Why Are Biased Banks Getting High CRA Marks from Regulators?

Posted by Josh Silver on July 21, 2016

The Community Reinvestment Act (CRA) statute has a statement of purpose affirming that banks “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.” Despite this clear statement, the federal bank regulatory agencies are failing to ensure that banks are responsibly lending to communities of color.

Three federal agencies, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC), conduct CRA exams scrutinizing the level of loans, investments, and bank services in low- and moderate-income communities. The agencies do not explicitly examine lending to communities of color, but CRA exams have a fair lending review section that checks whether banks are discriminating against people of color and women in violation of the Equal Credit Opportunity Act (ECOA) or the Fair Housing Act (FHA). This part of the exam provides an opportunity for community organizations to raise issues of racial disparity and possible discrimination in lending to the attention of CRA examiners.

When CRA examiners find potential ECOA and FHA violations for banks that have assets of less than $10 billion, they bring those cases to the attention of the Department of Justice (DOJ). When banks have assets of over $10 billion, the Consumer Financial Protection Bureau (CFPB) conducts the fair lending review, which is supposed to happen around the same time as the CRA exam.

In order to assess whether fair lending reviews were offering suitable anti-discriminatory protection for communities of color, NCRC reviewed twelve fair lending settlements between 2011 and 2016 involving federal agencies (DOJ, CFPB, and HUD) and two settlements involving the New York State Attorney General. Alarmingly, we found that the bank regulatory agencies made referrals of possible discriminatory activity in just four of the cases. Considering just the federal cases, the federal bank agencies made referrals only one-third of the time. Three of the cases involved a community-based fair housing organization, the Metropolitan St. Louis Equal Housing and Opportunity Council, issuing a complaint or comment letter describing potential discriminatory conduct. This one feisty community organization nearly outperformed three federal bank agencies with exponentially greater resources.

Of the twelve federal discrimination cases, the federal bank agencies gave the banks two “Outstanding” ratings, seven “Satisfactory” ratings, and three “Needs to Improve” ratings. “Needs to Improve” is considered a failing rating. In other words, in the twelve cases in which the CFPB, DOJ, and/or HUD sanctioned banks for discriminatory conduct, the federal bank agencies subsequently issued passing CRA ratings in three-fourths of the cases and downgraded the banks to failing ratings in only one-fourth of the cases.

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Embedding Equity Into Economic Development

Posted by Sarah Treuhaft on July 19, 2016

It is another summer in which America’s deep racial fault lines are being painfully exposed. Following the horrific violence in Baton Rouge, Falcon Heights, and Dallas, in a July 8 poll, seven in ten Americans said race relations are “generally bad.” A National League of Cities analysis of one hundred “state of the city” speeches from 2016 found that mayors increasingly view racism and inequities as major threats to progress in their cities.

While police accountability, racial bias, and respect for black lives are rightfully at the center of the public debate, the tentacles of racial inequity reach far and wide—and need to be addressed within all sectors. At PolicyLink, we believe that dismantling structural racism and advancing equity—just and fair inclusion into a society in which all can participate, prosper, and reach their full potential—is the central challenge of our time. As America bolts toward its more multicultural future, the costs of our yawning racial gaps in education, employment, income, health, and wealth continue to grow. Already, more than half of all children under age five are people of color. Ensuring they have the resources and opportunities they need to invest in their futures and contribute their skills to building a more sustainable, “next economy” is an economic imperative for our nation.

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Give Housing Vouchers Their Full Power

Posted by John Henneberger on July 15, 2016

A proposed rule change for the use of federal Housing Choice Vouchers would greatly improve the chance that housing vouchers will do what they are supposed to do: Provide low income families with a choice in where they want to live.

The U.S. Department of Housing and Urban Development (HUD) announced a new rule to change the formula determining how much rent a housing voucher will cover. Currently voucher holders, the great majority of whom are African-Americans and other people of color, are highly concentrated in low income, racially segregated neighborhoods—often the only areas where the value of a voucher meets the cost of rent, or where landlords are less likely to discriminate against people with vouchers. In these areas where HUD data shows “there is a wide variance in the rents being charged to tenants and where voucher holders are concentrated in a few high-poverty neighborhoods,” HUD would require local housing authorities to use Small Area Fair Market Rent (SAFMR) calculations to set different maximum allowable voucher rent levels by zip code.

