918 28
%175
4.15
64
541
4.70
6.37
1597
.69
69 43
752.27
%944
.38
64
12226
939
2.88
611683
75 54
93.68
052
88.84
%5.23
.40
88
7.24
%11.74
16719
4.31
%31
2.50
08 44
1.04
%577
1.14
055
5.51
%92978
5164
.33
76 6
1697
%54.27
82 44
%162
7.21
85.21
18 57
2.87
%1324
9.86
67 28
%75.84
838
2.90
09 16
%11
1.20
15
1255
89.29
52
61.16
%2.82
97 2
2410
289
025
17.46
%12348
6.37
14.27
%173.97
29 148
186
6.22
3328
%178
2.46
207
59 50
11.03
%76.58
17317
%4.02
2.50
27
8294
33
1%3.24
41.74
40 7
%152.69
46
%182.35
%121.30
3.30
51 12
176
26.30
%20.81
956
331
0.20
%12122
5.95
31.27
%6.50
81 7
31.03
%%42.22
69
54 11
2.23
%96.33
5%1.68
.14
%76.84
2.99
56 20
%82.86
3.67
309 69
15.77
%45.03
58 19
%970 56
16.42
12.25
%4.27 428
89 20
%185.21
4.55
.51
·
%62.60
457 64
%26.86
2.38
16.72
%272.64
36 168
22.71
%627.15
64 111
%794
11.74
.
1%7.68
2.50 .

oIndustry
Total
%f Hisp
.
AverageApps
Apps
17.42
%1.25

15.55
%7.04
%14.96
8.32
7.35
%26.75
1%2.37
1.73
26.75
%7.85

.

58
2156
5508
347
2434
31
985
22
131
3569
%
92 4.33
6770
308
5128
122
1070
243
57

500
51
%317.04
11.11
•
1%2.18
24.69
07
.
459
17.35
%52.99
08
%168.32
3.05
26

41
46
4
17
44
141
284.50
%16.44
69
29

P4.44
%1.73
0.95
1%8.00
•
9%7.30
.23
%7.04
17.56
%0.67
13.14
0.67
%9.49

%1.59
12.99

3.05
%
4.15
%
2%9.10

%
17.04
8.91
%
%4.50
222.83
%1%
3.78
302.99

12.99
%374
.
369
.
20.30
%158.32
96
%136.04
6.59
39
4.78
%125.13
58
2%19.17
6.75
174
42.75
%1.49
04
%181
9.23
10.67
%417
%314
17.42
•
613
771
762

26
•
27
104
33
11
132
6
25
14
.
28
176
49

/
Black
isp MSA
./HBlack
Industry
%of
Average
Apps
%
16.24
2183
%9.24
0.09
15.33
%111.64
194
2.15
%12%21
0.55
2.17
98.32
79
%7.79
18.20
%17.79
13.11
%
20.55
%
29.47
%
%
1.93
16.24
%
8.77
3.70
%
%
29.47
14.33
%
%
8.66
%25.20
16.23
20.55
%4.63
8.77
%
11.28
%
%
6.95
%
14.33
%
7.84
•
%
17.79
%
12.50
%
7.32
%
11.19
•
%0.55
217.45
%7.31
19.73
%
14.33
•
%2.72
14.26
11.24
%29.47
6%2.94
.39
70%1.84
.55
%
12.50
%
6.00
1%4.46
6.24
%
17.79
•
%
10.81
%
4.57
%5.20
222.83
%
14.33
6.43
%

545

The National Community Reinvestment Coalition⚫ 202-986-7898

MSA
Houston
MITCHELL
COMPANY
MORTGAGE
Washington
NAVY
UNION
CREDIT
FEDERAL
Chicago
NBD
COMPANY
MORTGAGE
NVR
MORTAGE
Oakland
Oakland
PIB
COMPANY
MORTGAGE
CO
INS
LIFE
MUTUAL
PRINCIPAL
Chicago
York
PROVIDENT
BANK
SAVINGS
New
B
SAVINGS
FEDERAL
Baltimore
REISTERSTOWN
Detroit
BANK
REPUBLIC
ROOSEVELT
BANK
SAVINGS
York
New
CORPORATION
Anaheim
RSL
MORTGAGE
Riverside
RURAL
AMERICAN
-BRAHAM
BANK
CORPORATION
SHELTER
MORTGAGE Chicago
Detroit
MORTGAGE
ONE
SOURCE
Tampa
MORTGAGE
ONE
SOURCE
CALIFORNIA
SA
FEDERAL
Anaheim
SOUTHERN
Phoenix
STATE
BANK
SAVINGS
860
MORTGAGE
CORP
SUNBELT
NATIONAL Oakland
Philadelphia
THE
.
CO
TRUST
MAWR
BRYN
Louis
St.
BANK
COLONIAL
THE
Chicago
COMPANY
THE
TRUST
NORTHERN
MORTGAGE
CPRUDENTIAL
THE
HOME Atlanta
MORTGAGE
CPRUDENTIAL
THE
HOME
Anaheim
MORTGAGE
C
Dallas
HOME
PRUDENTIAL
THE
CHOME
MORTGAGE
New
York
PRUDENTIAL
THE
MORTGAGE
CPRUDENTIAL
THE
HOME Boston
C
MORTGAGE
HOME
PRUDENTIAL
THE
Phoenix
HOME
MORTGAGE
C
PRUDENTIAL
THE
Philadelphia
C
MORTGAGE
2127
THE
HOME
PRUDENTIAL
Houston
MORTGAGE
CHOME Oakland
PRUDENTIAL
THE
HOME
MORTGAGE
C
PRUDENTIAL
THE
-Suffolk
Nassau
.
CO
MORTGAGE
WEYERHAEUSER
Riverside
WEYERHAEUSER
.
CO
MORTGAGE
742
Anaheim

HBlack
SA
./Misp
.
Hisp
o.%f Hisp
Total
Industry
Apps
Average
4.71
5266.42
77
%1552
45511
544
16.80
11.78
%649
1%2.73
6.37
4832
3132
692 83
%1649
7.09
258 59
465.21
1%91
298 113
%9.76
5.21
932
314 67 2.90
%126.37
6.31
%
280.81
%5.87
87 49

.

NAME

/Black
Black
.H/isp MSA

/
Black

HBlack
isp
./MSA

1990

1991

1992

/Black

.
.

20

WORST
:MARKETING
1990--1993
LENDERS
MINORITIES
TO

II.A.2
TABLE

WORST
LENDERS
- 993
D
:11990
ENIAL
RATIOS

1993
NAME

MSA
COMPANY
MORTGAGE Oakland
PACIFIC
ALL
ALLATOONA
FEDERAL
SAVINGS
BANK Atlanta
AMERICAN
San o
MORTGAGE Dieg
RESIDENTIAL
BARCLAYS
MORTGAGE
AMERICAN
COR Houston
COMPANY
MORTGAGE
B.F.SAUL
Baltimore
MORTGAGE
HOME
CORP
SNassau
- uffolk
.CHASE
Los
Angeles
MORTGAGE
HOME
.CHASE
CORP
New
MORTGAGE
HOME
York
.CHASE
CORP
Washington
MORTGAGE
HOME
.CHASE
CORP
CHASE
MORTGAGE
HOME
Chicago
.
CORP
Dallas
CONSUMER
U.S.
CHASE
SERVICES
Baltimore
CITIBANK
F.S.B.
COUNTRYWIDE
CORPORATIO Philadelphia
FUNDING
SERVICE
DEAGLE
/BACORP
TLAN
Atlanta
CORPORATION
FINANCIAL Atlanta
ENTRUST
CAPITAL
FEDERAL
FIRST
CORP
Minnesota
NATIONWIDE
FIRST
BANK
Detroit
CORP
MORT
UNION
.FIRST
Tampa
Philadelphia
Boston
Riverside
Louis
St.
Los
Angeles
Oakland
Tampa
Dallas
Minnesota
Louis
St.
York
New
St.
Louis
Louis
St.
Tampa
Anaheim
Philadelphia
Tampa
CMARGARETTEN
& OMPANY
Minnesota
MARGARETTEN
&COMPANY
York
New
MELLON
MORTGAGE
COMPANY
Phoenix
TMERCANTILE
RUST
&BANK
Dallas

Black
Black
/
/
Hisp
.White Hisp
.
Denial
Denial
Rate Rate
Denials
5.13
4.36
1.18
6.57
2.74
18.00
13.06
8.74
1.49
13.79
7.43
0.54
4.48 12.93 2.89
20.00
12.83
1.56
18.46
2.25
41.54
26.35
10.42
2.53
2.03
9.93
20.11
3.49
1.39
4.84
0.00
ERR
10.14
2.21
27.45
12.44
5.09
8.84
1.74
2.11
10.34
4.90
10.71
4.35
2.46
2.77
0.00
4.20
5.29
22.22
8.57
4.41
1.94
5.66
16.96
3.00
6.83
16.67
2.44
9.44
2.15
20.33
5.80
2.31
2.51
23.47
31.38
1.34
12.38
1.26
15.56
18.49
1.86
34.48
0.00
ERR
2.14
2.04
0.00
11.76
4.54
2.59
24.81
44.92
1.81
33.33
8.17
4.08
3.81
3.18
12.12
27.78
18.30
0.66
15.84
9.44
1.68
4.84 18.42 3.81
18.42
7.40
0.40
12.50
3.97
3.15
5.76
6.67
1.16
1.86
11.11
5.97
1.57
0.00
ERR

1992

/Black
White Hisp
.
Denial Denial
toWhite
Rate Rate
4.85 14.29
6.21
9.66
7.93 3.03
2.77 17.28
15.97
21.97
19.07
17.69
6.84
15.46
39.25
7.22
2.11
4.44
5.10
8.33
9.07
24.76
32.22
9.43
4.23
28.26
17.86
•
1.87
0.00 0.00
7.97
28.17
0.00
6.45
22.33
24.28
6.33
9.30
3.86
3.68
4.64
1.77

1990

1991
B/Black
lack
Black
/
Hisp
White Hisp
.
Hisp
.
.
White
toWhite Denial Denial toWhite Denial
Denials Rate Rate
Denials Rate
7.62
2.94
6.23 12.20 1.96
19.05
2.50
15.52
7.83
11.16
2.43
2.16
20.86
21.13 28.80 1.36 *
0.38
9.30 12.50 1.34 .
6.23
6.00
2.38
14.29
1.77
28.26
12.43
16.48
4.02
50.00
40.00
16.18 18.75 1.16
1.82
39.63
2.08
29.28
9.98
2.93
12.15
44.68
25.35
2.53
36.00
1.42
26.00
24.44
3.57
8.26
9.16
3.28
30.00
1.29
20.00
18.29
12.69 9.09 0.72
1.55
60.98
11.16
29.04 64.71 2.23
15.15
2.10
0.00
0.00
9.00
18.95
*
2.65
4.55
20.19
13.38 35.61 2.66
19.00
0.00
0.00
2.69 0.00 0.00
33.67
4.33
3.09
8.93
27.59
4.04
10.26
0.00
8.39 38.46 4.59
1.82
45.00
7.92
1.60
12.65
6.61
1.92
33.33
751
11.21
61.90
2.97
20.63
2.40
9.28
22.30
9.61
2.19
20.37
5.63
4.82
2.90
16.33
2.82
37.24
37.86
23.18
1.34
1.61 •
34.29
20.00
1.47
29.41
1.92
19.02
19.05
11.47
1.00
1.85
7.41
5.78
10.81
2.97
4.00
0.00
0.00
0.00
7.49
•
2.51
31.82
2.94
23.40
12.68
8.57
53.09
35.45
1.89
27.37
1.00
27.45
0.00
0.00
0.00 *
3.80
1.72
11.11
8.77
33.33 *
58.33
2.67 •
16.38
43.75
2.61
29.63
41.26
*
1.22 *
*
5.75
0.00
11.81
0.00 0.00
13.24
1.42
10.18
0.56 3.13 5.56
5.97
8.23
23.08
5.94
1.16
6.90
3.88
14.29
2.52 23.33 9.25 •
19.64
11.90
2.57
1.66
11.19
18.60
11.84
0.00
0.00
1.83

Hisp
.
Denial
Rate
10.53
26.32

B/Black
lack
.Hisp
toWhite
Denials
1.38
2.36

•
26.32
30.82
38.46
21.43
0.00
•

*

35.00
44.44
26.19
40.00
20.68
21.88
12.21
8.82
.
25.00

*
18.75
42.11
*
*
*
52.94
22.22
25.00
30.77
*
0.00
30.00

1.60
2.54
1.48
2.59
0.00
29.41
2.64
.
13.21
2.34
0.00
6.05
3.90
3.13
2.91
1.27
3.13
*
2.18
33.33
11.22
2.19
1.19
*
*
*
1.28
1.88
2.46
3.74
*
0.00
2.53

546

The National Community Reinvestment Coalition 202-986-7898

II.A.3
TABLE

21

22

WORST
:DENIAL
1993
-1990
LENDERS
RATIOS

.A.3
II
TABLE

1993
Black
/
.Hisp
Denial
Rate
14.45
38.46
7.40

12.14
11.36

11.92

3.60
9.68
6.67

31.82

1992

1991

1990

/
Black
.
Hisp
Denial
Rate
6.67
9.46
8.43
20.35
5.97
12.50
3.45

Black
/
Hisp
.
Denial
Rate
66.67
10.08
27.91
16.00
14.00
16.67
9.68

/
Black
.
Hisp
Denial
Rate
*
14.75
14.29
0.00
34.78
•
•
25.00
•
41.18
34.09
45.39

/
Black
White
White
.
Hisp
toWhite Denial
Denial
Rate
Denials Rate
1.60
3.80
4.16
1.33
7.09
1.38
6.15
1.37
7.12
18.64
7.76
2.69
6.92
11.31
7.79
1.80
2.40
4.18
2.49
8.59
1.66
14.29
794
2.13
5.88
6.12
1.49
1.72
2.32
16.37
17.29
1.57
25.71
38.84
14.77
18.66
2.08
28.48
•
4.69
3.82
6.92
0.68
1.71
2.65
3.02
4.55
7.41
6.15 21.51 3.50
20.45 *
17.20
1.19
7.48
4.46
33.33
8.90
2.70
28.07
10.38
10.04
8.65
28.57
5.68
3.30
7.65
11.19
3.56
27.27
4.78
36.68
7.67
3.79
1.32
9.75
11.71
12.82
17.74
1.25
14.32
22.22
1.88
27.78
14.77
15.06
1.96
32.95
16.80
28.54
17.06
2.51
26.79
42.86
21.91 9.09 0.42
36.23
15.88
12.14
2.98
2.24
15.95
7.99
17.86
12.17
2.47
25.00
10.13
31.25
13.46
2.32 *
7.92
3.98
1.81
7.21
4.19

14.29
6.98
37.04
•
33.77
50.00
35.14
42.00
45.08
•
31.58

*
13.33

/
Black
Hisp
White
.
toWhite Denial
Denials Rate
17.56 •
2.57
7.30
8.14
3.92
0.00
2.06
21.64
1.51
11.76
3.35 •
2.10 •
16.67
8.37
2.72
5.62 •
2.55
44.12
11.54
30.39
1.68
24.77
1.71
21.02
48.70
3.85
3.74
2.31 ·
5.00 •
14.37
3.80 •
3.17
31.82
6.43
7.70
43.75
4.47 •
9.28
13.41
13.07
3.59
0.00
12.15
3.32
50.00
22.36
1.58
100.00
3.73
22.22
23.23
•
17.35
3.46
55.00
18.00
1.98
1.83
22.22
19.15
.
2.33
10.08
18.45
4.07
3.18

Black
/
.Hisp
toWhite
Denials
•
5.74
1.76
0.00
1.61
.
•
2.99
•
3.57
1.12
2.16
8.06
31.03

•
•
19.23 1.34
.
•
•
18.52 2.88
*
•
66.35 4.95
36.36 2.78
.
•
36.36 2.99
2.37
53.03
1.50
33.33
0.00
3.00
52.00
3.18
57.14
•
•
1.87
35.71
2.65
26.70
1.51
6.12
•

•

547

The National Community Reinvestment Coalition 202-986-7898

White
NAME
MSA
Rate
MITCHELL
COMPANY
MORTGAGE
Houston
Washington 0.68
UNION
CREDIT
FEDERAL
NAVY
Chicago
COMPANY
MORTGAGE
NBD
NVR
MORTAGE
Oakland
Oakland
PIB
COMPANY
MORTGAGE
10.46
PRINCIPAL
CO
INS
LIFE
MUTUAL
Chicago
4.02
PROVIDENT
York
New
SAVINGS
BANK
6.23
B
SAVINGS
FEDERAL
REISTERSTOWN
Baltimore
2.52
Detroit
REPUBLIC
BANK
3.80
BANK
SAVINGS
ROOSEVELT
York
New
11.21
CORPORATION Anaheim
MORTGAGE
RSL
20.51
-BRAHAM
BANK
AMERICAN
RURAL
Riverside
SHELTER
MORTGAGE
CORPORATIONChicago
Detroit
1.53
MORTGAGE
ONE
SOURCE
Tampa
13.64
MORTGAGE
ONE
SOURCE
SA
FEDERAL
CALIFORNIA
SOUTHERN
Anaheim
14.97
STATE
BANK
SAVINGS
Phoenix
4.37
CORP Oakland
MORTGAGE
NATIONAL
SUNBELT
8.90
.
CO
TRUST
MAWR
BRYN
THE
Philadelphia 2.41
COLONIAL
THE
BANK
3.95
Louis
St.
COMPANY Chicago
TRUST
THE
NORTHERN
3.87
THE
C
MORTGAGE
HOME
PRUDENTIAL
Atlanta
THE
C
MORTGAGE
HOME
PRUDENTIAL
Anaheim
15.81
Dallas
C
MORTGAGE
HOME
PRUDENTIAL
THE
24.14
New
York
THE
C
MORTGAGE
HOME
PRUDENTIAL
15.54
THE
PRUDENTIAL
C
MORTGAGE
HOME
Boston
11.32
Phoenix
THE
C
MORTGAGE
HOME
PRUDENTIAL
19.21
THE
PRUDENTIAL
C
MORTGAGE
HOME
Philadelphia 11.37
C
MORTGAGE
HOME
PRUDENTIAL
THE
Houston
27.17
C
MORTGAGE
HOME
PRUDENTIAL
THE
Oakland
9.66
THE
PRUDENTIAL
C
MORTGAGE
HOME
-Suffolk 12.66
Nassau
.
CO
MORTGAGE
WEYERHAEUSER
Riverside
6.41
WEYERHAEUSER
Anaheim
CO
.MORTGAGE
5.40

Black
/
.Hisp
toWhite
Denials
0.38
10.88
11.36
3.98
2.85
7.46
23.91
3.21
2.31
24.18
3.02
1.82
1.89
4.76
3.14
2.52
28.30
1.37
28.13
37.69
25.43
1.48
4.39
10.67
2.43
6.25
4.08
0.26
2.37
35.48
4.88
1.12
1.09
4.37
10.53
1.69
20.98
5.42
1.76
16.43
9.32
1.36
21.43
0.44
10.72
1.67
25.94
16.13
1.42
1.66
22.90
2.01
0.31
8.50
1.31
12.66
1.23
15.57
1.86
11.93
2.27
12.28

WORST
LENDERS
1990
M
: INORITY
1993
-APPROVAL
RATES

1993

Name

MSA
MORTGAGE
PACIFIC
ALL
COMPANY Oakland
SAVINGS
FEDERAL Atlanta
ALLATOONA
BANK
San
MORTGAGE
RESIDENTIAL
AMERICAN Diego
BARCLAYS
AMERICAN
MORTGAGE
561
COR
Houston
MORTGAGE
B.F.SAUL
COMPANY
Baltimore
.
CORP
MORTGAGE
HOME
CHASE
Nassau
-S2.84
%15846
24uffolk
.91
306
Los
CHASE
MORTGAGE
HOME
Angeles
.
CORP
MORTGAGE
HOME
CORP
York
New
.CHASE
MORTGAGE
HOME
.CHASE
CORP
Washington
MORTGAGE
HOME
.CHASE
CORP
Chicago
2798
SERVICES
CONSUMER Dallas
U.S.
CHASE
468
Baltimore 579
F.S.B.
CITIBANK
COUNTRYWIDEPhiladelphia
FUNDING
CORPORATIO
D/BTLAN
CORP
SERVICE
Atlanta
AEAGLE
888
CORPORATION
FINANCIAL Atlanta
ENTRUST
1200
Minneapolis1374
Detroit
2383
Tampa
704
Philadelphia
Boston
916
1845
Louis
St.
Riverside 1132
MORTGAGE
GN
Oakland
831
GN
MORTGAGE
Anaheim 773
Los
Angeles
MORTGAGE
GN
2581
COMPANY
MORTGAGETampa
GREENTREE
LP
623
COMPANY Dallas
MORTGAGE
GUARDIAN
2067
&FINANCIAL
MORT
.HEIGL
CORP
Minneapolis 3110
SAVINGS
FEDERAL St.
MHOME
OF
BANK
Louis
2910
BANK
SAVINGS
INDEPENDENCE
York
New
1071
COMPANY
B.NUTTER
&JAMES
Louis
St.
920
CORPORATIONSt.
MORTGAGE
KNUTSON
Louis
887
CORPORATION
SERVICE
LINCOLN
Tampa
366
CORP
FINANCE
AMERICA
LOAN
Anaheim
1140
SAVINGS
FEDERAL
LINE
MAIN
BANK
Philadelphia 2924

213
2886
1557
38
2154
109
1726
147
7
37
5247
134
52
50
5
126
32
6347
191
15
192
38
27
374
19
57
34
30
65
10
29
13
85
31

3.05
%7.69
%
1.03

%7.46
%
1.06

1991

1992

Black
/
HBlack
./isp MSA

/
Black

HBlack
./Misp
SA
%oHisp
Industry
f Hisp
Total
.Total
.
Average Aprvs
Aprvs
%1126
1%6.57
743.48
125
66
11503
%5.46
949
820.82
85
084
12110
%7.38
2.23
132
%
%4.46
7253.51
87
6.34
9%11592
.53
101
434 67
33
%310.40
2.44
097 21
%318.31
5.06
053 163
%1265.31
8.52
008
1%4.22
34
4.81
613
118
%11.50
540.23
40
%93.53
6.39
41 16
377
%1728.12
2.55
193
%15.86
770.82
183
%4.17
022
20.82
%10.52
0.36
043
5.29
358
.15
3130
%6%
%74.55
53
422.69
%37.12
3.01
232 66
3%1.64
92 8
2.05
65.94
469 43
%613.52
296.03
%16.96
34 127
%153.48
4.57
84 23
11.37
%3.49
091 44
14.49
%30.40
024 412
*
•
*
1%2.76
0.23
344
101 15
2%.52
11.09
%2738 36
6.94
%168.31
6.07
45 38
1.09
6%4.94
68 3
%
3.27
04 8
67.94
%
1.14
%3791.69 5
3.55
%615 38
11.37
%2265 14
7.12

