Building Wealth: Bringing Banks to the Table with Community Power

October 30, 2012

Building Wealth: Bringing Banks to the Table with Community Power

Membership and Organizing Department, NCRC

Agenda: Welcome 2:00-2:02 p.m. Introductions of Speakers 2:02-2:04 p.m.Webinar Topics & Etiquette 2:04-2:08 p.m.Building Wealth: Bringing Banks to the Table with

Community Power 2:08-3:05 p.m.Questions and Answers 3:05-3:25 p.m.Adjourn 3:25 p.m.

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Presenters

The Department of Membership & Organizing connects our members to NCRC’s national advocacy opportunities and supports members in local organizing to hold financial institutions accountable to investing in low and moderate income communities. NCRC’s Regional Organizers come from a variety of organizing backgrounds, including union, political, and congregation based community organizing.   

Josh Silver, Vice President of Research and PolicyJesse Van Tol, Director of Membership & OrganizingErika Kuester Galloway, Organizing ManagerRamon Bullard, Southeast Regional OrganizerMakia Burns, Midwest Regional OrganizerCaitie Rountree, Northeast Regional Organizer

Holding Banks Accountable in Pittsburgh

Ernie HoganNCRC Board MemberExecutive DirectorPittsburgh Community Reinvestment Group

Case Study in Building Power

Mark SeifertNCRC MemberExecutive DirectorEmpowering and Strengthening Ohio’s People (ESOP)

An Overview of CRA

Ramon Bullard, Regional Organizer

Building Wealth

The Community Reinvestment Act (CRA) is a law which requires banks to meet the credit needs of credit worthy borrowers and businesses in low and moderate income communities.

What is CRA?

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The Community Reinvestment Act (CRA) establishes an affirmative obligation for banks to meet the credit needs of credit worthy borrowers and businesses in low- and moderate-income communities. It says that they must serve working class and disadvantaged communities. The act itself is a recognition that banks are an important ingredient in the health and vibrancy of neighborhoods and communities.

The Community Reinvestment Act

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• The benefits are clear and impressive: Since passage in 1977, it is estimated that there have been more than 6 trillion dollars in CRA agreements.

• A study done by Federal Reserve economists found that CRA agreements increased bank lending to minorities and LMI borrowers by 20 percent.

Impact of CRA

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• Every 2-5 years banks are examined by their federal bank regulators, the Office of the Comptroller of Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), depending on the charter of the bank.

• The bank gets a grade. This grade can be very important to the bank. Some banks take this process very seriously.

How Does CRA Work?

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• Banks are rated on the extent to which they are meeting community needs.

• Examinations typically take 3-6 months for small and medium size banks; longer for large national banks.

• Possible scores are Outstanding, Satisfactory, Needs-to-Improve or Substantial Non-compliance.

How CRA Exams Work

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1.Lending- Ex. Home Loans to LMI borrowers

2.Investment-Ex. Grants, LIHTC

3.Service- Ex. Branch locations

Exam Components

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• Public comments are particularly important when a bank applies to its regulator to acquire or merge with another bank.

• Regulators can deny mergers (rare) or approve them with conditions (sometimes) or simply approve (most common).

Mergers and Acquisitions

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• Fair Lending Review in CRA• Home Mortgage Disclosure Act (HMDA)• Fair Housing Act• Equal Credit and Opportunity Act (ECOA)• Dodd-Frank Coordination

Important CRA Related Legislation

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“Full responsibility for CRA

enforcement has always been the

job of people in the neighborhoods. When we wanted

agreements, we had to do research,

demand data, solicit banks, develop

products and direct outreach to the

borrowers.”-- Gail Cincotta

CRA Works When You Do

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• Regulators are required to take public comments into account on exams.

• Community based organizations are uniquely positioned to understand whether banks are meeting the community’s needs.

• When you comment, you are working to build the wealth in the communities you serve.

Community Involvement

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• CRA coalitions are an effective way to bring wealth to your community and alter the balance of power.

• Multiple community organizations commenting on a bank’s exam can significantly affect their rating.

• Commenting on exams can also lead to CRA agreements regarding improved products and services or alter bad practices.

Coalitions

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• Info on examinations,

• Finding past CRA exams,

• Analyze data on bank performance,

• Help draft CRA comment letter;

• And much more!

How NCRC Can Help

Building Community Engagement Around CRA

Erika Galloway, Organizing Manager

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The Community Reinvestment

Act’s most powerful

enforcement mechanism is

YOU!

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• Vehicles to build power and organize.

• Alter balance of power in community.

• Means to build wealth in LMI communities through enforcement of CRA.

CRA Coalitions

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Possible objectives for a successful collaboration may include:

• Enforce CRA• Increase lending activity• Responsible Banking Ordinances• Public comments

Define, Understand and Stand by Your Mission and Objectives

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Possible Interests in CRA Enforcement:

• Serve low-and-moderate income communities • Increase small business lending in communities• Fairness / Public Benefits

Coalition Partners – Self Interest

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• Investment in a community• Credit for low-and-moderate-income communities• Homeownership• Improve neighborhoods by providing more buyers for

housing on the market.

