CRA & Building Community Wealth Webinar | 11.29.12


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  • Josh or Jessie
  • CRA was enacted in 1977 in response to redlining, or the refusal to lend in certain neighborhoods. During this time banks would take a pen and draw a line around neighborhoods and refuse to lend to borrowers or businesses in those neighborhoods. It applies only to deposit taking institutions, in part based on the rationale that they receive a public benefit in the form of government insurance so they have a responsibility reinvest in their communities.
  • USE SLIDE From 1993 through 2002 home mortgage lending increased 79.5% to African Americans, 185.5% to Hispanics and 90.6% to low-income borrowers. Note that this lending all took place before the sub-prime lending crisis later in the 2000’s. Also make note about the fact that smaller percentage of loans defaulted were CRA loans.
  • Which regulator oversees a bank is determined by the bank’s charter. Note: Small banks under $250 million have a 4 to 5 year schedule.The bank gets a grade. This grade can be very important to the bank (more on that later). Many banks take this process very seriously; their reputations are on the line.
  • Because of grade inflation 98% of banks pass (satisfactory or higher) their CRA exams.
  • These are the main areas of examination:Lending: How is the bank meeting the lending needs of LMI communities and small businesses in their assessment areas? Investment: How is the bank investing in LMI communities? (Note: The smallest banks don’t have an investment test). (Identified a need and met the need) Service: How is the bank meeting the needs for branches, deposits and other products for low- moderate-income communities?
  • The public has 30 days after submission of the application to comment. The public can ask for extensions of comment period and hearings. For example on Capital One there were three national hearings and the comment period was extended from one month to about three months. Mergers can also lead to detailed CRA agreements outlining specific commitments by the bank in your community. These agreements can be formal and included in the merger decision or informal and stated public in an agreement between the bank and community orgs.
  • Even though CRA was created in part in response to discrimination the law does not measure use lending to ethnic or racial minorities in determining a bank’s grade. However, during each CRA exam regulators conduct a fair lending review. Any reported violations can significantly lower a bank’s rating. An important piece of companion legislation to CRA is the Home Mortgage Disclosure Act or HMDA as it is commonly know. This legislation which was passed in 1975 provides the public with key data on bank performance including lending to ethnic and racial minorities. Two other important pieces related to HMDA are the Fair Housing Act and the Equal Credit and Opportunity Act or ECOA. Using HMDA data community organizations can point to areas which may violate either the Fair Housing Act or ECOA. Currently NCRC is running into issues with Dodd-Frank coordination of the fair lending laws. We continue to work with the CFPB and bank regulators to make sure that these fair lending reviews are conducting in a coordinated manner.
  • CRA scores are taken into account when a bank applies to acquire or merge with another bank. CRA is most effective when community organizations are involved. Far to often there is grade inflation on exams and no community organizations comment. If no one comments banks don’t take CRA as seriously and consistently will pass exams even though they are not meeting the community’s needs. Also, if not one comments regulators will not which areas to focus on when reviewing a bank’s CRA performance. This makes CRA an effective tool for community empowerment.
  • NCRC model for CRA advocacy are CRA coalitions. We support coalitions across the country including in Pittsburgh, Chicago, St. Louis and South Florida. For example later on in the presentation Ernie Hogan from Pittsburgh will talk about the agreement they achieved with PNC.
  • NCRC is the only national organization in the country that supports CRA coalitions. We are here to help you comment on exams and bring more wealth to your community through CRA. NCRC can help you by:Finding out which banks are up for examination, which regulator oversees your bank and examiner will be overseeing the bank’s exam;Finding a past CRA exam for your bank;Analyzing data on the bank’s performance;Helping you draft a CRA comment letter;Connecting you with other members and advocates in your area;Working on media strategies and bank engagement strategies with you.Offering trainings to you, your colleagues and other coalition members; andIn a host of other ways!Now Erika will talk about partnering with local stakeholders to build community power.
  • To ensure that banks are meeting the obligation imposed by CRA, community organizations and community members must be paying attention to a banks lending, investment, and service practice. No one person or organization can effectively police all banks operating within a community. There is strength and power in numbers.