1990

/
Black

4.07
%11.93
9%4.67
.00
5%2.53
.35

6.45
%9.48

9%33.09
2.46
.22
1%0.71
.38
5%1.31
%71.28
.24
1%6.18
0.29
%50.62
.97

Black
/
%oIndustry
Total
f Hisp
.
Aprvs
Average Aprvs
152.48
%5.87
18
94.97
%4.48
76
%125.28
0.76
022
241
850
501
%21.91
97.80
09
%17.47
5.34
859
2.58
%513.17
09
8%2.11
1912.32
90.74
%2.09
44
94.69
%3.00
21
2.03
%54.97
14
*
91.48
%4.10
328
10.00
%5.22
43

37.24
%79
721
398
1509
%
5.89
157.47
81
5%0.64
5.38
32
%318
5.38
300
*
1022

MSA
.Hisp

36

89
7
36
8
13
128
32
28
10
18
13
*
85
1
634
1463.57
%
3.87
%728.24
4.86
81
.97
52145
%
2.04
169
%1292.69
2.74
5%2.93
046
141.38
0.42
%27108
13.60
04
3.94
1%3122.48
36
1%4.03
53
80.29
38
490
1214
27.80
%13.62
17
25
3
15
37
24
6
9
*
6

1%4.41.304
%13.64
2.90
1%4.24
1.87
7.57
%1.60
%30.68
1.43
16.29
%6.79

%
6.40

4.51
%
%1.89
*

4.10
%12.22
1%5.61
1.87
3.14
%%7.97
13.16
%
%
13.16
1.67
%0.18
3.86
%8.43
%9.43
2.85
7.97
6.69
%
%15.19
3.57
%11.44
4.45
30.68
%14.36
%9.43
4.49
%12.22
3.47
.67
1%0.75
60.99
%.18
%26.37
3.30
6.18
%
%
6.18
9%3.00
.43
%7.97
0.59

Black
/
of Hisp
Total
%Industry
.
Aprvs
Average Aprvs
%6.9
125.1
235 9 17
%
%13.5
4173.1
107 6 28 6.83
*
*
*
%
384 14 3.65
*
.
%26.89
13.30
701 110
357 24
%
3.14
55 22 2.91
%715.00
%
143 0
0.00
231 24
*
*
*
%
307 13 4.23
747 35
286 1
%
1071 31 2.89
216 6
280
3756
%%
1.04
46.02
16
61.18
%3.92
061 62
272.24
%15.34
61 187
•
*
478 35
*
*
%
259 12 4.63
%10
2.00
500
·
770 13
295 11
.
•
•
*
*
•
•
*
•
%221 16
11.44
343 7

Black
.H/Misp
SA
%of
Industry
Average
Aprvs
%16.34
7.62
14.01
%
11.74
%
%
12.34
%
13.66
9.07
%
34.05
%
%25.87
6.47
6.72
%18.01
18.04
%
%
10.46
10.39
%13.66
%
9.91
14.01
%
14.01
%
4.69
10.35
%.76
%
6.64
%9.72
2.78
.91
9%7.45
%425.97
4.06
%8.39
5.84
%24.26
24.57
%
16.34
%17.32
3.55
34.05
%
%
9.72
%
10.46
%
1.76
.39
8%1.69
2%5.87
3.73
%
8.39
%
8.39
%
9.72
1%7.24
3.55
%9.91
2.04

548

The National Community Reinvestment Coalition⚫ 202-986-7898

II.A.4
TABLE

23

24
TABLE
.A.4
II

1993

38
81
67
60
76
20

173

5.76
%

793
15
101

3.21
%

214
50

2.30
%4475
103
%
7.16

/
Black
HBlack
./isp MSA
Total
o%f .Hisp o%f
Industry
Average
Aprvs Aprvs
%.67
11.30
070 27
%2.22
10.61
9%5.52
.43
%75.35
5.24
62 31
%
23.30
%
1%5.99
7.47 332 23 6.93
7.86
%
%
%42.10
.07 654 35 5.35
%12.22
2.13
%93.09
1.30
28 7
%13.64
0.44
%229 1
11.93
10.72
%16.79
080
2223
%13.17
831 31
%12.32
2.19
27 42
%182.48
4.12
7.89
%172.48
02 75
14.47
%5.00
61 43
1%92.32
2.80
%
23.30
%
%373 25 6.70
17.47
59.00
%16 10
%8.43
2.18
284 28
1.57
%
41.63
%349 19
17.47
%1253 82
10.29
620.42
%39 79
1%5.00
2.73
%880 24
12.32
%
8.43
%
%49.57
38 40 4.26
2.21
%
9.43
%
7.24
%67.50
09 34 5.58
%
11.44
*
10.29 .
%6.97
*
%
%
7.86
%.07 942 51 5.41
40.76
%
15.19
%
12.48 514 30 5.84
%5.67
%
%
7.97
1.90
5%2.16
4.97
74 9
%
6.18
%
0.38
52.38
%0.91
63 1
%5.00
114.66
1%2.32 655 96
9.97
13.16
%
%
6.37
%96.48
55 29 4.43
11.44
%
0.29 378 7
%
1.85
1%3.07
%
2.87
.09 209 6
2.81
9%
9%1317.47 67
4.85
4%0.00
.02
20.71
%.69 194 0
•
4.07
%2.15
•
%.97
52.19
44 9
1%5.19
461.93 382 13
5.19
%11.87
31%151.88
75 7
2.48
%
7.57
%
5.35
*
•
•
%22.24
20.76
16.25
103
%20.42 660 137
%
10.29
%
758 26 3.43

Black
/
HBlack
./isp MSA

oIndustry
Total
.
%f Hisp
Aprvs
Average Aprvs
3%1.52
254 20
0.76
103 59
74.04
%1.69
19.15
%%58.31
01 30
3.17
%1737.97
764
1.65
%10.23 844 11
1%3.43
3.51 567 14 2.47
%
15.31 4449 383 8.61
%11.07
%
463 76
2.53
%134.81
5.90
%1353.48
164 48
%1141 90
13.48
5.81
181
%13115
24.81
254 63
%
08 42 5.20
1%85.56
8.31
%
087 28 2.58
1%9.53
2.80
1.15
722 28
6%133
1.48
%
45 26 5.84
%148.31
6.25
%
1%46303
5.52
1.37 74 5.68
%26.03 .
15.64
*
•
%61
3.99
1%4.32
4.81
528
2.74
%61.15
899 42
73 73
%97.69
4.71
1.37 502 35
1%3.31
75.48
%5.97
156
29 4
2847
17.15
%783
56
73.48
23 41
2.64
%1289
720
34
9.12
28
6%1.16
8.94
77
14
1205
183
1%2187
836
14.81
4.81
324
10.82
%1068 68
84 21
3.76
%16231
1.37
6144
144
%1917
2.30
40.23
63 13
%
24616
5.57
1431
8.31 118
257
1.21
%3526.05
63 4
1.89
%7.97 465 10
7.12
2012 44
%
%167
83.51
87
3.47
1929
14.40
%269
6107
73.48
96
%
5.91
%
2115 44 2.00
21.66
%266.03
34
11.37
%

1990

/
Black
HBlack
./isp
Total Hisp
Industry
.
Aprvs Aprvs
Average
1714 18
215
%12
5.58
.
·
%1
0.70
142
%
222 21 9.46
·
·
1141 156
1.69
%185.00
98 18
00 41
5.08
%155.19
%125.19
10.68
69 30
*
#
%
89 3
1.59
1%1.87
1.94
*
.
%
01 10 2.49
%3.30
425.44
52 29 8.24
3%11.44
%
6.54
%62.24
212.36
52 77
%
594 20 3.37
·
*
.
•
%
319 21 6.58
•
·
•
*
%
342 22 6.43
•
•
%
461 35 7.59
%
287 21 7.32
•
•
%
3.13
212.22
%24 7
%
71 62 7.12
27.20
%83.30
%2.53
158 4
%01.77
%130
7.86
7%1.65
3.97
36
%
2.38
52 6
%123.64
3.40
•
*
.
%
491 18 3.67
664 129
%
%730 46 6.30
11.44

MSA
%of
Industry
Average
Aprvs
%1.76
1.05
%
9.72
%
25.87
%
6.50
%
10.46
%
12.34
%18.01
13.67
%8.04
12.00
6.34
1%8.20
11.15
%16.34
%
18.04
%
25.87
%
13.66
%
6.64
25.87
%
%
13.55
11.81
%24.26
%
18.04
%
6.64
9.72
%
13.55
%
%
6.50
%
16.34
%
9.91
%
8.39
%
18.04
%
14.01
%
13.55
%
10.46
%
25.87
%
4.97
%
6.50
%912.91
3.57
%
12.34
16.34
%
%
9.07
%4.26
219.43
13.55
%

549

The National Community Reinvestment Coalition 202-986-7898

MSA
CMARGARETTEN
& OMPANY
Minneapolis
MARGARETTEN
&COMPANY
1533
Tampa
York
New
&COMPANY
MARGARETTEN
612
Phoenix
MELLON
COMPANY
MORTGAGE
2021
MERCANTILE
&TRUST
BANK
Dallas
1274
MITCHELL
COMPANY
MORTGAGE
Houston
466
Washington 5430
UNION
CREDIT
FEDERAL
NAVY
Chicago
Oakland
593
822
Oakland
PRINCIPAL
CO
INS
LIFE
MUTUAL
Chicago
PROVIDENT
BANK
SAVINGS
York
New
701
REISTERSTOWN
FEDERAL
B
SAVINGS
Baltimore 1431
Detroit
REPUBLIC
BANK
9011
ROOSEVELT
BANK
SAVINGS
York
New
608
RSL
MORTGAGE
CORPORATION Anaheim 833
Riverside 518
RURAL
-BRAHAM
BANK
AMERICAN
SHELTER
CORPORATIONChicago
MORTGAGE
1552
Detroit
SOURCE
MORTGAGE
ONE
2189
Tampa
SOURCE
MORTGAGE
ONE
1613
SOUTHERN
SA
FEDERAL
CALIFORNIA Anaheim 605
BANK
Phoenix
STATE
SAVINGS
MORTGAGE
CORP
SUNBELT
NATIONAL Oakland
THE
BRYN
.
CO
TRUST
MAWR
Philadelphia
BANK
THE
COLONIAL
Louis
St.
THE
COMPANY Chicago
TRUST
NORTHERN
3003
THE
C
MORTGAGE
HOME
PRUDENTIAL
Atlanta
THE
C
MORTGAGE
HOME
PRUDENTIAL
Anaheim
Dallas
THE
C
MORTGAGE
HOME
PRUDENTIAL
York
New
THE
C
MORTGAGE
HOME
PRUDENTIAL
2157
THE
C
MORTGAGE
HOME
PRUDENTIAL
Boston
MORTGAGE
C
THE
HOME
PRUDENTIAL
Phoenix
THE
C
MORTGAGE
HOME
PRUDENTIAL
Philadelphia 3148
THE
C
MORTGAGE
HOME
PRUDENTIAL
Houston
THE
C
MORTGAGE
HOME
PRUDENTIAL
Oakland
MORTGAGE
CPRUDENTIAL
THE
HOME
Nassau
-Suffolk
Riverside 988
Anaheim 698

.Hisp
Total
Aprvs
3680
28
62
56
64
21
16
601
117
4630
%
69 8.39
39
40

1991

1992

/Black
HBlack
./isp MSA

Name

RATES
APPROVAL
:MINORITY
1993

WORST
1990
LENDERS
--

1993

NAME

MSA
MORTGAGE
PACIFIC
ALL
COMPANY
Oakland
ALLATOONA
FEDERAL
BANK
SAVINGS
Atlanta
San
MORTGAGE
RESIDENTIAL Diego
AMERICAN
BARCLAYS
MORTGAGE
AMERICAN
COR
Houston
COMPANY
MORTGAGE
B.F.SAUL
Baltimore
MORTGAGE
HOME
SNassau
-6.99
CORP
.CHASE
%973
168uffolk
110
1561
6.13
CHASE
MORTGAGE
HOME
.
CORP
York
New
Los
MORTGAGE
HOME
Angeles
.CHASE
CORP
MORTGAGE
HOME
.CHASE
CORP
Chicago
MORTGAGE
HOME
Washington
.CHASE
CORP
1937
10.56
11.46
21240
689
131
5.31
%222
10.74
746.02
7.4
CONSUMER
U.S.
CHASE
SERVICES
Dallas
Baltimore
CITIBANK
F.S.B.
COUNTRYWIDE Philadelphia
FUNDING
CORPORATIO
12.83
%5534
1487
5.72
1710
85
7.00
2298.88
4.69
414
CORP
SERVICE
D/BAEAGLE
TLAN
Atlanta
CORPORATION
FINANCIAL Atlanta
ENTRUST
CAPITAL
FEDERAL
FIRST
CORP
Minneapolis
18.26
21413
4.22
18.64
%258
11.74
11099
558
129
7.1
104
BANK
NATIONWIDE
FIRST
Detroit
Tampa
Philadelphia
Boston
Louis
St.
Riverside
MORTGAGE
GN
Oakland
MORTGAGE
GN
Anaheim
GN
MORTGAGE
Los
Angeles
COMPANY
MORTGAGE
GREENTREE
LP
Tampa
GUARDIAN
MORTGAGE
COMPANY Dallas
FCORP
& INANCIAL
MORT
.HEIGL
Minneapolis
SAVINGS
FEDERAL St.
Louis
OF
BANK
MHOME
INDEPENDENCE
SAVINGS
BANK
York
New
&COMPANY
B.NUTTER
JAMES
Louis
St.
CORPORATION
MORTGAGE
KNUTSON St.
Louis
CORPORATION Tampa
SERVICE
LINCOLN
AMERICA
FINANCE
LOAN
CORP
Anaheim
Philadelphia
SAVINGS
FEDERAL
LINE
MAIN
BANK
&COMPANY
MARGARETTEN
York
New
&COMPANY
MARGARETTEN
Tampa
&COMPANY
MARGARETTEN
Minneapolis
3835
MELLON
COMPANY
MORTGAGE
Phoenix
MERCANTILE
&TRUST
BANK
Dallas
Houston
COMPANY
MORTGAGE
MITCHELL

1992

/
Low
/Low Mod MSA
Mod
.Total
o%f
Apps

/Low
Low
Mod
/
Mod
.
Total
Industry
Average
Apps
1178
%121
12.39
1146
6.79
1190
18.83
%1056
1561
294
22.62
170

%
7.05

15.60
%1891
1543
2295
192
3.86

430.39 *
770
%35.58

*

•

1991

MSA

/Low
Mod
/
Low
.%of
Mod
Total
Industry
Apps
AverageApps
10.17
%1555
652.69 11.71
%
105
16.10
%2519
0.69 20.23
%
2576
%
223 8.66
5266 1.88
%
15.50
14.66
2%1677
1487
2.96
218
77
1260
8.77
8.48
908

1990

/
Low
MSA
Total
Industry
%of Mod
.
AverageApps Apps
12.89 242 25
28.83 468 98
3174
1%
5.17
7.27
8.10
169
257
2324
3.22
11.81 •
•
2.23
%01853
4608
6.6
.66
19
8.32
20.2 *
.
25.42 *
·
7.43
%112.94
5.68 462 39
43579
1.32
1.33
%63841
32
2431
1.85
92104
51
7.57
.07
.24 1970 28
39
1.09
%1928
21
.07
3.59 •
•
01414
1.00
1.41
901085
.88
10.31
1740
12.13
%2150
299
2901
2.74
15.15
211
4.67
2.79 827
990
489 58
0%520
30639
2.58
.16
1.48 25.26 175 0
1279
.00
8.91
10.24
%1259
14.33
968.77
670
6.90
576
478
2.96
2%335.42 267 17
22.69
.
28.83 322 34
912
*
%1235
12.63
2156
12.28
112
0.69
2.62 *
17.17
212
1235
2.62 28.83 942 125
17.93
%12.05
22133
257
0.69
1567
281
29.5 286 56
23718
5.26
327
2518
6.79 1133
312.18
453
2.07
%12.99
10.71
194
1812
27
3738
244
%12.47
12.30
14.79
26146
496
920.39
5.12
311
7.85
4075
336
14.26
4328
4.69
%26755
9.24
9.48
963
1400
2.69
8.88
2364
224
1217
985
7.82
35.38
%9.32
53
440
8.45
2841.69
1.28 671 53
12.44
2.95
12.73
%2138
1084
9.05 1096 203
8.68
1051
1279
111
0.65
0.91
6.4 848 75
%14.76
2.64
2150
796
.
7.68
73
16.55
6.79
3.55
718
950
%15
47
2.69
422
2.89
%13.04 568 29
6.34
120
1056
1557
8.93
%11.41
1139
5.67
1052
678.73
4.50
%9.88 *
%4.44
6.53
14304
224
3429
2002
191
903.59
1.41
27.91
%7.85 295 14
3725.12
468
25.26 520 20
%
7.45
120
5.90
%
22111
5.68
1.48
1373
181
8.91
56
752
%29.5
10.23
3174
8.60
4.22
%273
7.00
122101
147
430
447.1
%
29.05 844 154
15.54
%13.68
3051
474
22983
2.95
3.86 15.98
408
277
1733
%9.07 459 15
3.38
53
735
.24
1456
.57
800
27
%63.64
3.78
926
%29.05 *
17.11
14.51
1006
3.86
146
%2468
5.98
91282.95
532
*
216.81
%9.05 •
13.95
%925
3.86
129
14.74
2753
59
351
2.95
111
20.05
%27.85 •
•
34500.39
15.11
2509
5.12
%68
15.72
80
73
364
•
•
13.04 383 25
%11266
11.93
151
6.00
5.67 •
816
498.73
1084
%22.69 390 32
5.63
61
3078
2296
4.69
4.26
%
9.62
2417
1103
8.88
347
13
%9.07 *
3.75
•
650
.24
%2.15
6714
.57
2.67
524
566
%7.85 242 9
14
22.47
11.83
3975.12
0.39
197
1219
%21665
7.96
2096
431
1874
61
2.91
%
2
9.5
1127
10.00
%29.39
213390
4.22
339
7.1
740
64
8.65
%21.93 177 6
2149
3.11
12066
7.21
%1863
3.38
635.49
2.10
36
334
%
7
258
2
5.26
4.87
%
23.49
63
1.48
130
8.91
1294
859
4.17
%20.2
240
10
552
7.25
40
8.32
%1577
5.55
326.6

/
Low
Mod

MSA
%of
Industry
Average
Apps
10.33
%15.7
%26.73
20.94
11.04
17.27
.
27.11
.
28.44
%4.08
%12.02
1.42
8.63
•
10.16
%2842.98
%26.72
11.86
%21.72
0.00
27.11
%
6.37
26.42
210.56
%6.73
%6.73
213.27
%30.56
19.58
8.56
%97
30.73
%
11.07
23.27
26.42
%
8.25
%19.95
7.90
%32.28
18.52
10.94
%
8.84
15.7
·
11.38
%
5.11
*
8.63
23.27
%
4.75
%21.72
3.85
30.56
•
%32.28
18.25
3.27
%12.02
32.28
*
32.28
23.27
*
6.53
%11.38
8.21
%26.42
12.02
%23.27
3.72
23.00
%30.56
%26.87
3.39
13.95
%
21.72
17.27

550

The National Community Reinvestment Coalition 202-986-7898

TABLE
. .5
AII
WORST
LENDERS
1990--1993
:L
OWMODERATE
I
NCOME
APPLICATION
-AND
S

25

26

.A.5
II
TABLE
:L
1990--1993
LENDERS
WORST
-I
MODERATE
AND
APPLICATIONS
NCOME
OW-

1993
MMSA
od
/Low
NAME

Low
/
/Low Mod MSA

2.53
%750
19
7887
24
.24 2.71
%

%118.44
716
6.4 *
132

4.10
2978
%122

.
•

23.11 576
134
%21255
10.68
3.86 952 81

6770
%
141 2.08

16.79 889 13

%
1.46

664
1070
37
%1986.4 5.57
9.16
%
742
15.09
%
1112
8.73 *

•

/Low
/
Low
Mod

MSA

/
Low
.Industry
Total
Industry
f Mod
Total
.
%oMod
Apps
AverageApps Apps
18.67
4544
25511
5.31
15.81
337
%1029
15.49
704
2131
7.4 1194 250
6.02
616
10.78
%12.75
1981
9.69
4.67
24832
3692
192
2.79
398
2.74 979 83
7.66
15.87
%6.20
1103
1258
69
2.69
6.79 12.89 500 42
649
78
901
%7.55
7.06
54
6.65
1298
1765
932
62
2.69 12.89 351 43
986.79
4.67
13.39
%2135
15.02
490
3263
11.67
270
2314
1008
2.79
2.74
%408
*
2.94
912.07 *
6.57
21469
12.53
8.26
%8.35
46
184
11114
551
8.77
2.96 207 23
925.42
.
224
17.11
1273
12.27
%13.57
1309
217
322.07
5.26
1769
9380
6.79
5.76
9.07 459 20
%695
6536
%
9.47
740
5.41
29.57
.24
433
41
5.66
%84
1108
8.73
13.04 508 30
154
10.25
%1632
9.44
1054
5.67
1483
5.12
%937
1480.65 869 67
10.91
190
%24.67 626 95
20.70
314
%
21.48
343
21541
20.38
2.79
1597
2.74 918
15.32
2%1939
5.26 969
32.07 •
•
%
15.69
152
6.79
341
2226
13.00
252
•
268
%15.92
183
27.11
2174
5.12 27.85 *
1052
16.54
1683
30.39
675
13.04 374 11
17.57
%11.68
719
84
608
465.67
8.73 * .
13.18
%1055
139
*
%
2.95
17
15.49 21.93 .
6.53
2.89 •
104
%
12.09
1818
860
73
386.79
582
2.69
8.92
14.54
%10.55
74
2509
2.69
967
1102
8.88 369 49
10.44
%2297
8.51
319.05
2.95 •
•
%213.53
133
18.24
4.67
729
324
13.80
2348
2.79 596 85
2.74
274
2025
1.73
%923.07 1174 24
642.24
.57
1331
%1.42
5508
7119
2.16
2956
0%428
12.89 •
•
3.70
12.69
15.68 613 23
*
2434
%15.09
5.87
8.45
7.82
%21.28 204 8
269
11
681
4.09
40
124
513.48
237
8.73
%13.04 *
1.14
3.24
%7317
833
440
295.67
251
76
%25.26 258 3
22156
3.53
%1546
2.38
138.91
1.48
10
3.98
3328
25.62
0.69
28.83 339 10
%759
39
187
311186
2.62 4.08
%
3.29
%654
9.95
19
21985
2.91
983.11
5.49 * *
21.93 181 4
%
22.69 417 16
24 3.66
656
1.75
%1970
8.32
6.6
%
1.88
40
172127
458
20.2 314 8
14 3.06
10.65 771 56
18 2.45
736
%
10.91
%
794
13.04 762 41
15.67
64 8.06

