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FDIC Federal Register Citations

Office of Rural and Farmworker Housing

From: Brien Thane [mailto:brient@orfh.org]
Sent: Monday, October 18, 2004 12:29 PM
To: Comments
Cc: 'Marty Miller'
Subject: Community Reinvestment -- RIN 3064-AC50

October 18, 2004

Robert E. Feldman, Executive Secretary
AATN: Comments/Legal ESS
Federal Deposit Insurance Corporation

RE: Federal Deposit Insurance Corporation proposed rulemaking, RIN 3064-AC50

Greetings:

The Office of Rural and Farmworker Housing (ORFH) opposes the proposed revisions to 12 CFR 345 regarding the Community Reinvestment Act (CRA). We also oppose the options outlined in the proposed rulemaking, but support adding rural areas to the definition of ‘community development’ with safeguards to ensure benefit to low-income and minority individuals. The proposed revisions, with the exception of adding rural areas to the ‘community development’ definition, would significantly undermine the intent of the Community Reinvestment Act, reduce private investment in community development and subvert the Administration’s stated goals of alleviating homelessness and increasing home ownership. The value of the current regulations to low-income and minority persons and communities far outweighs the benefits to lending institutions of any regulatory relief.

ORFH is a 501(c)3 organization that develops affordable housing for farm workers and other low-income residents of Washington State. The current CRA regulations have been essential to the successful development of affordable housing and other community development efforts throughout this state. The regulations have encouraged a broad range of lending institutions to participate in community development through purchasing Low Income Housing Tax Credits, providing creative financing and flexible underwriting, making grants to community development organizations and conducting outreach to low-income and minority communities. These community development activities have enabled many organizations to significantly leverage scarce public investments in affordable housing.

Changing the definition of ‘small bank’ to the asset threshold of $1 billion would exempt 31 banks in Washington State from the CRA standards for large banks, reducing the number of ‘large banks’ in this state by 74%. We are very concerned that this will result in many of these banks curtailing or eliminating their community development activities. Most lending institutions did not participate in community development activities before CRA was implemented.

We particularly oppose removing the holding company threshold from the definition of small bank. This will further reduce the number of institutions subject to the large bank test and allow holding companies to restructure simply to evade CRA compliance. While the local staff of ‘community banks’ may well have the interests of their communities at heart, they must answer to and follow the directives of their holding companies that are headquartered elsewhere.

The addition of a mandatory community development criterion for banks with assets between $250 million and $1 billion will not mitigate the impact of increasing the small bank threshold. We are also opposed to the proposed criterion that would allow banks to ‘perform well’ by engaging in one or more community development activities rather than all of the activities. This will encourage institutions to narrowly focus their activities and ignore the broad range of community needs under the guise of ‘market opportunities’ and ‘strategic strengths’. Community development is multifaceted and efforts such as affordable housing, job creation and micro-enterprise development are interdependent. The effectiveness of banks’ CRA activities will be undermined by allowing institutions to choose a limited range of community development activities.

ORFH does support adding rural areas to the definition of ‘community development’ with safeguards to ensure benefit to low-income and minority individuals. Rural areas generally have relatively limited access to community development investments and services because few if any banks have rural headquarters. Furthermore, rural communities tend to have lower median incomes and their economies are subject to the vagaries of economies based on agriculture and natural resource extraction. These factors greatly complicate community development activities and make rural areas less attractive markets for lenders.

Any definition of ‘Rural’ should not be based solely on population. “Rural’ should also include areas whose economies are dependent on traditional rural activities such as agriculture and natural resource extraction. Communities included in Metropolitan and Micropolitan Statistical Areas (MSA’s) should not be categorically excluded from any definition of rural. MSA’s are designated on the county level and often include small communities that rural in nature, based both on population and economy.

Thank you for this opportunity to comment. We urge that the proposed regulations not be adopted. ORFH does encourage adding a rural requirement to the definition of community development with safeguards to ensure benefit to low-income and minority individuals.

Martin Miller, Executive Director
Office of Rural and Farmworker Housing
1400 Summitview, #203
Yakima, WA


 


Last Updated 11/08/2004 regs@fdic.gov

Last Updated: August 4, 2024