  • Coalitions are ways to build power and organize individuals and organization to action. A successful coalition can alter the balance of power in a community. Instead of merely reacting to the policies or practices of a bank, a powerful coalition organizing around CRA principals can build a community that benefits from banks doing business within them.
  • Even the most informal of collaborations can benefit from a clearly stated mission and desired outcomes of a campaign. SEE SLIDE. Objectives may be broadly stated or may be limited to achieving a very limited purpose. What is most important is that there is something for which all partner organization can commit. It maybe helpful to form a steering group of representatives from various potential partner organizations to determine mission, objectives, and strategy. This has the advantage of being a demonstrably collaborative community effort from the outset.
  • Trust and mutual interest are key to building relationship with other organization and individuals. One on ones will be important to identify mutual interests and build trust with the other group or individual.
  • Trust and mutual interest are key to building relationship with other organization and individuals. One on ones will be important to identify mutual interests and build trust with the other group or individual.
  • It is important to identify and approach groups that will share in these interested. The amount of groups is less important than the quality of groups. Try and look for partners that will be most helpful in advancing a campaign. Groups track record and reputation matters and should be taken into consideration along with their willingness to commit. Also, look to have a variety of groups from every sector and every neighborhood.
  • We’ve talked about what CRA is and how it gives community organizations a seat at the table with banks, and we’ve talked about engaging stakeholders to amplify your impact. Now we want to shift our attention to community action: how to actually use CRA to get what you want for your community.Federal agencies examine and rate banks– but examinations are a snapshot. Community engagement is the strongest enforcement mechanism of the CRA. This makes sense: it is community members that are interacting with and doing business with the banks in their community on a daily basis. You are equipped with first-hand knowledge about the implications of a bank’s practices within your communities. Community experience can point agencies in certain directions, can influence decisions whether to approve applications to merge or expand services, and can influence a bank to modify its practices. So what does that look like?
  • Timely comments can influence a bank’s CRA rating by directing examiners to particular areas of strength or weakness in a bank’s lending, investments, or services in low- and moderate-income neighborhoods. A community group’s comment can have an influence on the overall CRA rating for a state or one of the tests on the CRA exam. Even changing a rating from an “Outstanding” to “Satisfactory” in one state or one part of the exam can motivate a bank to increase the number of loans, investments, and services to low- and moderate-income communities. On a quarterly basis, NCRC publishes a list of scheduled CRA examinations. Members can also contact their Regional Organizer to learn about upcoming examinations. As many of you know, banks are not going to call you up to let you know that they are up for their next CRA exam; the onus is on community organizations to keep track of when banks of interest are being tested.Many of our members routinely comment on CRA exams and have watched banks gradually shift lending patterns or quality of service over time as a response to those comments. NCRC members sometimes tell us that when they first started commenting, banks were a bit surprised to see somebody weighing in on bank performances in low and moderate-income neighborhoods, but that now, those same banks rely on the community organizations for this analysis. Commenting in coalition amplifies the impact of the comment, and in many cases lends further credibility to the comments themselves. A group of organizations working together to comment will have a fuller picture of the bank’s performance. Erika talked about the different stakeholders you can convene to organize around CRA; commenting en mass is a great opportunity to make your coalition’s power felt.
  • Most community organizations find that, without community input, bank mergers and acquisitions tend to be bad news for communities. It frequently means that local banks will have less autonomy about community investments and adds new layers of red tape to getting answers or decisions made. Often banks will reduce the amount of financial support given to community organization projects and programs like housing counseling as they reorganize and reprioritize. Federal agencies must approve mergers and acquisitions. Even though the vast majority of merger applications are approved, the agency can still indicate in the approval order that the bank should improve in an area of weakness or extend the stronger bank’s performance in areas serviced by the other bank. NCRC’s campaign against Capital One’s latest acquisition of ING Direct & of HSBC’s subprime credit card portfolio is a great example of this. We knew that the acquisition was not going to be dismissed, but that low and moderate income communities were going to suffer because of it. Our members dragged the acquisition out over 8 months and forced Capital One to agree to dedicate $180 billion towards community reinvestment lending and investments. NCRC could not have negotiated this merger on it’s own, but by acting in coalition, we won a huge victory that will impact communities across the country. Capital One is one of the largest banks in the country, and it took a large, coordinated effort from NCRC members all over the countries. While taking on the biggest banks in the country may seem like an ambitious campaign for a forming coalition, NCRC regional organizers are working successfully with our members on an on-going basis to comment in coalition on mid-size regional and local banks as they seek to expand through mergers or acquiring other banks. Commenting on mergers can ensure that communities don’t suffer at the expense of an expanding bank.