/Low
Mod MSA
%of
Industry
Average
Apps
220.94
%6.72
2%2.98
8.48
%15.7
8.40
15.7
%
12.25
22.98
12.02
*
%
27.11
11.11
30.73
*
%
4.36
12.02
11.38
%
5.91
7.71
%10.94
22.98
%
15.18
30.73
*
23.27
*
11.38
2.94
%
26.87
15.7
26.42
13.28
%
32.28
14.26
%
22.98
12.02
%
2.04
15.7
•
24.08
%
3.75
19.95
%
3.92
*
11.38
21.72
%
1.16
22.95
%6.73
22.21
%6.87
23.84
%6.42
2.55
%17.27
%10.94
7.26
%11.38
5.38

551

The National Community Reinvestment Coalition⚫ 202-986-7898

MSA
UNION
CREDIT
FEDERAL
NAVY
Washington
COMPANY
MORTGAGE
NBD
Chicago
MORTAGE
NVR
Oakland
COMPANY
MORTGAGE
PIB
Oakland
CO
INS
LIFE
MUTUAL
PRINCIPAL
Chicago
BANK
SAVINGS
PROVIDENT
York
New
REISTERSTOWN
SAVINGS
Baltimore
BFEDERAL
BANK
REPUBLIC
Detroit
New
York
BANK
SAVINGS
ROOSEVELT
CORPORATION
MORTGAGE
RSL
Anaheim
AMERICAN
RURAL
-BRAHAM
BANK
Riverside
CORPORATIONChicago
MORTGAGE
SHELTER
MORTGAGE
ONE
SOURCE
Detroit
Tampa
MORTGAGE
ONE
SOURCE
Anaheim
SA
FEDERAL
CALIFORNIA
SOUTHERN
BANK
SAVINGS
STATE
Phoenix
CORP
MORTGAGE Oakland
NATIONAL
SUNBELT
Philadelphia
14.27
%
189
21324
4.69
.
CO
TRUST
MAWR
BRYN
THE
THE
BANK
COLONIAL
St.Louis
Chicago
COMPANY
TRUST
NORTHERN
THE
York
New
C
MORTGAGE
HOME
PRUDENTIAL
THE
THE
C
MORTGAGE
HOME
PRUDENTIAL
Oakland
Nassau
uffolk
6.08
%-S143
MORTGAGE
HOME
PRUDENTIAL
15.82
2.94
6.13
CTHE
2457
312
5128
Boston
HOME
PRUDENTIAL
CTHE
MORTGAGE
Anaheim
MORTGAGE
HOME
PRUDENTIAL
CTHE
Dallas
PRUDENTIAL
MORTGAGE
HOME
CTHE
THE
C
MORTGAGE
HOME
PRUDENTIAL
Atlanta
Phoenix
C
MORTGAGE
HOME
PRUDENTIAL
THE
Philadelphia
212309
4.69
%3569
4.33
7.45
8.88
100
266
C
MORTGAGE
HOME
PRUDENTIAL
THE
Houston
THE
C
MORTGAGE
HOME
PRUDENTIAL
Riverside
.
CO
MORTGAGE
WEYERHAEUSER
Anaheim
.
CO
MORTGAGE
WEYERHAEUSER

1990

1991

1992

/
Low

WORST
LENDERS
1990-1993
L
: OWMODERATE
I
-AND
NCOME
APPROVALS
1993

1992

/
Low
/
Low
/Low Mod MSA
/
Low
Mod
%oTotal
f Mod
Total
Industry
.
Mod
.
Name
MSA
Aprvs
Aprvs Aprvs Aprvs
Average
MORTGAGE
PACIFIC Oakland
ALL
COMPANY
5.51 1125 104
%1132
11.72
1126
SAVINGS
FEDERAL
ALLATOONA
BANK Atlanta
0.73 985 150
%273
18.16
21503
RESIDENTIAL
AMERICAN San
MORTGAGE
Diego
%12886
7.48
216
4.03 2084 127
BARCLAYS
MORTGAGE
AMERICAN
COR Houston
5.31 787 18
%01561
3.53
B.F.SAUL
MORTGAGE
COMPANY
Baltimore
1592
15.01
1.32 209
%2239
1434
MORTGAGE
HOME
.76
CORP
York
New
5%2154
.CHASE
1.02
3053 28
22
MORTGAGE
HOME
-Suffolk
Nassau
CORP
.CHASE
4.6 1306 88
%155846
6.50
Los
Angeles
MORTGAGE
HOME
CORP
1557
.CHASE
%1122.82 1097 0
0.77
Washington
MORTGAGE
HOME
.CHASE
CORP
4.07 1008 87
210.14
175
%1726
Chicago
MORTGAGE
HOME
%21.5
10.19
1613
CORP
187
.CHASE
285
2798
468 1
%18.54 540 1
0.21
SERVICES Dallas
CONSUMER
U.S.
CHASE
0.19
%
Baltimore
75
579
F.S.B.
CITIBANK
%21.32 28
12.95
341
COUNTRYWIDE
FUNDING
CORPORATIO
Philadelphia
AEAGLE
D/BTLAN Atlanta
CORP
SERVICE
CORPORATION
FINANCIAL
ENTRUST
Atlanta
CAPITAL
FEDERAL
FIRST
CORP
Minneapolis
BANK
NATIONWIDE
FIRST
Detroit
11.46
273
%22383
4.06
3358
336
Tampa
CORP
MORT
UNION
.FIRST
704
11.79
%83
24.63 49
453
MORTGAGE
CAPITAL
GE
SERVICES Boston
916
%1292
4.59
426.77 19
Philadelphia
6347
14.10
%3232
895
22.63
258
Louis
St.
1845
15.56
%2287
1.1
183
1469
Riverside
1132
8.75
%1995.32
934
39
Los
Angeles
GN
MORTGAGE
2581 171
%3024
6.63
4.33
131
12.82
MORTGAGE
GN
Oakland
831 64
6.34
%7.70
15.51
584
37
MORTGAGE
GN
Anaheim
773 95
%1091
12.29
1101
8.05
LP
COMPANY
MORTGAGE
GREENTREE
Tampa
25.14
623 32
%4.63 *
*
*
MORTGAGE
GUARDIAN Dallas
COMPANY
116
2067
&FINANCIAL
MORT
.HEIGL
CORP
Minneapolis
257
3110
BANK
SAVINGS
FEDERAL
HOME
M
OF
St.
Louis
2910 428
BANK
SAVINGS
INDEPENDENCE
York
New
1071
%
2.80
%
305.76 645 17 2.64
CJAMES
& OMPANY
B.NUTTER
St.
Louis
2%125
1.1 468 28
920
13.59
CORPORATION
MORTGAGESt.
KNUTSON
Louis
887 119
13.42
%21.1 704 98
CORPORATION
SERVICE Tampa
LINCOLN
214.21
366 52
%4.63 391 58
CORP
FINANCE
AMERICA
LOAN
11.58
%1140
Anaheim
132
18.05 615 33
BANK
SAVINGS
FEDERAL
LINE
MAIN
2265
2912.63
Philadelphia
8.99
263
2924
%
&COMPANY
MARGARETTEN
Minneapolis
&COMPANY
MARGARETTEN
Tampa
10.83
%2166
4.63 1103 83
1533
CMARGARETTEN
& OMPANY
52.29
York
New
%
14.76 501 14
612
COMPANY
MORTGAGE
MELLON
Phoenix
6.63
%2134
2021
0.79 1764 58

1991

MSA
%9.24
11.57
%19.12
15.23
2.29
%
13.4
%17.4
14.57
4.79
%
0.92
0.00
%10.57
%25.16
8.63
%21.56
11.59
16.11
8.21
%17.4
12.29
645
25247
%1377
5.30
1732.63
6.67
2888
0.73
%11.71
11.74
104
11193
140
9.12
1200
0.73
%21226
17.00
204
2022
11.18
9.12
1374
1043
17.90
%1246
11.41
25.5
2.86
119
10.01
%22.14
210.82
%2.68
%17.39
6.51
7.98
%16.67
%20.01
12.46
%9.71
4.18
10.57
11.57
%14.93
9.26
22.68
5.61
5.73
%77
1344
16.11
8.54
%8.26
7.00
12101
25.5
2.86
147
14.71
12.56
%22738
1.1
344
0.01
4.79
5.98
%20.01
213.92
%0.01
%22.68
14.83
14.93
%
5.37
%16.67
4.02
23680
2.86
1047
128.45
5.5
321
%3254
9.86
7.52
%22.68
2.79
4.79
%
13.29
%3.05

/
Low
/
Low
Mod
%oIndustry
Total
f Mod
.
Average Aprvs
Aprvs
518 61
476 90
12022
1.95 110 5.44
%
6.09
%
1.24
%
241 3
850 67 7.88
%
%
1859 28 1.51
%501
6.74
%
11.22 31 6.19
909 0
%
0.00
509 44 8.64
%
891 132 14.81
%
244 0
%
0.00
321 22
%
414 29 7.00
*
.
•
1328 213
543 97
1634 151
281 41 14.59
%
192 5
2169 202
1046 129
704 20
1490 76
336 12
853 51
379 35
721 48
398 44
204
1509
581 16
532 91
318 49
300 60
*
*
1022 52
2070 60
562 14
332 12
%
3.61
654 57 8.72
%

1990
/
Low
/
Low
Mod
Total
Industry
%oMod
.f
Aprvs
Average Aprvs

MSA
%11.72
11.78
%26.15
18.91
10.7
16.69
23.22
7.09
14.21
8.99
25.98
22.21
22.28
6.85
%23.22
19.2
26.15
16.04
%26.15
17.86
%27.28
9.24
%28.07
25.4
2.60
%19.97
%19.2
9.31
%24.35
12.33
2.84
%9.51
%8.99
5.10
%11.72
3.57
5.98
%12.02
%25.4
9.23
%22.28
6.66
%27.28
11.06
%24.35
13.52
%7.09
2.75
%24.35
17.11
15.41
%24.35
%25.4
20.00
12.02
%19.2
5.09
%27.28
2.90
%25.4
2.49
7.09
19.94

223 23
410 81

19.76
%

·

1701
384
357
755
143
231
307
747
286
1071
216
616
3756
1061
761
478
259
500
770
295

221
343
1714
215
.
142

•
13
28
•
46
78
0
.
30
76
56
88
25
50
294
191
65
*
•
25
14
19
*
130
6
*
•
•
8
23
371
7
•
4

.
%0.76
7.29
%
.
5.63
%13
.
9.77
%

·

*
*

•
2.82
%

MSA
%of
Industry
Average
Aprvs
%14.36
10.31
23.83
8.56
14.23
0.2415
10.13
22.41
7.42
%24.74
12.89
%20.86
10.33
%18.93
0.00
0.2415
23.04
23.83
%23.83
10.17
19.58
%28.98
8.22
%25.8
%21.11
11.57
8.12
%19.03
7.83
%23.04
%28.99
18.00
%9.23
8.54
7.42
14.36
%9.99
5.23
5.41
%21.11
%18.93
3.80
28.98
%28.99
16.88
12.03
%0.13
28.99
28.99
21.11
%9.99
3.62
26.71
%3.04
21.65
%28.98
3.26
%21.11
10.13
21.89

552

The National Community Reinvestment Coalition 202-986-7898

TABLE
II
.A.6

27

28

APPROVALS
NCOME
I
-:LENDERS
MODERATE
AND
OWL
1990-1993
WORST

.A.6
II
TABLE

Name

MSA
4.71
160
%8.54
1%466
6.44
305.31
2%4.07
17.85
12.14
%562
21.5
4630

15.51
215
5.76
21.32
24.06
5.76
18.05
15.32
21.5
215.12
%4.06
215.44
%4.63
18.05
20.79
15.51
22.63
21.1
21.5
6.15
%4475
14.6
275
20.73
16.77
18.54
20.79
15.31
22.63
12.90
%8.05
5.51
11.85
%113
18.05
%15.32
8.81

/
Low
!Low Mod
Total
Industry
.
%of Mod
Aprvs
Average
%844
3.44
29
4449 657
354
3463
115.51
1164
%5.51 69
%
1141 85 7.45
%
2254 253 11.22
%
808 18 2.23
8.10
%1087
88
1722 202
445 19
%
1303 110 8.44
•
•
%
1528 310 20.29
1899 240
973 146
502 38
%
529 12 2.27
%
723 63 8.71
%
928 91 9.81
%
877 66 7.53
%
1836 170 9.26
%
2115 104 4.92
%
1068 34 3.18
%
1.03
52431
.76
25
1.73
%4616
80
563 25
%
463 10 2.16
465 15
%
887 14 1.58
%
2012 70 3.48
%
684 19 2.78
796 8
.
•
.
%
634 34 5.36

MSA

16.11
1313.4
%567
5.47
2%5.16
14.77
2%1.56
10.22
15.93
%1.57
11.57
21.56
4.79
17.4
11.73
%22.14
%4.79
4.27
14.93
9.71
21.56
212.64
%2.14
%22.68
15.01
17.57
%4.93
13.05
11.57
16.67
20.01
21.56
11.22
19.12
4.79
%17.39
4.44
16.11
13.23
%3.05
13.4
16.67
14.93
1.01
%11.57
14.93
9.71

Low
/
/Low Mod MSA
Total
.
Mod
Industry
f
o%
Average Aprvs
Aprvs
%22.28
1.83
328 6
16.69
%
229 10 4.37
%
316 15.19
25.98
2080
%
22.21
1831 164 8.96
11.72
53
%
6.41
827
11.72
%
702 50 7.12
%
22.21
961 128 13.32
7.09
%
373 10 2.68
%
23.22
516 40 7.75
%
28.07
1284 215 16.74
7.09
%
349 24 6.88
12.02
%
1253 66 5.27
9.51
%
639 31 4.85
22.21
%
880 184 20.91
28.07
%
938 145 15.46
25.4
%
609 156 25.62
12.02
.
•
•
19.94
%
942 115 12.21
%
11.72
514 27 5.25
19.2
%
12.87
474 61
210.65
%4.35
263 28
%
22.21
13.59
655 89
14.21
•
•
•
26.15
%
655 21 3.21
%
7.09
931 11 1.18
%
2.06
19.97
194 4
22.28
%
2.87
209 6
19.94
•
•
.
16.69
%
2.09
382 8
19.2
%
544 15 2.76
%
0.26
12.02
378 1
%
0.27
11.72
375 1
12.02
%
758 59 7.78
9.51
%
660 17 2.58

1990

/
Low
Mod
/
Low
Total
o%f Mod
Industry
.
Aprvs
Average Aprvs
%
222 29 13.06
•
•
%
1141 224 19.63
%
898 66 7.35
500 42
%
269 32 11.90
•
•
•
•
•
%
189 22 11.64
•
•
•
%
401 11 2.74
352 24
%
652 45 6.90
%
14.98
594 89
*
•
•
.
•
•
%
2.51
319 8
•
•
.
•
·
•
%
342 41 11.99
%
461 32 6.94
%
491 20 4.07
%
2.79
287 8
%
871 17 1.95
%
4.43
158 7
%
1.34
224 3
%
3.08
130 4
%
1.19
252 3
%
1.79
336 6
.
•
·
•
•
•
%
730 38 5.21
7.23
%48
664

MSA
Industry
%of
Average
Aprvs
18.93
14.23
24.74
20.86
1%4.36
8.40
14.36
20.86
10.13
0.2415
25.8
10.13
%9.99
6.82
9.23
20.86
25.8
21.11
9.99
21.89
14.36
23.04
28.99
20.86
22.41
23.83
10.13
19.03
18.93
21.89
14.23
23.04
9.99
14.36
9.99
9.23

553

The National Community Reinvestment Coalition 202-986-7898

/
Low
/
Mod
Low
.
Total Mod
Aprvs Aprvs
MSA
Dallas
1274
TMERCANTILE
BANK
& RUST
Houston
COMPANY
MORTGAGE
MITCHELL
Washington 5430 969
UNION
CREDIT
FEDERAL
NAVY
Chicago
COMPANY
MORTGAGE
NBD
593 92
Oakland
NVR
MORTAGE
%
822 46 5.60
Oakland
COMPANY
MORTGAGE
PIB
%
3115 454 14.57
CO
Chicago
INS
LIFE
MUTUAL
PRINCIPAL
2.57
%18
York
New
701
BANK
SAVINGS
PROVIDENT
%
1431 176 12.30
BSAVINGS Baltimore
FEDERAL
REISTERSTOWN
%
9011 1186 13.16
Detroit
BANK
REPUBLIC
%
New
York
608 25 4.11
BANK
SAVINGS
ROOSEVELT
%
Anaheim
833 83 9.96
CORPORATION
MORTGAGE
RSL
19.50
%101
Riverside
518
BBANK
- RAHAM
AMERICAN
RURAL
%
1552 327 21.07
CORPORATION
MORTGAGE
SHELTER Chicago
331
Detroit
2189
MORTGAGE
ONE
SOURCE
249
1613
Tampa
MORTGAGE
ONE
SOURCE
%
11.24
SA
605 68
FEDERAL Anaheim
CALIFORNIA
SOUTHERN
%
2847 113 3.97
Phoenix
BANK
SAVINGS
STATE
%
783 89
11.37
CORP
MORTGAGE
NATIONAL
SUNBELT Oakland
%
Philadelphia 1289 179 13.89
.BRYN
CO
TRUST
MAWR
THE
%
127 10.54
1205
Louis
St.
BANK
COLONIAL
THE
%2187
12.89
282
COMPANY
TRUST
NORTHERN Chicago
THE
-Suffolk
CPRUDENTIAL Nassau
MORTGAGE
HOME
THE
%
146 4.86
3003
C
Atlanta
MORTGAGE
HOME
PRUDENTIAL
THE
York
New
C
MORTGAGE
HOME
THE
PRUDENTIAL
104
%
2157 4.82
Boston
C
MORTGAGE
HOME
PRUDENTIAL
THE
%67
3.50
1917
C
Dallas
MORTGAGE
HOME
PRUDENTIAL
THE
%73
9.21
793
CHOME Phoenix
MORTGAGE
PRUDENTIAL
THE
%
1929 31 1.61
CHOME Houston
MORTGAGE
PRUDENTIAL
THE
%
212
CPRUDENTIAL Philadelphia
3148 6.73
MORTGAGE
HOME
THE
CMORTGAGE
6144 178
HOME
PRUDENTIALAnaheim
THE
C
MORTGAGE
HOME
Oakland
6107
PRUDENTIAL
THE
%
698 100 14.33
.MORTGAGE Anaheim
CO
WEYERHAEUSER
Riverside
988 87
.MORTGAGE
CO
WEYERHAEUSER

1991

1992

1993

554

SECTION II :

THE WORST LENDERS IN AMERICA
1990 -- 1993

DATA TABLES BY MSA

The National Community Reinvestment Coalition 202-986-7898

29

555

TABLE II. B.1

MSA

WORST LENDERS: 1990-1993

AGENCY TYPE OF INSTITUTION

LENDER

Anaheim
GN MORTGAGE
LOAN AMERICAFINANCE CORP
Anaheim
RSL MORTGAGE CORPORATION
Anaheim
Anaheim
SOUTHERN CALIFORNIA FEDERAL SA
THE PRUDENTIAL HOME MORTGAGE C
Anaheim
WEYERHAEUSER MORTGAGE CO.
Anaheim
Atlanta
ALLATOONAFEDERAL SAVINGS BANK
Atlanta
EAGLE SERVICE CORP D/B/A ATLAN
Atlanta
ENTRUSTFINANCIAL CORPORATION
THE PRUDENTIAL HOME MORTGAGE C
Atlanta
B.F.SAUL MORTGAGE COMPANY
Baltimore
CITIBANK F.S.B.
Baltimore
Baltimore
REISTERSTOWN FEDERAL SAVINGS B
Boston
GE CAPITAL MORTGAGE SERVICES
Boston
THEPRUDENTIAL HOME MORTGAGE C
CHASE HOME MORTGAGE CORP.
Chicago
NBD MORTGAGE COMPANY
Chicago
PRINCIPAL
MUTUAL LIFE INS CO
Chicago
SHELTER MORTGAGE CORPORATION
Chicago
THE NORTHERN TRUST COMPANY
Chicago
Dallas
CHASE U.S. CONSUMER SERVICES
Dallas
GUARDIAN MORTGAGE COMPANY
Dallas
MERCANTILE BANK & TRUST
Dallas
THE PRUDENTIAL HOME MORTGAGE C
Detroit
FIRSTNATIONWIDE BANK
Detroit
REPUBLIC BANK
Detroit
SOURCE ONE MORTGAGE
Houston
BARCLAYS AMERICAN MORTGAGE COR
Houston
MITCHELL MORTGAGE COMPANY
Houston
THE PRUDENTIAL HOME MORTGAGE C
Los Angeles
CHASE HOME MORTGAGE CORP.
GN MORTGAGE
Los Angeles
Minnesota
FIRSTFEDERAL CAPITAL CORP
Minnesota
HEIGL MORT. & FINANCIAL CORP.
Minnesota
MARGARETTEN & COMPANY
Nassau-Suffolk CHASE HOME MORTGAGE CORP.
Nassau-Suffolk THE PRUDENTIAL HOME MORTGAGE C
CHASE HOME MORTGAGE CORP.
NewYork
NewYork
INDEPENDENCE SAVINGS BANK
New York
MARGARETTEN & COMPANY
NewYork
PROVIDENT SAVINGS BANK
New York
ROOSEVELT SAVINGS BANK
New York
THE PRUDENTIAL HOME MORTGAGE C
Oakland
ALL PACIFIC MORTGAGE COMPANY
Oakland
GN MORTGAGE
Oakland
NVR MORTAGE
Oakland
PIB MORTGAGE COMPANY
Oakland
SUNBELT NATIONAL MORTGAGE CORP
Oakland
THE PRUDENTIAL HOME MORTGAGE C
Philadelphia
COUNTRYWIDE FUNDING CORPORATIO
GE CAPITAL MORTGAGE SERVICES
Philadelphia
Philadelphia
MAIN LINE FEDERAL SAVINGS BANK
THE BRYN MAWR TRUST CO.
Philadelphia

30

3
7
4
4
7
7
4
4
7
7
4
4
4
7
7
1
2
7
3
2
2
7
4
7
4
3
7
2
7
7
1
3
4
7
7
1
7
1
3
7
4
3
7
7
4
7
2
4
7
7
7
4
3

Bank Related MortgageCompany
Independent Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Independent Mortgage Company
Commercial/Savings Bank
Bank Related Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Bank Related Mortgage Company
IndependentMortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Independent Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
IndependentMortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Commercial/Savings Bank
Independent Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Independent Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Bank Related Mortgage Company
Bank Related Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Independent Mortgage Company
Commercial/Savings Bank
Commercial/Savings Bank

The National Community Reinvestment Coalition 202-986-7898

556

TABLE II. B.1

MSA
Philadelphia
Phoenix
Phoenix
Phoenix
Riverside
Riverside
Riverside
San Diego
St. Louis
St. Louis
St. Louis
St. Louis
St. Louis
Tampa
Tampa
Tampa
Tampa
Tampa
Washington
Washington