Coalition Partners – Self Interest

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• Community Development Corporations• CDFI’s• Community Organizations • Fair Housing Centers• Housing Counseling Agencies• Neighborhood Associations• Faith-Based Groups

Possible Coalition Partners

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Community development examples on CRA exams include:• Low Income Housing Tax Credits Housing Counseling• Individual Development Accounts• Loans to CDFIs• Investments in Small Business Investment Corporations• Support for community facilities

CRA activity benefits ALL neighborhoods. Look at CRA exams for your local banks to see activities and examples that can benefit your community.

What programs count on a CRA exam?

Case Study in Building Power

Mark Seifert, Executive DirectorEmpowering and Strengthening Ohio's People (ESOP)

Building Wealth

0

50

100

150

200

250

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 12 Mos-2005

Source: Inside Regulatory Strategies

Needs to Improve & Non-Compliance Rated Banks by Regulator, 1995-2005

(Stacked Line)

OCC

FRB

OTS

FDIC

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By 2005 the Dual Mortgage Market received unofficial legal sanction from federal regulators:

Prime Loans for Whites -- Subprime Loans for Blacks

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Points to Remember:

1.Technically Race is not a CRA issue, only Income categories are covered.

2.However, Race is covered by Fair Housing laws, and Race can be used to create “reputational risk” for banks

3.HMDA data is important to understand and use (know the enemy), but the banks and regulators will ALWAYS dismiss HMDA evidence as misleading and/or irrelevant.

4.HMDA data will include Race lending breakouts (see 2. above)

5.Don’t expect media coverage, fight for it.

Points of Leverage

Caitie Rountree, Regional Organizer

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• Timely comments influence CRA rating.

• Banks gradually shift lending patterns.

• Amplify comments via coalitions.

Comments

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Mergers and Acquisitions

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A new opportunity for accountability in a post-recession economy…

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Los AngelesNew York City

ClevelandPhiladelphiaPittsburghSan Diego

Responsible Banking Ordinances

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• Town Hall Meetings• Direct Public Action• Letters to the Editor• Opinion Editorial Pieces

Build Pressure to Leverage Power

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WANTED: “A community bank in the North Shore is looking for a Senior Compliance Officer with banking experience to join their team. Senior Compliance Officer is responsible for developing, implementing and administering all aspects of the bank's Compliance Management Program. Salary: up to $100,000 (depending on experience).”

CRA Officers

Holding Banks Accountable in Pittsburgh

Ernie HoganNCRC Board MemberExecutive DirectorPittsburgh Community Reinvestment Group

Resources and Next Steps

Makia Burns, Regional Organizer

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• NCRC Organizing Toolkit (coming soon)- toolkit gives an overview of CRA and organizing strategies you can implement to address lack of bank involvement in your community.

• NCRC Model Local Responsible Banking Ordinance – assists community groups with starting a banking ordinance.

• NCRC Matrix of Local Responsible Banking Ordinances – Summary of local banking ordinances from across the country.

Resources

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NCRC CRA Manual - how-to book for community organizations and any other stakeholder wishing to become engaged in the CRA process and economic building activities for low and moderate-income communities.

Keeping Banks Accountable to Our Communities: Report from a National Convening on Local Responsible Banking Ordinances – Guidebook for cities seeking to pass a local banking ordinance or strengthen an existing law.

Resources

Building Wealth

• NCRC pro bono data analysis – Get the most current home, small business or branch data for banks in your community. Get help in looking over CRA exams. Build in two to three weeks for turn-around time.

• Federal Financial Institutions Examination Council (FFIEC) - Visit website to view schedule of CRA exams and access a copy of past examinations. www.ffiec.gov

• Consumer Financial Protection Bureau (CFPB) – Educates consumers, monitors and enforces Federal consumer financial laws. www.consumerfinance.gov

Visit www.ncrc.org to access other research and reports.

Resources

Torey Hollingsworth

Makia Burns

Caitie

Rountree

Ramon Bullard

Building Wealth

Contact Your Regional Organizer

Director of Membership & Organizing

Jesse Van Tol

(202) 464-2709

jvantol@ncrc.org

Organizing Manager

Erika Kuester-Galloway

(202) 464-2723

egalloway@ncrc.org

Southeast Regional Organizer

Ramon Bullard

(202) 524-4877

rbullard@ncrc.org

Midwest Regional Organizer

Makia Burns

(202) 383-7701

mburns@ncrc.org

Pacific West Regional Organizer

Torey Hollingsworth

(202) 383-7719

thollingsworth@ncrc.org

Northeast Regional Organizer

Caitie Rountree

(202) 464-2727

crountree@ncrc.org

Membership & Data Coordinator

Adam Gosney

(202) 464-2724

agosney@ncrc.org

www.ncrc.org

Questions and Discussion