  • When the economy crashed and the federal government bailed out banks in order to prevent further instability, it highlighted the dangers of reckless expansion.The recession made it very clear that aggressive bank mergers can be dangerous for everyone. The new Dodd-Frank law aims to prevent tax payers from having to pay for banks’ mistakes in the future and requires the agencies to explicitly evaluate the benefits and costs of mergers. Benefits include increased lending, more investments, and better bank services. Costs include increases in systemic risk and decreases in the overall level of competition. The law is intended to force banks to prove that their merger or acquisition will benefit and not harm the public, but the truth is, this is a fairly new piece of legislation and, if we don’t set the bar high early on, banks will do what they can to avoid the rigorous application of this law. Using the new benefit /cost requirement, community organizations should ask banks to be specific about planned increases in responsible lending, investment, and bank services.
  • A responsible banking ordinance is local or state legislation; in some ways, it is a more local version of CRA. NCRC members have worked in coalitions to pass responsible banking ordinances all over the country. This is common sense-legislation that leverages one of the biggest depositories in any city…government money. All power comes from one of 2 sources: organized people or organized money. Responsible banking ordinances use both to make sure that banks are good stewards of community wealth. This is a very local solution to the economic problems facing communities across the nation. As you can see, a diverse group of cities have begun to use responsible banking ordinances to get banks to compete to best serve their communities. This list is by no means exhaustive, and every few weeks, we’re hearing of another city working on legislation for a responsible banking ordinance. Really, everybody should be doing this. NCRC has a model ordinance and matrix available for use by our members on our webpage.
  • Letters to the Editor/Opinion Editorial Pieces. These campaigns can be useful in raising public awareness around an issue. Additionally, they can spark media interest in your campaign, which can be leveraged as an additional source of pressure to accomplish objectives. Letters to the editor are most powerful if many different community organizations and individuals submit similar, but not identical, letters. Op-Ed pieces may be signed by many strategically selected community organizations and members.Town Hall Meetings. Organizing a town hall meeting with community elected officials can be a great way to build unity amongst community organizations. These meetings can be structured around discussion of the strength of local CRA enforcement. Question and answer sessions can be allowed to flow organically, or can be organized so that participants ask questions tailored to point to the need for a greater local commitment to CRA principles, including the possibility of a local CRA ordinance.Direct Public Action. A direct public action is a carefully organized meeting with large numbers of community members in attendance, typically seeking accountability from a community decision-maker. These meetings are powerful tools to secure public commitments from decision-makers (often elected officials) to implement solutions to community problems. A direct public action requires careful planning, advance research and negotiation, and the ability to engage and prepare a large number of community members, but the pay off for this amount of preparation can be substantial.
  • I pulled the want-ad on your screen off a job-search site earlier this week, because I think it’s very important for us as community organizations to be savvy about the role of CRA officers.First and foremost, a CRA officer is a bank employee. They’ve been hired to make sure the bank doesn’t get in trouble by not complying with CRA. Especially if you are just beginning to build a relationship with the banks in your community around their CRA commitments, you may find yourself first meeting with a CRA officer instead of the decision makers at a bank.You may be able to enlist a CRA officer as an ally who can influence decision makers at a bank, or who can help you understand a bank’s plans or hierarchy.However, you should go into those conversations with your own data and with the support of other community organizations. Because a CRA officer is a bank employee, it’s in their best interest to make their bank look good in the community. Don’t settle! Many CRA officers are used to meeting with community organizations and offering them a couple thousand dollars of “support,” instead of negotiating how many more home loans the bank will do in low-income neighborhoods in the next 3 years!