WORST LENDERS: 1990-1993

LENDER
AGENCY TYPE OF INSTITUTION
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
2
MELLON MORTGAGE COMPANY
Bank Related Mortgage Company
4 Commercial/Savings Bank
STATE SAVINGS BANK
7 Independent Mortgage Company
THE PRUDENTIAL HOME MORTGAGE C
7 IndependentMortgageCompany
GMAC MORTGAGE CORPORATION OF P
4 Commercial/Savings Bank
RURAL AMERICAN BANK - BRAHAM
7 Independent MortgageCompany
WEYERHAEUSER MORTGAGE CO.
7 Independent Mortgage Company
AMERICAN RESIDENTIAL MORTGAGE
7 Independent Mortgage Company
GMAC MORTGAGE CORPORATION OFP
4 Commercial/Savings Bank
HOME FEDERAL SAVINGS BANK OF M
7 Independent Mortgage Company
JAMES B. NUTTER & COMPANY
KNUTSON MORTGAGE CORPORATION
7 Independent Mortgage Company
THE COLONIAL BANK
3 Commercial/Savings Bank
FIRST UNION MORT. CORP.
2
Bank Related Mortgage Company
7
GREENTREE MORTGAGE COMPANY LP
Independent Mortgage Company
LINCOLN SERVICE CORPORATION
4 Bank Related Mortgage Company
7 Independent MortgageCompany
MARGARETTEN & COMPANY
7 Independent Mortgage Company
SOURCE ONE MORTGAGE
1
CHASE HOME MORTGAGE CORP.
Bank Related Mortgage Company
5 Credit Union
NAVY FEDERAL CREDIT UNION

The National Community Reinvestment Coalition⚫ 202-986-7898

31

32

NAME

MSA
CORP
Anaheim
LOAN
FINANCE
AMERICA
FEDERAL
SA
SOUTHERN
CALIFORNIA Anaheim
WEYERHAEUSER
.
CO
MORTGAGE
Anaheim
Anaheim
MORTGAGE
GN
CORPORATION Anaheim
MORTGAGE
RSL
C
MORTGAGE
THE
HOME
PRUDENTIAL
Anaheim
SAVINGS
BANK
ALLATOONA
FEDERAL Atlanta
CORPORATION
ENTRUST
FINANCIAL Atlanta
MORTGAGE
HOME
C
PRUDENTIAL
THE
Atlanta
EAGLE
D/BATLAN
CORP
SERVICE
Atlanta
SAVINGS
B
FEDERAL
REISTERSTOWN
Baltimore
Baltimore
B.F.SAUL
COMPANY
MORTGAGE
CITIBANK
F.S.B.
Baltimore
SERVICES
GE
MORTGAGE Boston
CAPITAL
Boston
MORTGAGE
C
THE
HOME
PRUDENTIAL
Chicago
CHASE
.
CORP
MORTGAGE
HOME
Chicago
NBD
COMPANY
MORTGAGE
Chicago
PRINCIPAL
CO
INS
LIFE
MUTUAL
CORPORATIONChicago
MORTGAGE
SHELTER
TRUST
COMPANY Chicago
NORTHERN
THE
Dallas
CONSUMER
SERVICES
CHASE
U.S.
COMPANY
MORTGAGE
GUARDIAN Dallas
Dallas
TMERCANTILE
& RUST
BANK
Dallas
C
MORTGAGE
PRUDENTIAL
THE
HOME
BANK
Detroit
NATIONWIDE
FIRST
Detroit
BANK
REPUBLIC
Detroit
MORTGAGE
ONE
SOURCE
COR
MORTGAGE
AMERICAN
Houston
BARCLAYS
Houston
COMPANY
MITCHELL
MORTGAGE
C
MORTGAGE
THE
HOME
PRUDENTIAL
Houston
Los
Angeles
CHASE
.
CORP
MORTGAGE
HOME
Los
Angeles
MORTGAGE
GN
CAPITAL
CORP
Minneapolis
FIRST
FEDERAL
Minneapolis
FHEIGL
.MORT
CORP
& INANCIAL
Minneapolis 3835
CMARGARETTEN
& OMPANY
561
S973
Nassau
-3.08
%6130uffolk
.86
.CHASE
CORP
MORTGAGE
HOME
65128
2.38
457
64.86
-S%2122
Nassau
uffolk
MORTGAGE
CHOME
PRUDENTIAL
THE
York
New
MORTGAGE
.HOME
CORP
CHASE
BANK
SAVINGS
New
York
INDEPENDENCE
York
New
C& OMPANY
MARGARETTEN

Hisp
.Total
Apps Apps
1266 101
%4.31
719 31
57742
39
1052
1054
64
294
7317
100
1561
56
1235
207
3328
58
912
42
1469
116
1677
51
670
18985
2434
31
124
2901
4832
3263
75
1597
2348
410
7
520
57
2111
1294
21
58
2156
2518 162
9380
151
64
2226
608 29
%
2127 92 4.33
1%6.92
1.79
1%7.61
1.79

12.50
%
%12.50
7.68

Black
/
HBlack
./isp MSA

1993

Total
Industr
.y
%of Hisp
Apps
Average Apps
1%7.98
82.50
16 54
608 44
•
#
2.50
1%3.71
557 72
%12.50
6.07
632 121
%814.02
2.50
33 27
1%6.41
12.46
056 58
1104
22.46
133
%
4.53
%178
2.46
6.22
186
6.36
%12.46
235 95
1%2.86
%
11.79
114 32
1487 81
576 41
31.83
%4.50
40 21
81 7
%6.50
31.27
6.37
1%4.27
740 45
1%2.73
692
836.37
3132
314
6.37
2206
67
16.31
%
%
4.70
541
1646.37
025
6.37
%12289
17.46
39 5
%162.35
1.35
37
373
%12.35
2.70
1%1.62
59 11
82.35
%152.35
2.69
46 18
7%36.43
196
.38
718
%711.61
.38
769 29
%1.38
72.88
939 44
1%4.77
86.42
53 33
514.71
%266.42
77 15
552
16.42
%970 56
3%
%1928
35
3.37
65
13.10
414
43429
663
304
15.89
%3545
3.10
105%1413
01.69
.35
099
1.07
%13174
234.69
101 15
10.83
390 26
%332.69
46
6.09
3%2431
270
841
2148
0.81
2118
%8.10
9810.81
26
%1456
9.23
260
%35
650
50.81
24
6.68
%

%
0.77

%
2.48

%
1.28
%
3.30
%
5.27
%
1.64

%3.24
%
5.49
%
4.88
%
6.58
%
7.69
2.87
%
%
5.45
%
7.12
4.77
%

11.74
%7• 94

/
Black

1992

20.20
%

6.51
%2.60
%

30.99
%

%13.97
14.27

%
11.03

%11.74
6.62
%11.74
7.24

HBlack
SA
./Misp
oIndustry
Total
%f Hisp
.
Apps
Average Apps
•
.
*
30
056
%14.62
611.74
1%7.41
109
1.74
483
%440 7
11.74
11.03
%519 21
%1567 132
11.03
%759
11.03
*
.
%551 12
10.59
%908 42
10.59
%478 51
10.59
%217 3
3.22
1.03
32.22
%
69 4
1%2.59
90 40
93.97
3.97 43
%981
12.25
008 50
%3.97
12.90
%93.97
14.15
18 28
729 148
0.78
79 11
%211.30
1%2.69
71.30
52 27
11.30
%334 7
%251 12
11.30
%1812 87
5.69
%1309 31
5.69
5%2.27
9.69
69 43
1%3.87
%75.03
66 8
%25.03
12.60
40 3
%45.03
15.77
58 19
1085 16
15.40
2%30.99
002 341
58 1
0.00
%15.48
0.71
%14.48
30 3
21.48
%096 29
6%2.95
79 16
%5.51
.
.
2%7.03
0.20
104 181
2%8.75
80.20
00 51
347 30
%
8.65

.

1.47
%

%2.37
%
4.44

2.10
%

%
1.49

*
4.63
%

•
.
%
3.78

/
Black

1991

oIndustry
Total
%f .Hisp
Average Apps
Apps
12.99
%
383 34
374 26
12.99
%
%762 49
12.99
5.78
%512.99
68 46
%17.35
52.99
08
11.59
%2.99 *
4.05
%16.04 468 38
%16.04 942 63
8.42
%50
36.04
39 33
16.59
%322 20
16.04
%14.69 207 4
2.18
14.69
%
*
10.67
%14.69 267 34
%46.75
1.38
71 32
%204 6
4.75
1%8.32 827 28
4.04
92.17
8.32 21
%179
%18.32 .
4.96
•
26 29
%68.32
13.05
96 104
158.32
%20.30
75 0
13.94
%5.13
20 15
155.13
%3.59
15.13
%
258 30
%5.13 258 11
14.78
14.80
%1.73 1133 42
%
11.73
•
·
%
11.73
%1%7.42 *
·
3.01
•
1%
1.25
7.42 .
4.15
%17.42 314 14
%
33.42
•
•
17.03
%33.42 •
•
10.18
%
%.87
286 1
10.70
%.87
•
*
874 26
1.38
%1.87
2.76
%84.91
62 19
%613 28
8.91
%28.60
16.75
970 159
2%6.38
46.75
59 19
%
26.75
•
•

Black
.H/Misp
SA

Black
/
HBlack
./isp MSA
Industry
%of
Average
Apps
4.33
1%8.88
4.33
1%6.95
16.43
%4.33
1%8.10
4.33
%444.33
18.66
%
14.33
•
%
%
17.31
8.12
%
6.69
%
17.31
%17.31
9.73
%17.31
6.21
%11.93
6.24
%
16.24
•
16.24
%12.73
6%4.77
.39
%6.39
2.94
2%0.55
3.39
%
20.55
%
2.15
%
20.55
.
0.55
2%4.63
%0.55
217.45
%
12.72
%
0.00
12.72
%
%
2.88
%12.72
11.63
%
12.72
%
4.26
%
3.71
%
8.77
%
8.77
•
%
8.77
•
%
16.24
•
%
16.24
•
%
16.24
%
4.46
35.61
%
•
35.61
%
•
2.05
%
0.35
%
2.05
%
•
%
2.05
1.39
%
1%4.11
0.81
%10.81
4.57
8.07
%
%
29.47
%
%
4.14
29.47
%
29.47
•

1990

MINORITIES
1990--1993
:M
TO
ARKETING
WORST
LENDERS

.

II.B.2
TABLE

557

The National Community Reinvestment Coalition 202-986-7898

TO
:MARKETING
1990--1993
LENDERS
WORST
MINORITIES

1993

Black
.H/Misp
SA
NAME

MSA
New
York
BANK
SAVINGS
PROVIDENT
New
York
ROOSEVELT
BANK
SAVINGS
THE
C
MORTGAGE
HOME
PRUDENTIAL
York
New
5508
ALL
COMPANY Oakland
MORTGAGE
PACIFIC
Oakland
MORTGAGE
GN
NVR
MORTAGE
Oakland
PIB
COMPANY
MORTGAGE
Oakland
SUNBELT
CORP
MORTGAGE
NATIONAL
Oakland
Oakland
THE
C
MORTGAGE
HOME
PRUDENTIAL
CORPORATIO Philadelphia
FUNDING
COUNTRYWIDE
GE
SERVICES
MORTGAGE
CAPITAL
Philadelphia
MAIN
BANK
SAVINGS
FEDERAL
LINE
Philadelphia
.
CO
TRUST
MAWR
Philadelphia
THE
BRYN
Philadelphia
THE
C
MORTGAGE
HOME
PRUDENTIAL
Phoenix
MELLON
COMPANY
MORTGAGE
BANK
SAVINGS
STATE
Phoenix
C
MORTGAGE
HOME
PRUDENTIAL
THE
Phoenix
CORPORATION
PMORTGAGE Riverside
OF
GMAC
Riverside
RURAL
-BRAHAM
BANK
AMERICAN
WEYERHAEUSER
.
CO
MORTGAGE
Riverside
San
AMERICAN
MORTGAGE Diego
RESIDENTIAL
St.
Louis
GMAC
P
OF
CORPORATION
MORTGAGE
MFEDERAL
OF
BANK
HOME
SAVINGS St.Louis
JAMES
&COMPANY
B.NUTTER
St.Louis
1006
Louis
KNUTSON
CORPORATIONSt.
MORTGAGE
925
BANK
Louis
THE
COLONIAL
St.
1255
LP
COMPANY
Tampa
GREENTREE
MORTGAGE
770
Tampa
LINCOLN
CORPORATION
SERVICE
& OMPANY
CMARGARETTEN
Tampa
MORTGAGE
SOURCE
ONE
1683
Tampa
CORP
MORT
UNION
.FIRST
Tampa
Washington
.CORP
MORTGAGE
HOME
CHASE
UNION
CREDIT
Washington
FEDERAL
NAVY

Hisp
.Total
Apps
Apps
750
44
695
53
347
1178
78
950
45
649
46
91932
860
62
6770
308
5534
147
6755
230
3078
38
1324
38
3569
131
2066
72
2978
164
985
22
1279
241
716
130
1070
243
3174
245
1891
69
3051
34
%
15 1.49
%
33 3.57
%
15 1.20
29
18
450

1991

1992

Black
/
oIndustry
Total
.
%f Hisp
Apps
Average Apps
5.87
8%20.81
87 49
235
%7.63
50.81
36
2176
956
%6.30
0.81
6.62
%15.21
190 77
%35
4.74
175.21
18
7.09
1%5.21
59
258
298 113
9.76
%15.21
17.21
%85.21
18 57
%15.21
84.55
89 20
%82.66
.86
1487 33
8.86
%43.40
328 120
%82.86
1.23
417 14
8%2.87
9.86
67 28
8.86
%
23.67
309 69
93.48
%1.33
863 42
95.51
%5.33
76 6
9%2.23
6.33
54 11
1%18.84
2051
7.15 160
18.16
%27.15 ·
•
22.71
%2111
67.15
64
17.72
139
%23.35
324
543
83.65
%154.29
2%1.11
983
847.29
%
8.29
468 3
%
8.29
753 9
%952 11
8.29
%.68 *
83.77
*
%85.68
4.00
09 12
219 68
81665
%14.56
76.68
15.23
052 93
%888.68
%84.74
738
354.68
96 22
19.50
%184
6.80
240 47
1937
%16496.80 4544 423
11.78
5511

Black
/
HBlack
./isp MSA

7%2.22
.84
%7.84
0.58

%
2.99
1.68
%

2.25
%5.14
%
5.14

1.20
%
1.16
%
%
2.36

%
8.40
8.40
%

1990

Black
/
Black
.H/isp MSA
%of Hisp
Total
Industry
IndustryTotal Hisp
%of
.
.
Apps
Average Apps Apps
Apps Apps
Average
2%7.35
6.75 *
5.52
%240.20
*
08 30
6.53
%240.20
7.85
%246.75
59 17
33 34
174 132
5.95
%210.20
29.17
%16.75
331 122
7.04
1
6.47
%154.27
%
7.39
55 41
242 19
7.04 *
1%4.03
1%4.87
44.27
22 17
*
4.69
01 50
%15.55
00 41
%914.27
5%7.04
%111.11
7.04 351 46
1%78.71
4.27
65 85
%17.56
7.04
%154.27
6.97
82 44
*
1%
17.04 *
2.25
%
2.10
44.27
28 9
•
%13.14
0.67 •
414 13
1%7.02
0.67
353
4075
%72.84
2.77
364 166
1084 6
10.67
%390 9
%
0.55
13.14
2.90
%75.84
%0.67 369 27
09 16
13.05
%0.67 417 25
%656 20
7.84
9.23
%
740 43 5.81
%
177 1
9.23
%
%
1.04
1%5.14
055 77 7.30
.
*
181 1
9.23
%
.
*
•
%24.50 848 213
17.46
15.22
7%22.64
96 139
%24.50 869 141
16.44
22.64
%937 154
22.83
%2168
16.72
74.50
2.64
36 771 176
1%5.98
125
.
22.13
4.85
2.80
576 *
9%4.52
.49
1096 68
63.50
149.82
084
11.58
733
%91.27
.49
622.82
844 16
*
%64.51
0.64
%
*
5.82
24
32 9.49
%351 9
6.82
%
2.56
·
%
9.49
*
0.67
%
9.49
%
.
6.82
%297 2
.
%14.49
0.95 295
468 21
%14.40
0.95 *
364 16
15.65
%20.95
42 16
85.40
%5.58
66 32
1%8.00
0.95 *
75 54
%86.40
8.84
•
1%4.18
8%4.44
1320.95
3.40
11
44 10
%17.26
50
89
%164.87
3.79
49.24
89 39
131
111.64
%129.31
4.87
%248
19.24
194

/
Black
Black
.H/isp MSA
%of
Industry
Apps Average
*
%
29.47
3.70
29.47
%
11.24
%29.47
%7.79
17.85
.
%
17.79
%
17.79
%
8.20
17.79
%13.11
%
17.79
17.79
%
12.50
%
•
%
12.50
%
8.66
1%2.31
2.50
17.32
%2.50
16.00
%2.50
%7.84
0.56
7.84
%
%7.84
0.55
25.20
%25.12
25.20
%16.23
25.20
%22.83
12.76
%
*
%11.19
6.20
1.90
%1.19
1%
%
*
11.19
•
%
11.19
%
11.19
*
%
11.28
%16
5.42
%
11.28
•
6.61
%
11.28
%
%
11.28
%11.28
4.10
27.98
%0.09
15.33
%2183
0.09

558

The National Community Reinvestment Coalition 202-986-7898

TABLE
II
.B.2

33

34

RATIOS
D
:--ENIAL
1993
1990
LENDERS
WORST

TABLE
.B.3
II

1993

MSA

Hisp
.White
Denial
Rate
13.33
24.77

35.61
42.00

16.67
14.29
64.71
33.33
27.91
14.29
7.41
0.00
27.59
6.98
12.50
66.67
31.58
18.75
37.24
0.00
6.90
50.00
•
29.28

1990

/
/
Black
Black
Black
/Black
Hisp
White Hisp
.
.
.
Hisp
White
to
Denial
Denial
toWhite
Denials
Denials Rate Rate
1.28
52.94
41.26
1.34
14.37
19.23
.
4.07
3.18
6.12 1.51
30.39 34.09 1.12
1.68
*
0.00
•
19.05
11.16 26.32 2.36
2.43
2.66
19.00 44.44 2.34
13.07 36.36 2.78
3.59
2.65 35.00 13.21
•
8.37
25.00
2.99
2.72
2.38 •
29.41
2.64
11.16
2.23
2.97
7.51 21.88 2.91
3.73
22.22 33.33 1.50
100.00
8.26 21.43 2.59
3.28
30.00
8.14 14.29 1.76
3.92
•
•
3.35
14.00 ·
31.03 8.06
3.85
3.74
13.41 66.35 4.95
9.28
35.14
18.29 0.00 0.00
0.72
9.09
1.85
2.97 33.33 11.22
0.00
11.84 30.00 2.53
12.15 36.36 2.99
50.00
3.32
6.05
4.33
26.19
3.09
•
5.62
.
9.68 •
•
2.31 •
•
1.34 •
•
•
17.56 •
1.98
18.00 57.14 3.18
1.16 B
•
.
1.61 ·
0.00 0.00 0.00
0.00
•
•
0.00 *
5.94
8.23 30.77 3.74
16.48 26.32 1.60
4.02
19.15 35.71 1.87
•
12.15 30.82 2.54
2.93
35.45 42.11 1.19
1.00
27.45
9.25
23.33

559

The National Community Reinvestment Coalition 202-986-7898

Anaheim
FINANCE
CORP
LOAN
AMERICA
Anaheim
SA
FEDERAL
CALIFORNIA
SOUTHERN
Anaheim
MORTGAGE
.
CO
WEYERHAEUSER
CORPORATION Anaheim
MORTGAGE
RSL
CHOME Anaheim
MORTGAGE
PRUDENTIAL
THE
BANK Atlanta
SAVINGS
FEDERAL
ALLATOONA
CORPORATIONAtlanta
FINANCIAL
ENTRUST
C
MORTGAGE
HOME
Atlanta
PRUDENTIAL
THE
TLAN
AEAGLE
D/BSERVICE
CORP
Atlanta
B
Baltimore
SAVINGS
FEDERAL
REISTERSTOWN
COMPANY
Baltimore
MORTGAGE
B.F.SAUL
Baltimore
F.S.B.
CITIBANK
MORTGAGE
SERVICES
GE
CAPITAL Boston
CHOME Boston
MORTGAGE
THE
PRUDENTIAL
Chicago
.HOME
CORP
MORTGAGE
CHASE
Chicago
COMPANY
MORTGAGE
NBD
Chicago
CO
INS
LIFE
MUTUAL
PRINCIPAL
CORPORATION
MORTGAGE
SHELTER Chicago
COMPANY
TRUST
NORTHERN Chicago
THE
Dallas
SERVICES
CONSUMER
U.S.
CHASE
COMPANY
MORTGAGE
GUARDIAN Dallas
Dallas
TMERCANTILE
& RUST
BANK
Dallas
HOME
C
MORTGAGE
PRUDENTIAL
THE
Detroit
BANK
NATIONWIDE
FIRST
Detroit
BANK
REPUBLIC
Detroit
ONE
MORTGAGE
SOURCE
COR
MORTGAGE
AMERICAN
BARCLAYSHouston
Houston
COMPANY
MORTGAGE
MITCHELL
C
MORTGAGE
HOME
Houston
PRUDENTIAL
THE
Los
Angeles
.HOME
CORP
MORTGAGE
CHASE
Los
Angeles
MORTGAGE
GN
CORP
CAPITAL
Minnesota
FEDERAL
FIRST
.& INANCIAL
CORP
Minnesota
FMORT
HEIGL
Minnesota
CMARGARETTEN
& OMPANY
-Suffolk
Nassau
.HOME
CORP
MORTGAGE
CHASE
- uffolk
CMORTGAGE SNassau
HOME
PRUDENTIAL
THE
.
CORP
York
New
MORTGAGE
HOME
CHASE
York
New
BANK
SAVINGS
INDEPENDENCE
York
New
CMARGARETTEN
& OMPANY

Black
/
Black
/
Black
/
Black
/
Hisp
.
White Hisp
.
Hisp
.White Hisp
.
Denial
Denial Denial
toWhite Denial toWhite Denial
Denials Rate
Denials Rate Rate
Rate Rate
24.28 29.63 1.22 ·
9.44 15.84 1.68
17.20 20.45 1.19 •
14.97 35.48 2.37
4.19
•
5.40 12.28 2.27 ·
14.77
1.37
28.13
18.66 38.84 2.08
20.51
1.25
14.32
1.36
17.74
21.43
22.22
15.81
7.83
2.50
15.52
6.57
18.00
6.21
2.74
13.38
4.55
20.19
4.35
10.71
4.44
2.46
11.71
1.32
1.76
9.75
12.82
9.32
16.43
2.11 18.95 9.00 •
2.11 10.34 4.90
5.88
6.12
2.13
12.50
1.89
2.52
4.76
6.23
6.00
17.28
2.89
12.93
2.77
4.48
29.04
1.55
39.25
60.98
12.44 27.45 2.21
11.21
16.67
32.22 61.90 1.92
2.44
6.83
26.79
17.06 42.86 2.51
1.42
16.13
11.32
9.16
6.84 24.44 3.57
4.84
1.39
3.49
7.12
6.15 8.43 1.37
3.98 11.36 2.85
4.18
2.49 5.97 2.40
4.02 12.14 3.02
3.82
0.68 4.69 6.92
2.43 10.67 4.39
3.79
4.78 36.68 7.67
3.87 20.98 5.42
1.29
15.46
20.00
12.69
ERR
10.14
0.00
4.00
1.87
10.81 5.78
0.00 2.14 ERR
1.83
1.77 0.00 0.00
0.00 1.57 ERR
15.06
1.88
27.78
14.77
0.44
10.72
24.14
8.93
4.04
33.67
8.33
4.20 22.22 5.29
1.49
1.72
3.45
2.32
3.80
11.92
3.14
2.65
3.02
1.71
4.55
4.08
1.53
6.25
9.30
7.93 3.03 0.38
0.54
13.79
7.43
3.80
1.60
6.67
14.45
4.16
38.46 0.38
15.95
17.86
2.24
7.99
0.31
27.17
8.50
1.82
16.18
21.97
40.00
41.54
18.46
2.25
23.18
1.34
28.26 37.86 1.34
23.47
31.38
2.69
0.00
0.00
5.10
0.00
2.77
7.49
0.00 0.00 0.00
0.00
2.04
1.16
3.86 23.08 5.97
3.97 12.50 3.15
12.43
15.97 28.26 1.77
12.83 20.00 1.56
2.32
•
31.25
1.23
13.46
15.57
12.66
9.98
2.08
39.63
19.07
10.42 26.35 2.53
27.37
1.89
28.17
53.09
1.81
44.92
24.81
2.52
3.88
14.29
1.16
3.68
6.67
5.76
.

NAME

1991

1992

1991

1992

1993

Black
Black
/
/
White
.White Hisp
Hisp
.
Denial Denial
NAME
toWhite
Denial
MSA
Rate Rate
Denials Rate
PROVIDENT
BANK
SAVINGS
York
New
8.59
6.23
11.36
1.82
York
New
16.37
2.52
ROOSEVELT
BANK
SAVINGS
11.21
28.30
16.80
HOME
C
MORTGAGE
15.54
1.67
PRUDENTIAL
THE
York
New
25.94
ALL
COMPANY Oakland
MORTGAGE
PACIFIC
4.85
4.36
5.13
1.18
17.86
1.26
Oakland
GN
MORTGAGE
15.56
12.38
Oakland
7.46
MORTAGE
NVR
3.21
23.91
6.92
10.46
PIB
COMPANY
MORTGAGE
Oakland
11.31
24.18
2.31
10.38
SUNBELT
CORP Oakland
MORTGAGE
NATIONAL
1.09
8.90
9.68
10.13
HOME
C
MORTGAGE
12.66
PRUDENTIAL
THE
Oakland
1.31
9.66
COUNTRYWIDE
CORPORATIO Philadelphia 5.09 8.84 1.74
FUNDING
7.22
GE
SERVICES
MORTGAGE
CAPITAL
3.00
Philadelphia 5.66
24.76
16.96
BANK
MAIN
SAVINGS
FEDERAL
LINE
18.42
3.81
6.33
4.84
Philadelphia
4.37
3.30
2.41
10.53
Philadelphia
.
CO
TRUST
MAWR
BRYN
THE
2.01
THE
C
MORTGAGE
HOME
PRUDENTIAL
22.90
Philadelphia 11.37
12.14
4.64
5.97
MELLON
COMPANY
MORTGAGE
1.86
Phoenix
11.11
1.12
Phoenix
4.37
4.88
7.48
BANK
SAVINGS
STATE
THE
C
MORTGAGE
HOME
PRUDENTIAL
Phoenix
1.66
31.82
21.91
19.21
2.15
Riverside
20.33
9.43
GMAC
P
OF
CORPORATION
MORTGAGE
9.44
RURAL
-BRAHAM
BANK
AMERICAN
25.43 37.69 1.48 *
Riverside
Riverside
11.93
.
CO
MORTGAGE
WEYERHAEUSER
3.98
1.86
6.41
MORTGAGE
San
AMERICAN
RESIDENTIALDiego
9.66
8.74 13.06 1.49
2.31
2.51
Louis
St.
GMAC
P
OF
CORPORATION
MORTGAGE
4.23
5.80
Louis
St.
7.97
HOME
M
OF
BANK
SAVINGS
FEDERAL
11.76
2.59
4.54
33.33
JAMES
&COMPANY
B.NUTTER
0.00
4.08
Louis
St.
8.17
6.45
Louis
3.18
KNUTSON
CORPORATIONSt.
MORTGAGE
3.81
12.12
1.69
Louis
St.
7.65
BANK
COLONIAL
THE
3.95
6.67
Tampa
GREENTREE
LP
COMPANY
MORTGAGE
18.49 34.48 1.86
Tampa
22.33
CORPORATION
SERVICE
LINCOLN
27.78
0.66
18.30
Tampa
7.40
MARGARETTEN
&COMPANY
18.42
9.30
0.40
13.64
Tampa
0.26
3.60
6.15
MORTGAGE
ONE
SOURCE
Tampa
9.07
4.41
8.57
CORP
MORT
UNION
.FIRST
1.94
Washington
17.69
2.03
20.11
9.93
.
CORP
MORTGAGE
HOME
CHASE
Washington
1.33
0.68
7.40
10.88
UNION
CREDIT
FEDERAL
NAVY

/
Black
Hisp
.
Denial
Rate
14.29
25.71
32.95
14.29
34.29

.
7.21
20.37
11.11

9.46

/Black
Hisp
.
Denials
1.66
1.57
1.96
2.94
1.92
2.69
18.64
1.80
20.35
2.70
28.07
2.47
25.00
15.15
2.10
1.82
45.00
0.00
8.65
28.57
36.23
2.98
2.57
11.90
4.46
33.33
0.42
9.09
20.63
2.19
*
1.81
2.16
20.86
4.82
23.40
2.94
0.00
1.72
3.56
27.27
.
58.33
2.61
13.24
1.42
21.51
3.50
0.00
2.53
44.68
7.09

/Black
Hisp
.
Denial
Rate
16.67
45.08

White
Denial
toWhite
Rate
7.94
17.29
28.54
6.23
20.00 29.41
7.76
7.79
10.04
12.17 22.22
0.00 0.00
7.92
5.75 0.00
5.68 43.75
15.88
11.19 18.60
8.90 33.77
•
9.28 22.30
28.48 48.70
7.92
21.13
2.90
12.68
0.00
0.00
8.77
11.19 50.00
19.02
16.38 43.75
0.56 3.13
7.41 37.04
8.39 38.46
25.35
1.38

1990

/Black Black
/
White Hisp
.Hisp
.
.Hisp
Denial Denial toWhite
toWhite
Denials Rate Rate
Denials
2.10
•
2.55
44.12
11.54 41.18 3.57
22.36 53.03 2.37
1.58
1.96
12.20
7.62 10.53 1.38
•
1.47 .
16.00
0.00
2.06
0.00 0.00
1.51
11.76
21.64 34.78 1.61
3.17
31.82 •
1.83 •
.
0.00 •
·
•
1.60
12.65
6.61 20.68 3.13
11.81 22.22 1.88
0.00
6.43 18.52 2.88
7.70
17.35 52.00 3.00
55.00
3.46
1.66
19.64 0.00 0.00
3.80 •
·
23.23 0.00 0.00
*
2.40
9.61 12.21 1.27
45.39
1.71
2.16
21.02
10.08
26.70
2.65
2.33
18.45
1.36
28.80
16.33
2.82 8.82 3.13
5.63
8.57 18.75 2.19
31.82
2.51
0.00 •
•
3.80
33.33 ·
•
4.47 •
•
.
11.47 25.00 2.18
1.00
19.05
2.67
•
5.56
25.00
2.46
10.18
5.00 •
3.90
4.59
40.00
10.26
1.48
38.46
1.42
36.00
26.00
5.74
14.75
7.30
10.08
2.57
/Black

560

The National Community Reinvestment Coalition⚫ 202-986-7898

RATIOS
-1993
:D
ENIAL
WORST
1990
LENDERS

TABLE
.B.3
II

35

36
RATES
APPROVAL
M
·-:- INORITY
1993
1990
LENDERS
WORST

.B.4
II
TABLE

85
20
50
27
46
231
6144
82
50
173
52
40
101
1592
37
15
26
118
2798
117
4630
3115
181
67
2187
324
7

21
44
126
2383
9011
133
60
25
16
67

%7.46
%
3.31

%
5.52
3.76
%
%
5.46
%
4.17
5.76
%
%
5.86
%
2.80
%
6.34
4.22
%

1.50
%
2.76
57
%
1.65
%
%
2.30
%
5.29
%
1.48
%
2.74
%
4.46

%
3.47
%38
2.44
374
%
0.36
5
34
1.09
%
%28
0.76

%
11.37
%17.16
1.37
%1.37
13.49
11.37
%
%
10.82
%
10.82
%
10.82
%
10.82
%9.53
6.39
1.21
%3.05
14.81
%
12.53
%4.81
1%4.32
4.81
10.23
%
10.23
%
10.23
%

%
13.51
%30.40
14.49
%
1.52
%
1.52
%
1.52

Total
Industry
o%f
Aprvs
Average
10.29
%
10.29
%
%
10.29

%
10.29
1%0.29
3.07
%9.48
9.48
%
9.48
%
9%.48
6.45
%
9.00
94.67
%.00
9.00
%
%
2.69
2%0.71
.69
%
12.32
12.32
%
%12.32
3.99
12.32
%
%
9.09
%
9.09
9.09
%
%.57
43.87
%
4.57
%1.93
14.07
1%2.47
%1.93
%1.93
15.19
%7.80
213.62
%
1.22
1.22
%
%
1.22

•
758
%853
10.29
1253
378
476
1328
655
516
850
321
192
194
891
1%831
12.32
961
880
655
9.09
%244
721
328
209
1634
1.63
%41.57
284
938
241
229
382
09
97.80
2%1.91
1490
543
398
2070

•
•
26
38
82
7
17
85
29
0
10
36
18
2
0
28
31
43
24
96
10
25
7
6
63
28
40
7
1
13
13
214
1
3
27

•
%
3.43
%
4.45
%
6.54
%
1.85
%
3.57

%
1.94
4.24
%
%
5.61
1.04
%
%
0.00
%
3.14
%
4.47
4.10
%
%
3.47
%
2.13
%
2.87
4.26
%
%
2.90
0.44
%
%
3.40
%
1.43

%
0.75
%
1.30

%
11.44
%
11.44
%
11.44
%
11.44
%
11.44
%
11.44
13.16
%
11.87
%
%
11.87
%
11.87
4.02
%
%
4.02
%
15.00
%
15.00
1%5.00
2.73
%
12.22
%
12.22
12.22
%
%
12.22
8%3.86
.43
8%2.18
.43
%
8.43
%
13.64
%
13.64
%
13.64
%
30.68
%0.68
314.36
.67
1%0.18
%
1.67
%
1.67

Total
Industry
%oHisp
.f
Aprvs
Average
221 16
319 21
730 46
478 35
352 29
.
%410 28
13.16
47
%176.40
3.16 35
87 21
%23.16
14.43
307 13
189 3
.
231 24
616 25
158 4
755 22
98 18
81%5.00
1.69
·
•
594 20
61 35
%145.00
14.66
143 0
500 10
222 21
224 7
1071 31
·
•
•
•
252 6
•
·
•
•
286 1
.
.
1714 18

/
Black
HBlack
./isp MSA
Industry
%oHisp
.f
Average
Aprvs
%
13.55
%
7.24
6.58
%13.55
13.55
%
%
6.30
%
13.55
%
7.32
%
13.55
%
8.24
%
13.55
•
%14.01
6.83
14.01
%
%
4.69
%
14.01
%
7.32
%
14.01
%
4.23
%
13.66
%
1.59
%
13.66
•
%3.66
110.39
%
4.06
4.97
%
2.53
%4.97
18.04
%
%
2.91
%
18.04
%
2.00
%
18.04
•
1%8.04
3.37
%18.04
7.59
10.46
%
%
0.00
1%0.46
2.00
%0.46
19.46
%
10.46
%
3.13
%
6.64
%
2.89
%
6.64
%
6.64
.
%
12.34
•
%
12.34
•
%
12.34
%
2.38
%
34.05
34.05
%
·
%
0.35
%
1.76
%
1.76
•
1.76
%
%
1.05

561

The National Community Reinvestment Coalition 202-986-7898

CORP
1140
FINANCE
Anaheim
AMERICA
LOAN
Anaheim 605
SA
FEDERAL
CALIFORNIA
SOUTHERN
698
.MORTGAGE
CO
WEYERHAEUSER Anaheim
Anaheim 773
MORTGAGE
GN
CORPORATION Anaheim 833
MORTGAGE
RSL
CHOME Anaheim
MORTGAGE
PRUDENTIAL
THE
1503
BANK Atlanta
SAVINGS
FEDERAL
ALLATOONA
1200
CORPORATION
FINANCIAL
ENTRUST Atlanta
3003
CTHE
MORTGAGE
HOME
Atlanta
PRUDENTIAL
888
Atlanta
TLAN
D/BASERVICE
CORP
EAGLE
BSAVINGS Baltimore 1431
FEDERAL
REISTERSTOWN
Baltimore
COMPANY
MORTGAGE
B.F.SAUL
Baltimore 579
F.S.B.
CITIBANK
916
SERVICES
MORTGAGE
CAPITAL Boston
GE
2157
CHOME Boston
MORTGAGE
PRUDENTIAL
THE
Chicago
.HOME
CORP
MORTGAGE
CHASE
Chicago
COMPANY
MORTGAGE
NBD
CO
INS
Chicago
LIFE
MUTUAL
PRINCIPAL
1552
CORPORATION
MORTGAGE
SHELTER Chicago
COMPANY
Chicago
TRUST
NORTHERN
THE
Dallas
468
SERVICES
CONSUMER
U.S.
CHASE
2067
COMPANY
MORTGAGE
GUARDIAN Dallas
1274
&TRUST
BANK
Dallas
MERCANTILE
1917
CHOME Dallas
MORTGAGE
PRUDENTIAL
THE
Detroit
BANK
NATIONWIDE
FIRST
Detroit
BANK
REPUBLIC
Detroit
2189
MORTGAGE
ONE
SOURCE
COR
Houston
561
MORTGAGE
AMERICAN
BARCLAYS
466
Houston
COMPANY
MORTGAGE
MITCHELL
C
Houston
1929
MORTGAGE
HOME
PRUDENTIAL
THE
Los
Angeles
1557
.
CORP
MORTGAGE
HOME
CHASE
Los
Angeles
2581
MORTGAGE
GN
Minneapolis 1374
CORP
CAPITAL
FEDERAL
FIRST
.&MORT
CORP
Minneapolis3110
INANCIAL
FHEIGL
Minneapolis 3680
&COMPANY
MARGARETTEN

Total
Industry
f Hisp
.
.%oTotal
Hisp
Average Aprvs
Aprvs
%
11.37
%615 38 6.18
%
502 35 6.97
•
•
%
1091 44 4.03
%
1303 74 5.68
%684 21
11.37
%
985 49 4.97
%
2022 83 4.10
%
1068 68 6.37
1193 77
%
1%087 28 2.58
9.53
1434
%67
9.53
%
341 16 4.69
%
2.74
3%1.64
2.05
92 8
563 4
%
1613
34 2.11
3463
76 2.19
%
2.80
24.81
254
%163
5.81
1528 61
%
9.97
183
114.81
%14.81
836
%
0.74
540
4
%
33 2.46
1344
%
844 11 1.30
%
%463 13 2.81
10.23
%3358 130
6.15
6.15
%1722 28
%1899 42 2.21
%
6.15
%787 32
13.51
67 14
%153.51
3.43
887 46
%1097 21
30.40
3024 412
0.00
%
1043 0
%
0.71
2101 15
%
3254 20 0.61

.

MSA

HBlack
/isp
.MSA

.

/Misp
H.Black
SA
Name

/
Black

/
Black
Black
.H/isp MSA

Black
/

1990

1991

1992

1993

Name

THE

MSA
2.84
306
-S33
Nassau
%51846
.91
24uffolk
CHASE
.
CORP
MORTGAGE
HOME
44
Nassau
-S4475
5103
%22.30
uffolk
.91
115
MORTGAGE
CHOME
PRUDENTIAL
THE
York
New
.
CORP
CHASE
MORTGAGE
HOME
1071
York
New
SAVINGS
BANK
INDEPENDENCE
York
New
612
MARGARETTEN
&COMPANY
York
New
701
BANK
PROVIDENT
SAVINGS
York
New
608
BANK
ROOSEVELT
SAVINGS
New
York
C
MORTGAGE
HOME
PRUDENTIAL
1126
COMPANY
MORTGAGE
Oakland
PACIFIC
ALL
831
Oakland
GN
MORTGAGE
Oakland
593
NVR
MORTAGE
COMPANY
MORTGAGE
PIB
Oakland
822
783
NATIONAL
MORTGAGE
CORP Oakland
SUNBELT
MORTGAGE
HOME
C
PRUDENTIAL
THE
Oakland
CORPORATIO Philadelphia
FUNDING
COUNTRYWIDE
Philadelphia
MORTGAGE
SERVICES
GE
CAPITAL
Philadelphia2924
FEDERAL
BANK
SAVINGS
MAIN
LINE
Philadelphia1289
CO
.BRYN
THE
TRUST
MAWR
Philadelphia 3148
MORTGAGE
CPRUDENTIAL
THE
HOME
COMPANY
2021
MORTGAGE
MELLON
Phoenix
BANK
STATE
SAVINGS
Phoenix
793
CHOME Phoenix
MORTGAGE
PRUDENTIAL
THE
POF
CORPORATION
MORTGAGE
GMAC
Riverside
RAHAM
-BANK
BAMERICAN
Riverside 518
RURAL
.MORTGAGE
CO
Riverside 988
WEYERHAEUSER
San
MORTGAGE Diego
RESIDENTIAL
AMERICAN
1845
P
OF
Louis
St.
CORPORATION
MORTGAGE
GMAC
M
OF
BANK
2910
SAVINGS
FEDERAL
HOME
Louis
St.
CNUTTER
&B.OMPANY
Louis
St.
920
JAMES
CORPORATION
Louis
887
MORTGAGE
KNUTSON St.
1205
BANK
St.
Louis
COLONIAL
THE
623
LP
COMPANY
Tampa
MORTGAGE
GREENTREE
366
CORPORATION Tampa
SERVICE
LINCOLN
1533
& OMPANY
CMARGARETTEN
Tampa
1613
MORTGAGE
Tampa
ONE
SOURCE
Tampa
704
.MORT
ORP
CUNION
FIRST
Washington 1726
.HOME
CORP
MORTGAGE
CHASE
Washington 5430
UNION
CREDIT
FEDERAL
NAVY

Black
/
HBlack
./isp MSA
%of
Industry
Average
Aprvs

Black
/

/
Black
/HBlack
isp
.MSA

5%2.08
.35
65
%56
9.15
39
38
257
4616
74
38
35
69
56
6107
269
134
5247
3.01
%6347
191
31
34
7%2.64
.12
101
15
81
213
2886
65
30
10
14
19
13
62
76

1.89
%
7.97
%
%
15.64
26.03
%

132154
8.31
%5.06
109
053
6.07
6%18.31
45
18.31
%501
5.56
%188.31
08
1%4.57
53.48
84
15.90
%13.48
164
18.39
%3.48
141
%173.48
7.15
23
%73.48
14.40
96
2.55
%71.12
377
7.12
%3232
265
1.06
%27.12
928
%%
5.48
7156
52847
.97
29
465
91132
34
16.96
%2192
6.03
*

1.03
%
1.16
%6%.94
3.05
%7.69

%
3.55
4.04
%

61.09
%4.94
68
6%3.27
729.94
04
877
•
%391
7.69
7.69
%1103
73
79%.69
4.71
53
4.55
%7432.69
5.31
008
8.52
%1147

/
Black
%oIndustry
Total
f Hisp
.
Aprvs
Average Aprvs

.Total
Hisp
Aprvs
163
38
30
42
16.25
%4268.31
45
21%5.57
431
8.31
%118
16.57
125
%663.48
23
48
90
41
15
28
66
14
20
2%744.12
012
3.21
764
%%1737
3.17
64.97
4
10
127
6221.66
103
34
%214
6.03
2%1110
084
2.23
7.38
63.52
1.94
469
%43
36
%2738
6.94
3
8
8
•
5
59
73
22
26
383
449
11.07
%41601
5.31

17.47
%5.89
%7.47
15.99
%17.47
5.20
7.47
1%5.84

1.88
%

12.48
%
%.97
52.04

.97
5%2.19
2.10
%4.07
%4.07
0.76
4.07
%2.15

%1.14
%
0.91

%
5.38

7.50
%

%
7.24
%7.24
4.86
1%3.17
2.58
1%8.61
3.17

•

2.53
%5.35
01
1%5.34
859
7.47
581
332
373
349
31
%197.47
4.85
5.87
%512.48
18
1%3.94
32.48
36
1%4.12
82.48
27
02
%172.48
7.89
5.67
%152.48
14
375
52.03
%4.97
14
022
0.62
%51.97
74
4%5.97
2.16
544
654
942
•
213.60
%70.42
04
%639
20.42
16.25
%260.42
60
20.76
022
1%5.28
1.38
046
5%2.93
1.38
509
5%1.31
32
%5.38
0.64
318
5.38
%263
7.24
%379
7%1.28
3.24
00
7%5.35
5.24
62
609
281
509
2080

8
.
128
37
23
25
19
67
36
12
42
75
30
7
13
145
2169
6
9
9
35
51
•
108
79
137
89
41
15
24
6
1
17
9
31
34
8
32
223

%
1.60
%6.89
%
6.37
%
6.70

%
0.59
%
1.90
1.65
%
%
5.35
%
5.41

4.40
%

/
Black
Black
/
.
Hisp
Hisp
.MSA
%of Total Hisp
Industry
.
Aprvs
AverageAprvs Aprvs
%384 14
7.57
%491 18
7.57
123.30
%701 110
2%95 11
23.30
*
*
%23.30
6.93
.
%
23.30
•
.
23.30 401 10
%5.44
83.30
71
7.12
%62
2%7.20
16.95
%25.19
23 17
%13.57
5.19 ·
.
%15.19 500
5.08
%5.19 269 30
110.68
%15.19
5.84
%15.19
.
1.87
•
%%
3.14
7.97
3756 280
6.69
%7.97
%
2.04
7.97
%343 7
7.97
%
342 22
%
%336 12 3.57
7.97
7.86
%
142 1
·
%
7.86
%130 1
7.86
15.34
%272.24
61 187
12.36
%262.24
52 77
20.76
%262.24
64 129
11.34
%
•
.18
%16061
3.92
60.99
70 13
%7.18
4.51
%6.18 •
•
•
%6.18 •
1.89
•
6%0.38
.18 .
•
•
4.63
%12
9%4.49
.43 259
.
.
%9.43
3.00
%
9%5.52
.43 215 12 5.58
.
%9.43 •
5.58
•
%
2.78
9%2.85
.43 216 6
57 24
1%36.79
6.29
16.79 1141 156
%10.72
.