  • CRA & Building Community Wealth Webinar | 11.29.12

    1. 1. Building Wealth: Bringing Banks to the Table with Community Power October 30, 2012
    2. 2. Building Wealth: Bringing Banks to the Table withCommunity PowerMembership and Organizing Department, NCRC
    3. 3. 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 withCommunity Power 2:08-3:05 p.m.Questions and Answers 3:05-3:25 p.m.Adjourn 3:25 p.m.
    4. 4. Did you know?When you put us on hold, we can hear your music.
    5. 5. Please mute your phone by pressing *6To mute your computer click the green microphone Questions or comments, type them here
    6. 6. PresentersThe Department of Membership & Organizing connects our members toNCRC’s national advocacy opportunities and supports members in localorganizing to hold financial institutions accountable to investing in low andmoderate income communities. NCRC’s Regional Organizers come from avariety of organizing backgrounds, including union, political, andcongregation 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
    7. 7. Holding BanksAccountable in PittsburghErnie HoganNCRC Board MemberExecutive DirectorPittsburgh Community Reinvestment Group
    8. 8. Case Study in BuildingPowerMark SeifertNCRC MemberExecutive DirectorEmpowering and Strengthening Ohio’sPeople (ESOP)
    9. 9. An Overview of CRARamon Bullard, Regional Organizer
    10. 10. Building WealthWhat is CRA?The Community Reinvestment Act(CRA) is a law which requires banks tomeet the credit needs of credit worthyborrowers and businesses in low andmoderate income communities.
    11. 11. Building WealthThe Community Reinvestment ActThe Community Reinvestment Act (CRA)establishes an affirmative obligation forbanks to meet the credit needs of creditworthy borrowers and businesses in low- andmoderate-income communities. It says thatthey must serve working class anddisadvantaged communities. The act itself isa recognition that banks are an importantingredient in the health and vibrancy ofneighborhoods and communities.
    12. 12. Building WealthImpact of CRA• 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.
    13. 13. Building WealthHow Does CRA Work?• 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.
    14. 14. Building WealthHow CRA Exams Work• 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.
    15. 15. Building WealthExam Components1.Lending- Ex. Home Loans to LMI borrowers2.Investment-Ex. Grants, LIHTC3.Service- Ex. Branch locations
    16. 16. Building WealthMergers and Acquisitions• 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).
    17. 17. Building WealthImportant CRA Related Legislation•Fair Lending Review in CRA•Home Mortgage Disclosure Act (HMDA)•Fair Housing Act•Equal Credit and Opportunity Act (ECOA)•Dodd-Frank Coordination
    18. 18. Building Wealth CRA Works When You Do “Full responsibility for CRA enforcement has always been the job of people in the neighborhoods. When wewanted agreements, we had to do research, demanddata, solicit banks, develop products and directoutreach to the borrowers.” -- Gail Cincotta
    19. 19. Building WealthCommunity Involvement• 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.
    20. 20. Building WealthCoalitions• 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.
    21. 21. Building WealthHow NCRC Can Help • Info on examinations, • Finding past CRA exams, • Analyze data on bank performance, • Help draft CRA comment letter; • And much more!
    22. 22. Building Community Engagement Around CRAErika Galloway, Organizing Manager
    23. 23. Building Wealth The Community Reinvestment Act’s most powerful enforcement mechanism is YOU!
    24. 24. Building WealthCRA Coalitions• Vehicles to build power and organize.• Alter balance of power in community.• Means to build wealth in LMI communities throughenforcement of CRA.
    25. 25. Building WealthDefine, Understand and Stand by YourMission and ObjectivesPossible objectives for a successful collaborationmay include:•Enforce CRA•Increase lending activity•Responsible Banking Ordinances•Public comments
    26. 26. Building WealthCoalition Partners – Self InterestPossible Interests in CRA Enforcement:• Serve low-and-moderate income communities• Increase small business lending in communities•Fairness / Public Benefits
    27. 27. Building WealthCoalition Partners – Self Interest• Investment in a community•Credit for low-and-moderate-income communities•Homeownership•Improve neighborhoods by providing more buyers forhousing on the market.