Total
.Hisp

1990

1991

1992

1993

MSA
Industry
%of
Average
Aprvs
%9.07
3.65
93.67
%.07
26.47
%5.87
2%5.87
3.73
%
25.87
%
25.87
%25.87
2.49
%
25.87
6.34
1%7.62
%
16.34
1%8.20
416.34
11.15
%16.34
%
16.34
%
16.34
%
9.91
7.45
%9.91
9.91
%
6.43
%9.91
%
9.91
0.70
%6.50
6.50
%
%6.50
0.77
24.57
%24.26
%4.26
211.81
%24.26
19.43
%
11.74
85.84
%62.39
%.39
81.69
%
8.39
8.39
%
%
8.39
%
9.72
9.72
%
%
9.72
%
9.72
9.72
%
18.01
%6.72
18.01
%13.67

562

The National Community Reinvestment Coalition 202-986-7898

RATES
APPROVAL
M
INORITY
1990
:-1993
LENDERS
WORST

TABLE
.B.4
II

37

38

S
APPLICATION
NCOME
I
-MODERATE
AND
OW:L
1990--1993
LENDERS
WORST
BII
. .5
TABLE

/
Low
/
Low
Mod MSA
NAME

%
10.25
%
15.09
%
11.41
11.68
%
11.93
%
112
%
12.28
5.62
%
17.17
%
14.33
%
%
12.53
5.38
%
%
12.75
616
13.80
%
%
21.48
343
%
10.31
4.87
%
%
5.68
327
%
12.99
%341
15.32
2226

18.73
18.73
18.73
18.73
22.62
22.62
22.96
22.96
17.82
%17.82
5.09
22.74
2.74
%2490
15.02
22.74
21.48
21.48

26.79

%
0.66
1.09
%
258
%
18.26
29.39
%
1127
6.08
%
6.99
%
2.53
%
%
5.76
%119
2.16
%
2.15

24.22
24.22
7.24
7.24
7.24
7.24

/Low
/
Low
Mod
/
Low
Mod MSA
/
Low
.f y
Mod
Industr
.Total
Total
%oTotal
Industry
f
%oMod
.Mod
Averag
Apps e
Apps
Average
%
84
15.67
%
1483 5.66
154
1632
18.73 9.44
%
15.67 794 64 8.06
*
•
·
67
6.34
%
1056
1
5.67
%
8.93
139
1557
*
7.57
%46
15.67 •
608
15.67 •
*
%
816 49 6.00
1%5.14
5.67 440
3.48
17317
298.73
3.24
%833
237
%
20.69
•
1235 156 12.63
%
310.69 4.08
222.62
3.29
%759
39
1186
105
519
%
16.10
%21056
0.69
170
18.83
2.62 20.23
281
12.05
%1567
20.69
257
2133
908
218
11487
14.66
%
15.50
%260
28.77
2.96 77 8.48
10.24
%59478
%
576
18.77 33 6.90
18.77
551 46 8.35
%
%
1114 92 8.26
1217
%
3.69
%440
9.32
418.45 8
5.87
%1269
8.45 11
681 40
%22.79
10.78
3692 398
135
1008
22.79
%
2314 270 11.67
%
22.79 729 133 18.24
274
%
13.53
2025
22.79 918 190
%
20.38
314
22.74
1541
%
990
22.79 150 15.15
%
12.13
1740
211
22.74
%
2.10
18.91
%
334 7
859 30 3.49
56
18.91
752
%
1373 81 5.90
%
08.91 0.00
0.16
%1279
1.48 1
%2639
0.58
%
251
8.91
2.38
3.53
%1210
13
546
1.48 3.98
1812
25.26 194
12.18
%
3718
453
1309
224
25.26
1273
%1769
13.57
217
9380
212.27
6.79
%
25.26 969 152 15.69
13.00
%
252
1939
26.79
%
%132
5.55
6.6 240 10 4.17
8.32
7.25
577
40
146.6
458
1.75
1970
8.32
%172127
1.88
40
%
1.88
16.6
266 5
%
18.32
853 19 2.23
12002
%
4.44
%901.41 4.50
6.53
%224
14304
3.59 191
3429
%
0.00
11414
1.41 1085 0
013.59
%
.07
%
7.00
14.22
7.1 430 44 10.23
147
22101
%3174
8.60
273
%
17.1 558 104 18.64
11.74
%
129
1099
%
10.00
%17.1 2096 61 2.91
3390 339
12.94
%
5.82
.
·
143
2457
16.13
%12.94
7.43
579
43
%
1561 110 7.05
16.13
%
2.94
408
12
6.57
2.71
%
887
24
%
41 9.47
433
6.57
%
536 29 5.41
%
6.57 1331 23 1.73
%
2956 42 1.42
%
6.57 347 13 3.75
%
14 2.67
524

MSA

13.04
13.04
13.04
13.04
13.04
13.04
28.83
28.83
28.83
%28.83
17.93
25.42
25.42
25.42
21.28
4.09
%21.28
%1981
9.69
24.67
192
%24.67
13.39
24.67
20.70
%24.67
24.67
25.26
27.45
%5.26
25.26
25.26
%32.07
10.71
317.11
%2.07
32.07
20.2
%20.2
3.06
20.2
9.88
9.88
29.5
29.5
29.5
15.68
15.68
9.07
9.07
9.07
9.07

/
Low
Total
Industry
o%f .Mod
Average Apps
Apps
508 30
762 41
568 29
374 11
383 25
322 34
339 10
468 98
942 125
.
•
267 17
207 23
671 53
204 8
979 83
596 85
626 95
827 84
258 36
520 20
175 0
258 3
1133 97
•
#
314 8
·
•
•
•
•
•
286 56
1874 431
613 23
462 39
•
459 20
1174 24
•

/Low
Mod
5.91
%
%
5.38
%
5.11
%
2.94
%
6.53

%
10.56
%2.95
%
20.94
%
13.27
%
6.37
%
11.11
%
7.90
%
3.92
%
8.48
%
14.26
%
15.18
%
13.95
3.85
%
%
0.00
1.16
%
%
8.56
•
%
2.55
•
•
.
•
%
19.58
%
3.75
8.44
%
%
4.36
%
2.04

MSA
Industry
%of
Average
Apps
11.38
11.38
11.38
11.38
11.38
11.38
26.73
26.73
26.73
26.73
27.11
27.11
27.11
19.95
19.95
22.98
22.98
22.98
22.98
%22.98
10.16
21.72
21.72
21.72
21.72
30.73
30.73
30.73
17.27
17.27
17.27
8.63
8.63
30.56
30.56
%30.56
23.00
24.08
24.08
12.02
12.02
12.02
12.02

563

The National Community Reinvestment Coalition 202-986-7898

MSA
Anaheim 1054 108
CORPORATION
MORTGAGE
RSL
Anaheim 742 112
.
CO
MORTGAGE
WEYERHAEUSER
1052 120
Anaheim
MORTGAGE
GN
84
719
CALIFORNIA
SA
FEDERAL
SOUTHERN
Anaheim
151
1266
Anaheim
CORP
FINANCE
AMERICA
LOAN
CHOME
MORTGAGE
Anaheim
PRUDENTIAL
THE
912
TLAN
AEAGLE
Atlanta
D/BSERVICE
CORP
187
3328
CPRUDENTIALAtlanta
MORTGAGE
HOME
THE
1561 294
BANK
SAVINGS
Atlanta
FEDERAL
ALLATOONA
1235 212
CORPORATION
FINANCIAL
ENTRUST Atlanta
COMPANY
Baltimore 1677
MORTGAGE
B.F.SAUL
Baltimore 670 96
F.S.B.
CITIBANK
BFEDERAL
Baltimore 1469 184
SAVINGS
REISTERSTOWN
Boston
985 53
SERVICES
MORTGAGE
CAPITAL
GE
124
CMORTGAGE
2434
HOME
PRUDENTIALBoston
THE
4832
Chicago
COMPANY
MORTGAGE
NBD
3263
Chicago
CO
INS
LIFE
MUTUAL
PRINCIPAL
Chicago
2348 324
COMPANY
TRUST
NORTHERN
THE
1597
CORPORATION
MORTGAGE
SHELTER Chicago
2901
Chicago
299
.HOME
CORP
MORTGAGE
CHASE
1294 63
Dallas
TMERCANTILE
& RUST
BANK
2111 120
COMPANY
MORTGAGE
GUARDIAN Dallas
520 3
Dallas
SERVICES
CONSUMER
U.S.
CHASE
CHOME Dallas
2156 76
MORTGAGE
PRUDENTIAL
THE
Detroit
2518
BANK
NATIONWIDE
FIRST
Detroit
BANK
REPUBLIC
Detroit
MORTGAGE
SOURCE
ONE
Houston 552
COMPANY
MORTGAGE
MITCHELL
Houston
CHOME
MORTGAGE
PRUDENTIAL
THE
Houston 608 4
COR
MORTGAGE
AMERICAN
BARCLAYS
Angeles
Los
MORTGAGE
GN
Los
Angeles 1928 21
.HOME
CORP
MORTGAGE
CHASE
Minneapolis
.MORT
CORP
FHEIGL
& INANCIAL
Minneapolis1413
CORP
CAPITAL
FEDERAL
FIRST
Minneapolis3835
CMARGARETTEN
& OMPANY
Nassau
-S312
uffolk
C
5128
MORTGAGE
HOME
PRUDENTIAL
THE
Nassau
-S68
973
uffolk
.CORP
MORTGAGE
HOME
CHASE
750 19
York
New
BANK
SAVINGS
PROVIDENT
695 40
York
New
BANK
SAVINGS
ROOSEVELT
5508
York
CPRUDENTIAL New
MORTGAGE
HOME
THE
York
650 14
New
CMARGARETTEN
& OMPANY

1990

1991

.

1992

1993

NAME

1992

/
Low

MSA
Mod

/Low
Mod
/
Low
.Total
Mod
o%f o%f
Industry

16.79

%
47 6.55
718

/
Low
.
Mod
Total
Apps
Apps
73

%
7.68

%
141 2.08

16.79 889 13
4.33
%

24.69

4328
400
2173.11
%576
4.10
63
7.21
%1863
149
2066
23.11
%298
654
9.95
985
193.11
1%716
6.4 * *
18.44
132
*
5.57
37
9.16
%664
1070
98
16.4
4.76
50
8.68
%
1279
11051
111
6.4
3174
7.27
169
18.10
%257
2324
5.17
13.95
%129
%
2111
753
9253.86 14.74
1006
14.51
2%146
%
3.86 468 28 5.98
2952
3.86 8.51
%
%1255
10.68
81
134

122
2978

%
16.54
174

15.92
%3268
0.39 1052
68

5.58
%30.39
43
770
1029
%
18.67
5511

.

1991
/Low
/
Low
Mod MSA
MSA
.
Mod
Total
Industry
Apps
Average
3.78
.57
3.38
%9.07
%61456
3.64
800
35
.24
727
926
53
6%3841
39
1.33
51
%9.07
1.85
%2104
1.32
.24
32.57
72431
15422
12.69
%12.89
3.55
2.69
18.92
38
%12.09
6.79
73
582
%12.89
6.53
818
104
860
10.17
2.69 11.71
6.79
65
11178
1190
%555
12.39
121
%
12.89
146
54
765
%1298
7.55
2.69 7.06
6.79
16.65
98
%
62
12.89
932
%1258
6.20
15.87
%
2.69 7.66
696.79
901
78
103
1649
12.89
1%2.69 428 3
%
0.70
12.89
1.46
22.69
74
%18.88
14.54
509
22.69
%24
3.66
18.88
656
5.72
22.69
7.00
%414
%18.88
29
2364
%19.48
9.24
224
8.88 22.69
%22.69
5.63
4.26
%1084
1618.88
213.18
1055
%1.93
2.95
1139
%
5.49
%
21.93
3.38
%64
1740
5.49 8.65
21.93
%15.49 •
2.91
•
937
10.65
%48
5.12
10.91
10.65
10.91
736
%
18 2.45
%
10.65
10.91
21 2.64
796
%11.81
8.66
223
2576
13.22
%29.05
12.73
138
1084
15.60
%1543
12.44
192
2.95
2295
3.86
216.81
%9.05
22.95 351 59
%9.05
217.11
22.95
91
532
%29.05
15.98
2474
277
1733
2.95
15.54
%2983
13.68
408
3.86
%29.05
10.44
22.95
31297
12.30
46
%27.85
14.79
3738
%
12.47
0.39
496
61
2311
5.12
92
25.12 675 183
%27.85
27.11
%27.85
566
2.47
5.12
7.96
14
197
970.39
%321219
11.83
2%7.85
20.05
15.11
%15.72
3509
73
364
20.39
5.12
80
2%7.85
7.91
25.12
37468
%27.4
15.81
4544
15.49
25.31
%2704
337
2131
6.02
%
10.74
27.4

1990

/
Low
o%Industry
Total
f Mod
.
Average
Apps Apps
459 15
1970 28
.
•
242 25
351 43
500 42
.
•
369 49
417 16
·
4075 336
390 32
177 6
181 4
869 67
771 56
848 75
•
•
1096 203
.
.
•
#
844 154
.
244 27
.
•
242 9
*
•
295 14
1194
250
489

/Low
Mod

MSA
Industry
%of
Apps
Average
%12.02
3.27
%12.02
1.42
15.7
*
15.7
1%5.7
10.33
15.7
%
12.25
15.7
%
8.40
15.7
•
%
13.28
26.42
26.42
%
3.84
26.42
%
8.25
26.42
%
8.21
26.42
26.87
%26.87
3.39
%26.87
2.21
%10.94
7.71
%10.94
7.26
%10.94
8.84
11.04
32.28
%
18.52
32.28
*
32.28
.
%
32.28
18.25
32.28
.
%
11.07
23.27
23.27
•
%
3.72
23.27
23.27
*
%23.27
4.75
20.94
%26.72
58
%26.72
11.86

564

MSA
York
New
INDEPENDENCE
BANK
SAVINGS
New
York
MORTGAGE
.HOME
CORP
CHASE
Oakland 950
MORTGAGE
GN
MORTGAGE
CORP
SUNBELT
NATIONAL Oakland
ALL
COMPANY Oakland
MORTGAGE
PACIFIC
Oakland
PIB
COMPANY
MORTGAGE
Oakland
NVR
MORTAGE
MORTGAGE
HOME
C
Oakland
6770
PRUDENTIAL
THE
967
%14.27
10.55
Philadelphia
.
CO
4.69
102
189
21324
THE
TRUST
MAWR
BRYN
Philadelphia
%2266
7.45
MORTGAGE
CPRUDENTIAL
4.69
100
2309
HOME
THE
3569
%1487
12.83
710
854.69
25534
COUNTRYWIDE
CORPORATIO Philadelphia
FUNDING
MORTGAGE
SERVICES
14.26
6755
%963
GE
CAPITAL
Philadelphia
24.69
103
Philadelphia
SAVINGS
BANK
296
2417
MAIN
FEDERAL
LINE
9.62
%3078
SAVINGS
BANK
Phoenix
STATE
Phoenix
MELLON
MORTGAGE
COMPANY
CTHE
MORTGAGE
HOME
PRUDENTIAL
Phoenix
Riverside
BANK
-BAMERICAN
RAHAM
RURAL
WEYERHAEUSER
.
CO
MORTGAGE
Riverside
CORPORATION
P
OF
Riverside
MORTGAGE
GMAC
San
AMERICAN
MORTGAGE Diego
RESIDENTIAL
CORPORATION
PMORTGAGE St.
OF
Louis
GMAC
1891
CORPORATION
Louis
KNUTSON
MORTGAGE St.
Louis
St.
JAMES
&COMPANY
B.NUTTER
SAVINGS
MFEDERAL St.
OF
BANK
3051
HOME
Louis
BANK
St.Louis
COLONIAL
THE
Tampa
ORP
.CUNION
MORT
FIRST
1683
MORTGAGE
SOURCE
ONE
Tampa
Tampa
1665
CMARGARETTEN
& OMPANY
450
LINCOLN
CORPORATION Tampa
SERVICE
MORTGAGE
LP
COMPANY
Tampa
GREENTREE
Washington
UNION
CREDIT
FEDERAL
NAVY
2131
689
Washington
%11.46
10.56
1240
222
746.02
5.31
1937
MORTGAGE
.
CORP
CHASE
HOME

1993

22

The National Community Reinvestment Coalition⚫ 202-986-7898

I
APPLICATIONS
NCOME
MODERATE
-AND
L
OW1990--1993
:II.B.5
LENDERS
WORST
TABLE

39

40

APPROVALS
NCOME
-AND
I
MODERATE
: OWL
1990-1993
LENDERS
WORST

TABLE
.B.6
II

/Low
/Mod
Low
Name

Total .Mod
Aprvs
%132
11.58
1140
833
773
698
605

95
100
68

204
273
104
176
239
1592
75
42
104
285
282
562
327
1552
1917 67
1274 60
2067 116
468
9011 1186
2189
2383 273
1929 31
466 30
561
1557 12
1200
1503
888
1431
579
916
2157
2798
2187
4630

%
12.29
%
11.24
4.86
%3003
146
17.00
%
18.16
%
%
11.71
12.30
%
15.01
%
%
12.95
%
4.59
%
4.82
%
10.19
14.57
%
3115
454
%
12.14
21.07
%
%
3.50
%
4.71
%
5.61
0%1.21
%
13.16
11.46
%
%
1.61

0%3.53
%
0.77
%6.63
2581
171
%1374.
17.90
246
1047 28.45
%
3680
257
3110
%
846 55 6.50
%
4475 275 6.15
%
2154 22 1.02
%
612 14 2.29

18.05
2.90
8.05
%1178
6144
19.96
%838.05
18.05
1%8.05
14.33
18.05
20.73
20.73
20.73
20.73
21.32
21.32
21.32
16.77
16.77
21.5
21.5
212.89
%1.5
21.5
21.5
18.54
18.54
18.54
18.54
24.06
4.06
%2331
15.12
15.31
%15.31
6.44
15.31
12.82
12.82
22.86
8.26
%22.86
14.6
14.6
5.76
5.76

/
Low
/
Mod
Low
Total
Industry
o%f Mod
%of
.
Average Aprvs Aprvs
Aprvs
%
615 33 5.37
%
684 19 2.78
1303 110
%101
9.26
1091
·
.
%
502 38 7.57
1068 34 3.18
%
%
2022 226 11.18
985 150
%
1193 140 11.74
1087 88
%
341 28 8.21
%
292 19 6.51
%
563 25 4.44
1613 187
%
1836 170 9.26
%
3463 354 10.22
%
1528 310 20.29
%
463 10 2.16
844 29
%
1344 77 5.73
540 1
1722 202
1899 240
3358
%
24.06 336 10.01
887 14
%
567 31 5.47
787 18
%
0.00
1097 0
4.33
%131
3024
%
1043 119 11.41
%
3254
22.86 321 9.86
%
2101 147 7.00
%
1306 88 6.74
%
104
2115 4.92
%
3053 28 0.92
%
501 14 2.79

MSA

14.93
14.93
14.93
14.93
14.93
19.12
19.12
15.23
%19.12
19.12
%17.4
8.10
7.4
%1209
14.57
1434
17.4
17.39
17.39
11.59
%21.56
211.22
%1.56
253
2254
21.56
21.56
21.56
16.11
1%6.11
3.44
16.11
10.19
%6.11
%22.14
11.73
12.64
%22.14
22.14
1%3.4
1.58
13.4
%13.4
2.29
10.57
10.57
15.5
15.5
15.5
11.22
11.22
4.79
4.79

/
Low
/Low Mod
Mod
Total
.
Industry
Aprvs Aprvs
Average

MSA

•
1
66
51
59
*
21
213
90
.
40
67
22
5
4
132
128
89
164
184
6
6
48
0
215
145
151
1634
8
10
3
0
76
97
60
44
31
•
28
12

12.02
12.02
12.02
5.98
%12.02
%12.02
7.78
12.02
26.15
26.15
26.15
26.15
23.22
23.22
23.22
19.97
19.97
22.21
22.21
13.59
%22.21
%22.21
8.96
22.21
22.28
22.28
22.28
22.28
28.07
28.07
%28.07
9.24
16.69
16.69
16.69
8.99
8.99
%27.28
17.86
27.28
27.28
14.21
14.21
7.09
7.09

•

378
4.93
18.44
%1253
853
758
•
655
1328
476
516
850
321
192
194
891
961
655
1831
880
209
328
721
244
1284
938
382
229
241
909
1490
543
2070
398
501
•
1859
332

0.26
%
%
5.27

•
%3.21
%
16.04
%
18.91
%
7.75
%
7.88
%
6.85
%
2.60
%
2.06
%
14.81
%
13.32
20.91
%
%
2.87
%
1.83
%
6.66
%
0.00
16.74
%
%
15.46
%
2.09
%
4.37
%
1.24
%
0.00
%
5.10

%
2.90
%
11.06
%
6.19
.
%
1.51
%
3.61

/
Low
/Mod MSA
Low
Industry
%of
Total
Industry
.
%of Mod
Average
Aprvs
Average Aprvs
Aprvs
221
352
478
730
319
287
747
410
307
189
231
616
158
755
461
898
594
224
222
500
143
•
1071
252
•
•

•
·

•

286
1714
384
491
1701

8
•
24
25
38
8
8
76
81
30
22
·
13
50
7
78
•
32
66
89
3
29
19
0
•
88
3
.
•
•
•
56
371
28
20
13
•

3.62
%
%
6.82
%
5.23
%5.21
%
2.51
%
2.79
%
10.17

9.99
9.99
9.99
9.99
9.99
9.99
23.83
23.83
%23.83
19.76
29.77
%3.83
%11.64 0.2415
0.2415
•
0.2415
%
5.63
19.03
%
8.12
%
4.43
19.03
20.86
%
10.33
20.86
20.86
6.94
%
7.35
%
20.86
20.86
%
14.98
11.34
%8.93
%
13.06
18.93
%
3.80
18.93
%
0.00
18.93
25.8
•
25.8
·
8.22
%
25.8
14.23
1.19
%
14.23
14.23
•
7.42
•
7.42
•
19.58
%28.98
21.65
%28.98
28.98
.
22.41
%
7.29
%22.41
4.07
10.76
%0.13
10.13

565

The National Community Reinvestment Coalition 202-986-7898

MSA
FINANCE
CORP
Anaheim
LOAN
AMERICA
MORTGAGE
CPRUDENTIAL
THE
HOME Anaheim
CORPORATION Anaheim
MORTGAGE
RSL
Anaheim
GN
MORTGAGE
Anaheim
MORTGAGE
.
CO
WEYERHAEUSER
SA
FEDERAL
Anaheim
CALIFORNIA
SOUTHERN
CPRUDENTIAL
MORTGAGE
HOME
Atlanta
THE
CORPORATION
FINANCIAL
ENTRUST Atlanta
BANK
FEDERAL
SAVINGS Atlanta
ALLATOONA
Atlanta
B/ASERVICE
DTLAN
CORP
EAGLE
Baltimore
SAVINGS
B
FEDERAL
REISTERSTOWN
COMPANY
MORTGAGE
Baltimore
B.F.SAUL
CITIBANK
F.S.B.
Baltimore
SERVICES
MORTGAGE
CAPITAL Boston
GE
C
Boston
MORTGAGE
HOME
PRUDENTIAL
THE
Chicago
.HOME
CORP
MORTGAGE
CHASE
CO
INS
LIFE
MUTUAL
PRINCIPAL Chicago
COMPANY
TRUST
NORTHERN Chicago
THE
Chicago
COMPANY
NBD
MORTGAGE
CORPORATION
MORTGAGE
SHELTER Chicago
CTHE
Dallas
MORTGAGE
HOME
PRUDENTIAL
RUST
TMERCANTILE
Dallas
&BANK
COMPANY
MORTGAGE
GUARDIAN Dallas
Dallas
SERVICES
CONSUMER
U.S.
CHASE
Detroit
REPUBLIC
BANK
Detroit
MORTGAGE
ONE
SOURCE
Detroit
BANK
NATIONWIDE
FIRST
CPRUDENTIAL
MORTGAGE
Houston
HOME
THE
COMPANY
MORTGAGE
MITCHELL Houston
COR Houston
MORTGAGE
AMERICAN
BARCLAYS
Los
Angeles
.MORTGAGE
CORP
HOME
CHASE
Los
Angeles
MORTGAGE
GN
Minneapolis
CORP
CAPITAL
FEDERAL
FIRST
Minneapolis
CMARGARETTEN
& OMPANY
Minneapolis
.&MORT
CORP
INANCIAL
FHEIGL
SNassau
.CORP
- uffolk
MORTGAGE
HOME
CHASE
CPRUDENTIAL SNassau
MORTGAGE
HOME
- uffolk
THE
York
New
.
CORP
MORTGAGE
HOME
CHASE
&COMPANY
MARGARETTEN
York
New

MSA

1990

1991

1992

1993

1993

MSA
York
New
PROVIDENT
BANK
SAVINGS
York
ROOSEVELT
New
SAVINGS
BANK
C
MORTGAGE
HOME
York
New
THE
PRUDENTIAL
York
New
BANK
SAVINGS
INDEPENDENCE
PIB
COMPANY
MORTGAGE
Oakland
CORP Oakland
MORTGAGE
SUNBELT
NATIONAL
THE
PRUDENTIAL
C
MORTGAGE
HOME
Oakland
NVR
MORTAGE
Oakland
Oakland
MORTGAGE
GN
ALL
COMPANY Oakland
MORTGAGE
PACIFIC
GE
SERVICES
MORTGAGE
CAPITAL
Philadelphia
Philadelphia
THE
C
MORTGAGE
HOME
PRUDENTIAL
BANK
SAVINGS
FEDERAL
LINE
MAIN
Philadelphia
Philadelphia
.
CO
TRUST
MAWR
BRYN
THE
COUNTRYWIDE
FUNDING
CORPORATIOPhiladelphia
Phoenix
C
MORTGAGE
HOME
PRUDENTIAL
THE
Phoenix
STATE
BANK
SAVINGS
COMPANY
MELLON
MORTGAGE Phoenix
WEYERHAEUSER
.MORTGAGE Riverside
CO
RURAL
-BRAHAM Riverside
BANK
AMERICAN
GMAC
P
OF
CORPORATION
MORTGAGE
Riverside
San
AMERICAN
MORTGAGE Diego
RESIDENTIAL
BANK
MFEDERAL
OF
HOME
SAVINGS St.
Louis
CJAMES
& OMPANY
B.NUTTER
Louis
St.
KNUTSON
CORPORATION
MORTGAGE
Louis
St.
St.
Louis
GMAC
P
OF
CORPORATION
MORTGAGE
Louis
BANK
St.
COLONIAL
THE
Tampa
LP
COMPANY
MORTGAGE
GREENTREE
FIRST
UNION
CORP
.MORT
Tampa
CORPORATION
LINCOLN
SERVICE Tampa
Tampa
& OMPANY
CMARGARETTEN
Tampa
MORTGAGE
ONE
SOURCE
Washington
MORTGAGE
.HOME
CORP
CHASE
Washington
UNION
CREDIT
FEDERAL
NAVY

701
608
4616
822
783
593
831

1289
179
645
5247

920

125
1205
127

5.32
119.50
101
%518
1%995.32
8.75
1132
4.03
12886
%216
7.48
%2910
14.71
1.1
2428
%21.1
13.59
%119
13.42
:11
2887
1.1
%2287
15.56
1845
%21.1
10.54
4.63
25.14
623
%32
4.63
2%1533
10.83
166
4.63
21613
%15.44
249

!
Low
/Low Mod
%of Mod
Total
Industry
.
Average Aprvs
Aprvs
808 18
445 19
%5.76 25
1.73
2431
%
645 17 2.64
%
1141 85 7.45
723 63
%
796 8
1.01
1164 69
37
%
584 6.34
104
1125
%
2.63 7.98
%26347
14.10
258
3232
895
%
3148
%2012
6.73
702.63 3.48
2212
%2265
2924
8.99
%
22.63 4.02
91
263
%
%2928
13.89
912.63 9.81
1377
%73
12.29
22.63
%465
29.21
730.79
15
793
%
2847
%529
3.97
0.79 12 2.27
2113
%58
6.63
0.79
2134
1764
2021
%
988
%1875.32 34 5.36
8.81
634
•
·
%
39
934 4.18
2084
%
127 6.09
%
2738
344 12.56
468 28
704 98
1469
183
877 66
•
·
.
4.63 49
%453
11.79
83
2704
4.63 58
%2391
14.21
52
366
1103 83
973 146
%87
8.63
%4.07
10.14
175
21008
1726
4.07
4449
217.85
%657
14.77
%5430
969

MSA
%4.79
2.23
%4.79
4.27
%4.79
1.03
4.79
11.57
18.71
%1.57
11.57
%11.57
5.93
11.57
19.24
%1.57
16.67
16.67
16.67
16.67
5.30
%16.67
%13.05
3.23
13.05
%13.05
3.29
9.71
9.71
9.71
11.95
20.01
%20.01
5.98
13.92
%20.01
212.46
%0.01
7.53
%20.01
22.68
%22.68
10.82
14.83
%22.68
7.52
%22.68
%22.68
15.01
25.16

/
Low
!
Low
%oMod
Total
Industry
.f
Aprys
Average
Aprvs
%
10 2.68
24
11
16
%
50 7.12
27
1
53
12
61
%
202 9.31
%
15 2.76
%
52 5.09
61
.
%12.21
115
57
17
31
20
%
110 5.44

373
349
931
581
702
514
375
827
336
518
2169
544
1022
474
414
942
654
660
639
704
2022
1509
532 91
318 49
1046
129
263 28
379 35
281 41
300 60
562 14 2.49
%
%
609 156 25.62
25.16
509

.

Name

1991

1992

/
Low
/Low Mod MSA
Total
.
Mod
Aprvs
52.57
%.76
18
25
%5.76
4.11
80
1071
52.80
%.76
30
5.60
%15.51
46
11.37
%15.51
89
6107
1.85
%15.51
113
%15.51
92
15.51
%15.51
7.70
64
1%5.51
132
1126
11.72

1990
Mod
MSA
7.09
7.09
%6.88
%7.09
1.18
2.75
%7.09
11.72
5.25
%11.72
0.27
%11.72
%11.72
6.41
%11.72
3.57
111.78
%1.72
19.2
19.2
19.2
%19.2
12.87
7.00
%29
19.2
19.94
19.94
%19.94
8.72
%9.51
2.58
4.85
%951
2.84
%951
10.7
%2204
4.35
13.52
%24.35
17.11
215.41
%4.35
12.33
%24.35
2%4.35
10.65
2%5.4
9.23
214.59
%5.4
%25.4
20.00
25.4
25.4
8.64
%2445.98
%2080
15.19
2316
5.98

/
Low
!
Low
Mod MSA
%of
Industry
Total
Industry
o%f Mod
.
Average
Aprvs
Average
Aprvs
•
10.13
•
%
10.13
401 -11 2.74
%10.13
1.95
871 17
%10.13
2.03
295 6
%
11.90
14.36
269 32
14.36
·
•
•
14.36
•
•
•
%
14.36
500 42 8.40
•
14.36
•
•
%14.36
10.31
223 23
%3.04
27.83
3756 294
%3.04
1.79
2
336 6
%
23.04
343 23 6.71
%23.04
11.99
342 41
23.04
·
·
•
21.89
130 4
%
3.08
21.89
·
•
·
2.82
%21.89
142 4
%9.23
7.23
664 48
652 45
%9.23
6.90
%
9.23
761 65 8.54
8.56
•
•
%
28.99
770 130 16.88
28.99
.
•
28.99
%28.99
18.00
1061 191
28.99
5.41
%21.11
259 14
216 25
11.57
%21.11
21.11
•
%
3.26
215 7
21.11
21.11
·
.
·
212.89
%464.74
357
219.63
4.74
%224
1141

566

The National Community Reinvestment Coalition 202-986-7898

APPROVALS
:LNCOME
1990-1993
LENDERS
WORST
-I
MODERATE
AND
OW-

.B.6
II
TABLE

41

567

SECTION III :

THE WORST LENDERS IN AMERICA

1993

DATA TABLES

42

The National Community Reinvestment Coalition⚫ 202-986-7898

568

SECTION III

EXPLANATION OF DATA TABLES FOR 1993
This section contains tables of data on the lenders selected as the worst performers
for the year of 1993. The data is presented in two different ways: by the name of the lender
( Table A) and by the MSA ( Table B) . Each table presents data on each of the five indicators
used to measure lending performance ( marketing to minorities, denial ratios, minority
approvals, low- and moderate-income applications, and low- and moderate-income
approvals) . The categories in each table are self-explanatory. MSA averages represent how
the industry performed overall and are used as the benchmark for judging individual lender's
performance.
Table III. A.1: This table presents a list of the worst lenders alphabetically for the year
1993. The third column AGENCY indicates which regulatory agency the institution reports
its HMDA data to. 1 is the Office of the Comptroller of the Currency ( OCC) , 2 is the Federal
Reserve System ( FRS) , 3 is the Federal Deposit Insurance Corporation ( FDIC) , 4 is the
Office of Thrift Supervision ( OTS) , 5 is the National Credit Union Administration ( NCUA) ,
and 7 is the Department of Housing and Urban Development ( HUD) .
The next column TYPE OF INSTITUTION is a classification of the lender. A lender is either
an independent mortgage company ( regulated by HUD, not subject to CRA, and not affiliated
with a bank or bank holding company) , a commercial bank or savings bank ( subject to CRA
and regulated by one of the four bank regulatory agencies) , a credit union ( not subject to CRA
and regulated by the NCUA) , or a bank related mortgage company ( affiliated with a bank or
bank holding company and not subject to CRA) .
Table III. A.2:
Table III. A.3:
Table III. A.4:
Table III. A.5:
Table III. A.6:

Minority applications for each lender.
Denial rates between white and minority applicants.
Minority approval rates.
Low- and moderate-income applications.
Low- and moderate-income approvals.

Table II.B 1-6: These tables are exactly the same as the Tables A. 1-6, but lenders are
organized by MSA rather than alphabetically.

The National Community Reinvestment Coalition⚫ 202-986-7898

43

569

SECTION III :

THE WORST LENDERS IN AMERICA

1993

DATA TABLES BY LENDER

44

The National Community Reinvestment Coalition 202-986-7898

570

TABLE III. A.1
LENDER
ALLATOONA FEDERALSAVINGS BANK
ALLIED SAVINGS BANK
AMERICAN HOME FUNDING
AMERICAN HOME MORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIAL MORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIALMORTGAGE
ASSURANCE MORTGAGE CORP OF AME
ATLANTIC RESIDENTIAL MORTGAGE
BANCBOSTON MORTGAGE CORP.
BANCBOSTONMORTGAGE CORP.
BANCBOSTON MORTGAGECORP.
BANCORP MORTGAGE INC
BARCLAYS AMERICAN MORTGAGE COR
BARCLAYS AMERICAN MORTGAGE COR
BROOKSAMERICAMORTGAGECORP.
B.F.SAUL MORTGAGE COMPANY
CAL COASTMORTGAGE CORPORATION
CALIFORNIA UNITED BANK
CARLI. BROWN AND COMPANY
CHARLES FCURRY COMPANY
CHASE HOME MORTGAGE CORP.
CHASE HOMEMORTGAGECORP.
CHASE HOMEMORTGAGE CORP.
CHASEHOME MORTGAGECORP.
CHASE HOME MORTGAGE CORP.
CHASEHOMEMORTGAGE CORP.
CHASE U.S. CONSUMER SERVICES
CITIBANK F.S.B.
COLONIALMORTGAGECOMPANY
COLONIAL MORTGAGE COMPANY
COLONIAL MORTGAGE COMPANY
CORNERSTONEMORTGAGE COMPANY
COUNTRYWIDEFUNDINGCORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
CRESTARMORTGAGE CORPORATION
CROSSLAND MORTGAGE CORP.
CROSSLAND MORTGAGE CORP.
CTX MORTGAGE COMPANY
CTX MORTGAGE COMPANY
DEDHAM INSTITUTIONFORSAVINGS
DOLLARMORTGAGE CORPORATION
EAGLESERVICE CORP D/B/AATLAN
EASTCAMBRIDGE SAVINGS BANK
EMIGRANTSAVINGS BANK
EMIGRANTSAVINGS BANK
ENTRUST FINANCIAL CORPORATION
ENTRUSTFINANCIALCORPORATION
FIRST FRANKLIN
FIRST FRANKLIN
FIRST FRANKLIN
FIRST FRANKLIN
FIRST HEIGHTS BANK

THE WORST LENDERS IN 1993
MSA
AGENCY
4
Atlanta
4
Oakland
3
Tampa
Atlanta
7
7
Anaheim
7
Los Angeles
7
Oakland
7
SanDiego
7
St. Louis
Boston
7
3
Baltimore
Houston
1
1
Tampa
1
Washington
3
Philadelphia
2
Dallas
Houston
2
7
Oakland
Baltimore
4
7
SanDiego
1
Los Angeles
7
Tampa
7
Phoenix
Boston
1
1
Chicago
1
LosAngeles
Nassau-Suffolk 1
1
NewYork
1
Washington
Dallas
2
St. Louis
4
7
Riverside
7
Atlanta
Dallas
7
7
Houston
7
Houston
Atlanta
7
7
Boston
Nassau-Suffolk 7
7
Riverside
SanDiego
7
7
St. Louis
7
Washington
St. Louis
2
Dallas
7
Houston
7
7
Baltimore
7
Washington
Boston
3
7
SanDiego
Atlanta
4
Boston
3
Nassau-Suffolk 3
NewYork
3
7
Atlanta
7
Baltimore
7
LosAngeles
7
Oakland
7
Riverside
7
SanDiego
Houston
4

TYPE OF INSTITUTION
Commercial/Savings Bank
Commercial/Savings Bank
Bank Related Mortgage Company
IndependentMortgage Company
Independent MortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgageCompany
BankRelatedMortgageCompany
Bank Related Mortgage Company
Bank Related Mortgage Company
Bank RelatedMortgage Company
Bank Related Mortgage Company
Bank RelatedMortgage Company
Bank RelatedMortgage Company
IndependentMortgageCompany
Bank Related Mortgage Company
IndependentMortgageCompany
Commercial/Savings Bank
IndependentMortgageCompany
Bank Related MortgageCompany
Bank Related MortgageCompany
BankRelatedMortgage Company
BankRelatedMortgage Company
Bank Related Mortgage Company
Bank RelatedMortgage Company
BankRelatedMortgage Company
Commercial/SavingsBank
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
Independent MortgageCompany
IndependentMortgageCompany
Independent MortgageCompany
IndependentMortgageCompany
Independent MortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgage Company
Commercial/Savings Bank
IndependentMortgageCompany
Commercial/SavingsBank
Commercial/Savings Bank
Commercial/Savings Bank
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
Commercial/Savings Bank

The National Community Reinvestment Coalition 202-986-7898

45

571

TABLE III. A.1

THE WORST LENDERS IN 1993

LENDER
FIRSTLIBERTY BANK
FIRST UNION MORT. CORP.
FIRST UNION MORT. CORP.
FLAGSHIP FEDERAL SAVINGS BANK
FLEET MORTGAGE CORP.
FRANKLIN MORTGAGE CAPITAL
FRANKLIN MORTGAGE CAPITAL
FRANKLIN MORTGAGE CAPITAL
GE CAPITAL MORTGAGE SERVICES
GECAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GE CAPITAL MORTGAGE SERVICES
GMACMORTGAGE CORPORATION OFP
GMAC MORTGAGECORPORATION OFP
GNMORTGAGE
GNMORTGAGE
GNMORTGAGE
GNMORTGAGE
GREENTREE MORTGAGE COMPANY LP
GUARDIAN MORTGAGE COMPANY
HEADLANDS MORTGAGE COMPANY
HEADLANDS MORTGAGE COMPANY
HEIGL MORT. & FINANCIAL CORP.
HOMEFEDERAL SAVINGSBANK OF M
HOMESTEAD MORTGAGE CORPORATION
HORIZON SAVINGS BANK
HOUSEHOLD BANK
IMPERIAL CREDIT INDUSTRIES
INDEPENDENCE SAVINGS BANK
INTEGRA MORTGAGE COMPANY
JAMES B. NUTTER & COMPANY
J.J. KISLAK MORTGAGE CORP.
KEYCORPMORTGAGE INC.
KNUTSONMORTGAGE CORPORATION
LAKELAND MORTGAGE CORP.
LEEDS FEDERAL SAVINGS & LOAN
LOAN AMERICA FINANCE CORP
LOAN AMERICA FINANCE CORP
LOAN AMERICA FINANCE CORP
MAIN LINE FEDERALSAVINGS BANK
MARGARETTEN & COMPANY

MSA

AGENCY
4
2
2
4
2
7
7
7
7
7
7
7
7
7
7
7
7
7
3
3
3
3
7
7
7
7
7
4
7
4
4
7
3
2
7
7
3
7
7
4
7
7
7
4
7
7
2
2
2
2
4
7
2
7
7
7
7
7
7
7
7
4

Atlanta
Baltimore
Tampa
SanDiego
Riverside
Baltimore
Dallas
Washington
Baltimore
Boston
Chicago
Dallas
Houston
Oakland
Philadelphia
Washington
Minneapolis
Riverside
Anaheim
Los Angeles
Oakland
SanDiego
Tampa
Detroit
Anaheim
Oakland
Minneapolis
St. Louis
Minneapolis
Tampa
Chicago
Riverside
New York
Philadelphia
St. Louis
Boston
Nassau-Suffolk
Minneapolis
Minneapolis
Baltimore
Anaheim
Chicago
Minneapolis
Philadelphia
Tampa
Phoenix
Baltimore
MELLONBANK ( MD)
Washington
Dallas
MELLON MORTGAGE COMPANY
MELLON MORTGAGE COMPANY
Phoenix
Dallas
MERCANTILE BANK & TRUST
METMOR FINANCIAL
Phoenix
Atlanta
METROBANK
METROPOLITAN SERVICE CORP.
Anaheim
METROPOLITAN SERVICE CORP.
LosAngeles
Riverside
METROPOLITAN SERVICECORP.
MICALMORTGAGE
Riverside
MIDCOASTMORTGAGE CORPORATION Nassau-Suffolk
MIDLAND FINANCIAL MORTGAGES
Chicago
MIDLAND FINANCIAL MORTGAGES
St. Louis
Houston
MITCHELL MORTGAGE COMPANY
MTVERNON FEDERAL SAVINGS BANK Atlanta

46

TYPE OF INSTITUTION
Commercial/Savings Bank
Bank RelatedMortgage Company
Bank RelatedMortgage Company
Commercial/Savings Bank
BankRelated Mortgage Company
IndependentMortgage Company
IndependentMortgage Company
Independent MortgageCompany
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
BankRelatedMortgage Company
BankRelated Mortgage Company
Bank Related Mortgage Company
Bank RelatedMortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
Commercial/Savings Bank
IndependentMortgageCompany
Commercial/Savings Bank
Commercial/Savings Bank
IndependentMortgage Company
Commercial/Savings Bank
Bank Related MortgageCompany
Independent Mortgage Company
IndependentMortgageCompany
Bank Related Mortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
Commercial/Savings Bank
IndependentMortgage Company
IndependentMortgageCompany
Independent Mortgage Company
Commercial/SavingsBank
IndependentMortgageCompany
IndependentMortgageCompany
Commercial/Savings Bank
Commercial/SavingsBank
BankRelated MortgageCompany
BankRelatedMortgage Company
Commercial/Savings Bank
IndependentMortgageCompany
Commercial/Savings Bank
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
Independent MortgageCompany
IndependentMortgageCompany
Independent MortgageCompany
Commercial/Savings Bank

The National Community Reinvestment Coalition · 202-986-7898

88-882 - 95 - 19

572

TABLE III.A.1

LENDER

THE WORST LENDERS IN 1993

MSA
AGENCY
S
Washington
2
Chicago
7
Philadelphia
2
Atlanta
Boston
3
3
New York
7
Philadelphia
2
Anaheim
2
Oakland
7
Atlanta
7
Philadelphia
1
Los Angeles
1
New York
7
Chicago
4
Philadelphia
7
Dallas
4
NewYork
Riverside
4
PROVIDENT SAVINGS BANK
4
PROVIDENT SAVINGS BANK
SanDiego
4
Baltimore
Detroit
3
3
St. Louis
Nassau-Suffolk 3
7
Phoenix
Nassau-Suffolk 3
Detroit
7
Nassau-Suffolk 3
3
New York
4
Anaheim
7
Oakland
7
SanDiego
NewYork
7
7
Detroit
7
SOURCE ONEMORTGAGE
Houston
7
SOURCE ONEMORTGAGE
Tampa
7
Washington
SOURCE ONE MORTGAGE
4
SOUTHERN CALIFORNIA FEDERALSA Anaheim
1
Tampa
4
SOVEREIGNBANK. A FED SAVINGS
Philadelphia
4
Detroit
STANDARD FEDERALBANK
4
Phoenix
STATE SAVINGS BANK
Detroit
7
ST.JAMES SERVICING CORP
7
Boston
SUBURBAN MORTGAGE CO.
7
SUNBELTNATIONALMORTGAGECORP Houston
7
SUNBELTNATIONAL MORTGAGECORP Phoenix
Boston
4
SUNCOAST SAVINGS & LOAN ASSOC.
4
SUNCOAST SAVINGS & LOAN ASSOC.
Tampa
Nassau-Suffolk 4
SUNRISE FEDERAL SAVINGS BANK
4
TEMPLE-INLAND MORTGAGE CO.
Los Angeles
Nassau-Suffolk 4
TEMPLE-INLAND MORTGAGE CO.
THE BRYNMAWRTRUST CO.
3
Philadelphia
THE COLONIAL BANK
3
St.Louis
Boston
1
Detroit
1
Anaheim
7
7
Atlanta
7
Baltimore
Boston
7
7
Chicago
7
Dallas
7
Houston
7
Los Angeles