    28. 28. Building WealthPossible Coalition Partners• Community Development Corporations• CDFI’s• Community Organizations• Fair Housing Centers• Housing Counseling Agencies• Neighborhood Associations• Faith-Based Groups
    29. 29. Building WealthWhat programs count on a CRA exam?Community development examples on CRA examsinclude:• Low Income Housing Tax Credits Housing Counseling• Individual Development Accounts• Loans to CDFIs• Investments in Small Business Investment Corporations• Support for community facilitiesCRA activity benefits ALL neighborhoods. Look atCRA exams for your local banks to see activities andexamples that can benefit your community.
    30. 30. Case Study in Building PowerMark Seifert, Executive DirectorEmpowering and Strengthening Ohios People (ESOP)
    31. 31. Building Wealth Needs to Improve & Non-Compliance Rated Banks by Regulator, 1995-2005 (Stacked Line) 250 OCC FRB 200 OTS FDIC 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 12 Mos- 2005 Source: Inside Regulatory Strategies
    32. 32. Building Wealth By 2005 the Dual Mortgage Market received unofficial legal sanction from federal regulators: Prime Loans for Whites -- Subprime Loans for Blacks
    33. 33. Building Wealth 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.
    34. 34. Points of LeverageCaitie Rountree, Regional Organizer
    35. 35. Building Wealth Comments• Timely commentsinfluence CRA rating.• Banks gradually shiftlending patterns.• Amplify comments viacoalitions.
    36. 36. Building WealthMergers and Acquisitions
    37. 37. Building WealthA new opportunity for accountability in apost-recession economy…
    38. 38. Building WealthResponsible Banking Ordinances Los Angeles New York City Cleveland Philadelphia Pittsburgh San Diego
    39. 39. Building Wealth Build Pressure to Leverage Power•Town Hall Meetings•Direct Public Action•Letters to the Editor•Opinion Editorial Pieces
    40. 40. Building Wealth CRA OfficersWANTED: “A community bank in the NorthShore is looking for a Senior Compliance Officerwith banking experience to join their team. SeniorCompliance Officer is responsible for developing,implementing and administering all aspects of thebanks Compliance Management Program.Salary: up to $100,000 (depending onexperience).”
    41. 41. Holding BanksAccountable in PittsburghErnie HoganNCRC Board MemberExecutive DirectorPittsburgh Community Reinvestment Group
    42. 42. Resources and Next StepsMakia Burns, Regional Organizer
    43. 43. Building WealthResources• 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.
    44. 44. Building WealthResourcesNCRC CRA Manual - how-to book for communityorganizations and any other stakeholder wishing to becomeengaged in the CRA process and economic buildingactivities for low and moderate-income communities.Keeping Banks Accountable to Our Communities:Report from a National Convening on Local ResponsibleBanking Ordinances – Guidebook for cities seeking topass a local banking ordinance or strengthen an existinglaw.
    45. 45. Building WealthResources• 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.• Consumer Financial Protection Bureau (CFPB) – Educates consumers, monitors and enforces Federal consumer financial laws. www.consumerfinance.govVisit to access other research and reports.
    46. 46. Building WealthContact Your Regional Organizer Torey Makia Burns Hollingsworth Ramon Bullard Director of Membership & Organizing Manager Southeast Regional Midwest Regional Pacific West Regional Northeast Regional Membership & Data Organizing Organizer Organizer Organizer Organizer Coordinator Erika Kuester- Jesse Van Tol Galloway Ramon Bullard Makia Burns Torey Hollingsworth Caitie Rountree Adam Gosney (202) 464-2709 (202) 464-2723 (202) 524-4877 (202) 383-7701 (202) 383-7719 (202) 464-2727 (202) 464-2724
    47. 47.
    48. 48. Questions and Discussion