NAVY FEDERAL CREDITUNION
NBD MORTGAGE COMPANY
NORTH AMERICAN MORTGAGE CO
OLD COLONY MORTGAGE CORPORATIO
PEOPLES WESTCHESTER
PHILADELPHIA MORTGAGE CORP.
PIB MORTGAGE COMPANY

TYPE OF INSTITUTION
CreditUnion
Bank Related Mortgage Company
IndependentMortgageCompany
Bank Related MortgageCompany
Bank RelatedMortgage Company
Commercial/Savings Bank
IndependentMortgage Company
Bank Related MortgageCompany
BankRelatedMortgage Company

IndependentMortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
IndependentMortgage Company
Commercial/Savings Bank
IndependentMortgageCompany
Commercial/Savings Bank
Commercial/Savings Bank
Bank Related Mortgage Company
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgageCompany
Independent Mortgage Company
Commercial/Savings Bank
Bank RelatedMortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgage Company
Commercial/Savings Bank
Commercial/Savings Bank
Commercial/Savings Bank
BankRelated Mortgage Company
BankRelatedMortgage Company
Commercial/Savings Bank
BankRelated MortgageCompany
Bank Related Mortgage Company
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
Independent MortgageCompany
IndependentMortgage Company

The National Community Reinvestment Coalition⚫ 202-986-7898

47

573

TABLE III.A.1

THE WORST LENDERS IN 1993

LENDER
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIALHOMEMORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THEPRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THEPRUDENTIAL HOME MORTGAGE C
THEPRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THEPRUDENTIAL HOME MORTGAGE C

48

MSA
Minneapolis
Nassau-Suffolk
NewYork
Oakland
Philadelphia
Phoenix
Riverside
SanDiego
Tampa
Washington
Tampa
Washington
Phoenix
Anaheim
Los Angeles
Phoenix
Riverside
Atlanta
Chicago
Minneapolis
Riverside
Anaheim
Riverside
Detroit

AGENCY
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
1
2
7
7
7
7
7
7

TYPE OF INSTITUTION
IndependentMortgage Company
IndependentMortgageCompany
IndependentMortgage Company
IndependentMortgageCompany
Independent Mortgage Company
IndependentMortgage Company
Independent Mortgage Company
IndependentMortgageCompany
IndependentMortgageCompany
IndependentMortgageCompany
Independent Mortgage Company
Independent Mortgage Company
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgage Company
IndependentMortgageCompany
Commercial/SavingsBank
BankRelated Mortgage Company
IndependentMortgageCompany
IndependentMortgage Company
Independent MortgageCompany
IndependentMortgageCompany
IndependentMortgage Company
Independent MortgageCompany

The National Community Reinvestment Coalition⚫ 202-986-7898

574

TABLE III.A.2

THE WORST LENDERS IN 1993: MARKETING TO MINORITIES

LENDER

MSA

ALLATOONA FEDERAL SAVINGS BANK
ALLIED SAVINGS BANK
AMERICAN HOME FUNDING
AMERICAN HOME MORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIAL MORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIALMORTGAGE
AMERICAN RESIDENTIAL MORTGAGE
ASSURANCE MORTGAGE CORPOF AME
ATLANTIC RESIDENTIAL MORTGAGE
BANCBOSTON MORTGAGE CORP.
BANCBOSTON MORTGAGE CORP.
BANCBOSTON MORTGAGE CORP.
BANCORP MORTGAGE INC
BARCLAYS AMERICAN MORTGAGE COR
BARCLAYS AMERICAN MORTGAGE COR
BROOKSAMERICA MORTGAGE CORP.
B.F.SAUL MORTGAGE COMPANY
CALCOASTMORTGAGE CORPORATION
CALIFORNIA UNITED BANK
CARLL. BROWN AND COMPANY
CHARLES FCURRYCOMPANY
CHASE HOME MORTGAGE CORP.
CHASEHOME MORTGAGE CORP.
CHASE HOME MORTGAGE CORP.
CHASEHOMEMORTGAGECORP.
CHASE HOME MORTGAGE CORP.
CHASE HOMEMORTGAGE CORP.
CHASE U.S. CONSUMER SERVICES
CITIBANK F.S.B.
CITIZENS NATIONAL MORTGAGE COR
COLONIAL MORTGAGE COMPANY
COLONIALMORTGAGE COMPANY
COLONIALMORTGAGE COMPANY
CORNERSTONEMORTGAGE COMPANY
COUNTRYWIDE FUNDINGCORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDE FUNDING CORPORATIO
COUNTRYWIDEFUNDING CORPORATIO
COUNTRYWIDE FUNDINGCORPORATIO
CRESTAR MORTGAGE CORPORATION
CROSSLAND MORTGAGE CORP.
CROSSLAND MORTGAGE CORP.
CTX MORTGAGE COMPANY
CTX MORTGAGE COMPANY
DEDHAM INSTITUTION FOR SAVINGS
DOLLARMORTGAGE CORPORATION
EAGLE SERVICE CORP D/B/A ATLAN
EASTCAMBRIDGE SAVINGS BANK
EMIGRANT SAVINGS BANK
EMIGRANT SAVINGS BANK
ENTRUST FINANCIAL CORPORATION
ENTRUST FINANCIAL CORPORATION
FIRSTFRANKLIN
FIRST FRANKLIN
FIRSTFRANKLIN
FIRST FRANKLIN
FIRST HEIGHTS BANK

Atlanta
Oakland
Tampa
Atlanta
Anaheim
Los Angeles
Oakland
SanDiego
St. Louis
Boston
Baltimore
Houston
Tampa
Washington
Philadelphia
Dallas
Houston
Oakland
Baltimore
SanDiego
Los Angeles
Tampa
Phoenix
Boston
Chicago
Los Angeles
Nassau-Suffolk
NewYork
Washington
Dallas
St. Louis
Riverside
Atlanta
Dallas
Houston
Houston
Atlanta
Boston
Nassau-Suffolk
Riverside
SanDiego
St. Louis
Washington
St. Louis
Dallas
Houston
Baltimore
Washington
Boston
SanDiego
Atlanta
Boston
Nassau-Suffolk
New York
Atlanta
Baltimore
LosAngeles
Oakland
Riverside
SanDiego
Houston

White
Minority MSA
%of Minority
% of Minority
Total
Share of White
Applications Applications Applications Applications Applications Applications Average

1561
1768
555
2135
2138
4511
2212
3174
1058
1606
2147
699
619
1916
2030
638
608
710
1677
1602
1718
1094
1240
820
2901
1928
973
2431
1937
520
681
2214
3433
1477
918
1181
3576
4929
1635
5287
9231
1020
2687
957
1311
1629
1079
1941
627
641
912
635
1010
1314
1235
550
3584
1409
735
1436
1709

1.03%
155%
0.64%
1.41%
158%
1.44%
1.94%
2.54%
0.81%
1.32%
2.11%
0.73%
0.71%
0.82%
1.02%
0.72%
0.63%
0.62%
1.65%
1.28%
055%
1.26%
0.88%
0.67%
1.07%
0.61%
1.17%
2.27%
0.83%
0.59%
0.52%
1.70%
2.27%
1.66%
0.96%
1.23%
2.36%
4.05%
1.96%
4.06%
7.39%
0.78%
1.15%
0.73%
1.48%
1.70%
1.06%
0.83%
0.51%
0.51%
0.60%
0.52%
1.21%
1.23%
0.82%
054%
1.14%
1.23%
0.56%
1.15%
1.78%

1461
1634
519
2076
2010
3777
2047
2929
1011
1585
2034
670
578
1798
2005
619
579
650
1561
1394
1639
1047
1104
808
2777
1863
943
2283
1753
513
654
1604
3281
1435
884
1097
3392
4867
1568
4313
8553
990
2397
943
1277
1555
1019
1797
623
576
854
628
973
1221
1179
511
3092
1282
645
1343
1596

The National Community Reinvestment Coalition 202-986-7898

93.59%
92.42%
93.51%
97.24%
94.01%
83.73%
92.54%
92.28%
95.56%
98.69%
94.74%
95.85%
93.38%
93.84%
98.77%
97.02%
95.23%
91.55%
93.08%
87.02%
95.40%
95.70%
89.03%
98.54%
95.73%
96.63%
96.92%
93.91%
90.50%
98.65%
96.04%
72.45%
95.57%
97.16%
96.30%
92.89%
94.85%
98.74%
95.90%
81.58%
92.66%
97.06%
89.21%
98.54%
97.41%
95.46%
94.44%
92.58%
99.36%
89.86%
93.64%
98.90%
96.34%
92.92%
95.47%
92.91%
86.27%
90.99%
87.76%
93.52%
93.39%

100
134
36
59
128
734
165
245
47
21
113
29
41
118
25
19
29
60
116
208
79
47
136
12
124
65
30
148
184
7
27
610
152
42
34
84
184
62
67
974
678
30
290
14
34
74
60
144
4
65
58
7
37
93
56
39
492
127
90
93
113

6.41%
7.58%
6.49%
2.76%
5.99%
16.27%
7.46%
7.72%
4.44%
1.31%
5.26%
4.15%
6.62%
6.16%
1.23%
2.98%
4.77%
8.45%
6.92%
12.98%
4.60%
4.30%
10.97%
1.46%
4.27%
3.37%
3.08%
6.09%
9.50%
1.35%
3.96%
27.55%
4.43%
2.84%
3.70%
7.11%
5.15%
1.26%
4.10%
18.42%
7.34%
2.94%
10.79%
1.46%
2.59%
4.54%
5.56%
7.42%
0.64%
10.14%
6.36%
1.10%
3.66%
7.08%
4.53%
7.09%
13.73%
9.01%
12.24%
6.48%
6.61%

12.46%
15.21 %
8.68%
12.46%
12.50%
33.10%
15.21%
13.35%
8.29%
3.50%
11.79%
16.42%
8.68%
16.80%
8.86%
12.35%
16.42%
15.21 %
11.79%
13.35%
33.10%
8.68%
9.33%
3.50%
16.37%
33.10%
6.86%
20.81%
16.80%
12.35%
8.29%
27.15%
12.46%
12.35%
16.42%
16.42%
12.46%
3.50%
6.86%
27.15%
13.35%
8.29%
16.80%
8.29%
12.35%
16.42%
11.79%
16.80%
3.50%
13.35%
12.46%
3.50%
6.86%
20.81%
12.46%
11.79%
33.10%
15.21%
27.15%
13.35%
16.42%

49

575

TABLE III. A.2

THE WORST LENDERS IN 1993: MARKETING TO MINORITIES

White
Minority
% of Minority
%of
Total Share of White
LENDER
MSA
Applications Applications Applications Applications Applications Applications
80
6.07%
1239
93.93%
1319
0.87%
Atlanta
FIRST LIBERTY BANK
4.72%
95.28%
29
615
586
0.60%
FIRSTUNION MORT. CORP.
Baltimore
35
703
95.26%
4.74%
738
0.85%
FIRSTUNION MORT. CORP.
Tampa
48
704
6.38%
752
0.60%
93.62%
FLAGSHIP FEDERAL SAVINGS BANK
SanDiego
285
721
71.67%
28.33%
Riverside
1006
0.77%
FLEETMORTGAGE CORP.
18
97.00%
3.00%
582
600
0.59%
Baltimore
FRANKLIN MORTGAGE CAPITAL
32
2.36%
1356
1324
97.64%
Dallas
1.53%
FRANKLIN MORTGAGE CAPITAL
93.14%
274
3992
3718
6.86%
1.70%
FRANKLINMORTGAGE CAPITAL
Washington
6.14%
688
45
93.86%
Baltimore
733
0.72%
GE CAPITAL MORTGAGE SERVICES
Boston
18
985
98.17%
GE CAPITAL MORTGAGE SERVICES
0.81 %
967
1.83%
167
2038
1871
91.81%
8.19%
0.75%
GE CAPITAL MORTGAGE SERVICES
Chicago
19
Dallas
4.05%
469
450
95.95%
GECAPITAL MORTGAGE SERVICES
0.53%
615
0.68%
652
94.33%
37
5.67%
Houston
GECAPITAL MORTGAGE SERVICES
5.91%
94.09%
54
Oakland
913
859
0.80%
GE CAPITALMORTGAGE SERVICES
230
3.40%
6755
3.40%
6525
96.60%
GE CAPITAL MORTGAGE SERVICES
Philadelphia
92.02%
269
7.98%
GE CAPITAL MORTGAGE SERVICES
3373
1.44%
3104
Washington
98.69%
1.31%
2402
32
2434
1.21%
GMACMORTGAGE CORPORATION OF P Minneapolis
1038
241
18.84%
1279
81.16%
GMAC MORTGAGE CORPORATION OF P Riverside
0.98%
1013
39
3.71%
Anaheim
1052
0.78%
96.29%
GNMORTGAGE
84.11%
545
15.89%
2884
GNMORTGAGE
3429
1.09%
Los Angeles
950
45
Oakland
905
95.26%
4.74%
GNMORTGAGE
0.83%
681
0.55%
636
45
6.61%
93.39%
SanDiego
GNMORTGAGE
741
29
770
96.23%
0.88%
3.77%
GREENTREE MORTGAGE COMPANY LP Tampa
98.78%
Detroit
1230
1215
15
1.22%
0.52%
GUARDIAN MORTGAGE COMPANY
748
690
58
Anaheim
92.25%
7.75%
HEADLANDS MORTGAGE COMPANY
0.55%
1300
144
90.03%
1444
9.97%
Oakland
1.26%
HEADLANDS MORTGAGE COMPANY
3174
3140
34
98.93%
1.07%
HEIGLMORT. & FINANCIAL CORP.
158%
Minneapolis
3017
34
3051
2.33%
98.89%
1.11%
HOME FEDERAL SAVINGS BANK OFM St. Louis
27
2986
1.49%
2959
99.10%
0.90%
HOMESTEAD MORTGAGE CORPORATION Minneapolis
564
529
35
6.21%
0.65%
93.79%
HORIZON SAVINGS BANK
Tampa
5265
HOUSEHOLD BANK
5605
2.06%
93.93%
340
6.07%
Chicago
1290
Riverside
1582
81.54%
IMPERIAL CREDIT INDUSTRIES
1.22%
292
18.46%
1456
118
1.36%
1338
91.90%
8.10%
INDEPENDENCE SAVINGS BANK
NewYork
1011
1053
42
96.01%
0.53%
3.99%
INTEGRAMORTGAGE COMPANY
Philadelphia
St. Louis
1006
991
98.51%
0.77%
15
JAMES B. NUTTER & COMPANY
1.49%
Boston
18
1441
1.18%
1423
98.75%
J.J. KISLAK MORTGAGE CORP.
1.25%
40
97.11%
1383
KEYCORPMORTGAGE INC.
2.89%
Nassau-Suffolk
1.66%
1343
4175
KNUTSONMORTGAGE CORPORATION Minneapolis
4143
32
0.77%
2.08%
99.23%
LAKELAND MORTGAGE CORP.
3393
1.69%
3358
98.97%
35
1.03%
Minneapolis
630
20
LEEDS FEDERAL SAVINGS & LOAN
Baltimore
610
96.83%
3.17%
0.62%
1266
92.02%
1165
101
Anaheim
LOAN AMERICA FINANCE CORP
0.93%
7.98%
1649
1527
92.60%
122
LOAN AMERICA FINANCE CORP
0.61%
7.40%
Chicago
1019
12
1007
LOAN AMERICA FINANCE CORP
0.51%
98.82%
1.18%
Minneapolis
3040
3078
38
1.55%
98.77%
MAIN LINE FEDERAL SAVINGS BANK
1.23%
Philadelphia
1589
76
1665
95.44%
4.56%
1.91%
MARGARETTEN & COMPANY
Tampa
1935
93
Phoenix
2028
95.41%
4.59%
1.45%
635
Baltimore
664
0.65%
95.63%
29
4.37%
MELLON BANK( MD)
1898
1673
88.15%
225
11.85%
0.81%
MELLON BANK ( MD)
Washington
475
Dallas
507
93.69%
32
MELLON MORTGAGE COMPANY
6.31%
0.57%
72
2066
96.52%
MELLONMORTGAGE COMPANY
Phoenix
1.47%
1994
3.48%
MERCANTILE BANK & TRUST
21
Dallas
1294
1273
98.38%
1.46%
1.62%
822
771
METMOR FINANCIAL
Phoenix
0.59%
93.80%
51
6.20%
METROBANK
Atlanta
760
733
96.45%
27
0.50%
3.55%
2338
METROPOLITAN SERVICE CORP.
Anaheim
2186
152
1.73%
93.50%
6.50%
METROPOLITAN SERVICE CORP.
2519
0.80%
2114
83.92%
405
16.08%
Los Angeles
METROPOLITAN SERVICE CORP.
687
Riverside
581
0.53%
84.57%
106
15.43%
MICAL MORTGAGE
Riverside
2136
71.11%
617
1.64%
1519
28.89%
2788
2647
MIDCOASTMORTGAGE CORPORATION Nassau-Suffolk
3.34%
141
94.94%
5.06%
MIDLAND FINANCIAL MORTGAGES
2330
2189
0.86%
141
93.95%
6.05%
Chicago
1388
MIDLAND FINANCIAL MORTGAGES
St. Louis
1373
1.06%
15
1.08%
98.92%
Houston
552
MITCHELL MORTGAGE COMPANY
0.58%
95.29%
26
526
4.71%
1153
0.76%
MTVERNON FEDERAL SAVINGS BANK Atlanta
1069
92.71%
7.29%
84
50

MSA
Minority
Average
12.46%
11.79%
8.68%
13.35%
27.15%
11.79%
12.35%
16.80%
11.79%
3.50%
16.37%
12.35%
16.42%
15.21%
8.86%
16.80%
1.69%
27.15%
12.50%
33.10%
15.21%
13.35%
8.68%
7.38%
12.50%
15.21%
1.69%
8.29%
1.69%
8.68%
16.37%
27.15%
20.81%
8.86%
8.29%
3.50%
6.86%
1.69%
1.69%
11.79%
12.50%
16.37%
1.69%
8.86%
8.68%
9.33%
11.79%
16.80%
12.35%
9.33%
12.35%
9.33%
12.46%
12.50%
33.10%
27.15%
27.15%
6.86%
16.37%
8.29%
16.42%
12.46%

The National Community Reinvestment Coalition · 202-986-7898

576

TABLE III.A.2

THE WORST LENDERS IN 1993: MARKETING TO MINORITIES

LENDER

MSA

NAVY FEDERAL CREDIT UNION
NBD MORTGAGE COMPANY
NORTH AMERICAN MORTGAGECO
NORWEST MORTGAGE
OLD COLONY MORTGAGE CORPORATIO
PEOPLES WESTCHESTER
PHILADELPHIA MORTGAGE CORP.
PIB MORTGAGECOMPANY
PIB MORTGAGE COMPANY
PINE STATE MORTGAGE CORPORATIO
PINNACLE MORTGAGE INVEST. CORP
PNC MORTGAGECORP. OF AMERICA
PNCMORTGAGE CORP. OF AMERICA
PRINCIPAL MUTUAL LIFE INS CO
PROGRESS FEDERAL SAVINGS BANK
PROGRESSIVE SOUTHERN MORTGAGE

Washington
Chicago
Philadelphia
Atlanta
Boston
New York
Philadelphia
Anaheim
Oakland
Atlanta
Philadelphia
Los Angeles
New York
Chicago
Philadelphia
Dallas
New York
Riverside
SanDiego
Baltimore
Detroit
St. Louis
Nassau-Suffolk
Phoenix
Nassau-Suffolk
Detroit
Nassau-Suffolk
New York
Anaheim
Oakland
SanDiego
New York
Detroit
Houston
Tampa
Washington
Anaheim
Tampa
Philadelphia
Detroit
Phoenix
Detroit
Boston
Houston
Phoenix
Boston
Tampa
Nassau-Suffolk
LosAngeles
Nassau-Suffolk
Philadelphia
St. Louis
Boston
Detroit
Anaheim
Atlanta
Baltimore
Boston
Chicago
Dallas
Houston
Los Angeles

PROVIDENT SAVINGS BANK
PROVIDENT SAVINGS BANK
REISTERSTOWN FEDERAL SAVINGS B
REPUBLIC BANK
REPUBLIC BANK
REPUBLIC BANK FOR SAVINGS
RIDGEWOOD SAVINGS BANK
ROCK FINANCIAL CORPORATION
ROOSEVELTSAVINGS BANK
ROOSEVELT SAVINGS BANK
RSLMORTGAGE CORPORATION
RYLAND MORTGAGE COMPANY
SAN DIEGO FUNDING
SIBLEYMORTGAGE CORPORATION
SOURCE ONEMORTGAGE
SOURCE ONEMORTGAGE
SOURCE ONEMORTGAGE
SOURCE ONE MORTGAGE
SOUTHTRUSTMORTGAGE CORP.
SOVEREIGN BANK. A FED SAVINGS
STANDARD FEDERALBANK
STATE SAVINGS BANK
ST.JAMES SERVICING CORP
SUBURBAN MORTGAGE CO.
SUNBELTNATIONALMORTGAGE CORP
SUNBELTNATIONAL MORTGAGE CORP
SUNCOASTSAVINGS & LOAN ASSOC.
SUNCOAST SAVINGS & LOAN ASSOC.
SUNRISE FEDERAL SAVINGSBANK
TEMPLE-INLAND MORTGAGE CO.
TEMPLE-INLAND MORTGAGE CO.
THE BRYN MAWR TRUST CO.
THE COLONIAL BANK
THE HUNTINGTON MORTGAGE CO
THE HUNTINGTON MORTGAGE CO
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGEC
THE PRUDENTIAL HOME MORTGAGEC
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIALHOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C
THE PRUDENTIAL HOME MORTGAGE C

White
Minority
%of
Minority
%of
Share of White
Total
Applications Applications Applications Applications Applications Applications
4862
88.22%
649
11.78%
5511
2.35%
132
4700
4832
1.78%
97.27%
2.73%
20
1215
0.61%
1195
98.35%
1.65%
90
1553
1643
94.52%
1.09%
5.48%
7
867
860
0.71%
0.81%
99.19%
1574
1.47%
93.33%
105
1469
6.67%
3128
98.33%
53
1.60%
1.67%
3181
74
7.85%
943
869
92.15%
0.70%
9.76%
932
841
91
0.82%
90.24%
96
1093
91.93%
1189
0.79%
8.07%
2583
2633
1.32%
50
1.90%
98.10%
298
19.10%
1560
1262
0.50%
80.90%
76
0.63%
598
88.72%
11.28%
674
3057
206
3263
1.20%
93.69%
6.31%
1003
985
98.21%
18
1.79%
0.50%
639
48
0.72%
591
92.49%
7.51%
750
706
44
5.87%
94.13%
0.70%
1351
209
15.47%
1142
1.04%
84.53%
1014
0.81%
9