Right now, most vouchers are pinned to an area’s Fair Market Rent, which HUD determines as the standard payment amount for each metropolitan area or county. By narrowing the scope of allowable rents to individual zip codes, SAFMRs allow for higher rents in more expensive areas and lower subsidies in less affluent areas.

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Don’t Rush to Judge These Three Artist’s Lofts in The Twin Cities

Posted by Raisa Johnson and Michael Bodaken on July 13, 2016

There has been some debate recently around three Minnesota affordable housing projects. The Carleton Place Lofts, Schmidt Artist Lofts, and the Pillsbury A Mill have all come under fire in a recent New York Times editorial piece for receiving federal money for development through the artist-exemption in the Low Income Housing Tax Credit (LIHTC) program.

The A Mill, in particular, is called out for its costs and 80 percent white residential occupancy. The various city governments have been accused of ignoring the needs of low income families of color in favor of young, white, and often childless artists as a political concession to the Twin Cities’ wealthy elites, who have historically opposed the development of affordable housing in their communities. According to the editorial, artist housing represents political kowtowing at best and the advent of two racially separate and unequal affordable housing systems at its worst.

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Who Is It For?

Posted by Irfana Jetha Noorani on July 12, 2016

The 11th Street Bridge Park, a project of Ward 8-based nonprofit Building Bridges Across the River at THEARC and D.C. Government will be Washington, D.C.’s first elevated public park. Located on the piers of the old 11th Street Bridge and spanning the Anacostia River, the Bridge Park will be a new venue for healthy recreation, environmental education and the arts. In October 2014 the design team of OMA+OLIN was selected to build the park and the Bridge Park launched an ongoing capital campaign, securing more than $10 million to date. Anchored in nearly 700 stakeholder meetings, the Bridge Park encourages ongoing dialogue with the community who participate in forming plans around design development and economic impact of the park.

While the 11th Street Bridge Park and similar projects across the country are addressing factors of economic displacement in surrounding neighborhoods (see the Bridge Park’s Equitable Development Plan), we often struggle to tackle the less tangible effects of our projects—cultural displacement.

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FHA Sends Mixed Signals to Nonprofits on Sales of Delinquent Loans

Posted by Jeffrey Yuen on July 11, 2016

Last week, FHA announced 11 significant changes to the Distressed Asset Stabilization Program (DASP), a federal program that sells pools of severely delinquent, FHA-insured mortgages to investors.

The buyers are responsible for resolving the delinquent mortgages (a process known as loss mitigation), through steps including like mortgage modification, short sales, and foreclosure. FHA began selling these non-performing loans (NPLs) in 2012 and has sold approximately 100,000 to date. Most of these NPLs are 36-48 months delinquent and underwater, meaning the property is worth less than the amount owed on the mortgage.

Over the years, FHA has tweaked the program in response to feedback from housing advocates to provide more protection for vulnerable homeowners seeking to avoid foreclosure. Most of the current 11 changes will help that cause, but 1 may have the unintended consequence of significantly reducing nonprofit participation.

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Fairness and The Financial System

Posted by Bill Bynum on July 8, 2016

Trying to bring fairness to financial transactions for everyday people has long been both an avocation and passion for me, anchored largely in my belief in the “Golden Rule,” that we should treat others as we would have them treat us.

This passion is also rooted in principles of faith. I along with many advocates for justice draw from Pope Francis’ undeniable clarity with regard to usury, “... when a family has nothing to eat because it has to repay loan sharks, that is not Christian! It is inhuman! It is a dramatic social evil that wounds the inviolable dignity of the human person.”

Last month, the Consumer Financial Protection Bureau (CFPB) landed a new blow in the fight for a fair deal for consumers by proposing rules that would prohibit payday lenders from engaging in the most predatory of practices.

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Co-ops Gain Ground in Communities of Color

Posted by Steve Dubb on July 7, 2016





















Since 2010, 60 percent of new cooperative worker-owners are people of color and more than two thirds of total worker-owners are women.

These are some of the findings from Cooperative Growth Ecosystem: Inclusive Economic Development in Action, Melissa Hoover of the Democracy at Work Institute, the nonprofit arm of the U.S. Federation of Worker Cooperatives, and Hilary Abell of Project Equity, a San Francisco Bay Area-based worker co-op developer consultancy.

Additionally, their report finds that nearly a third of U.S. worker co-ops operating today have been formed since 2010. 

This represents a remarkable change. Democracy at Work Institute data found that for the 100-plus worker co-ops founded nationally between the mid-90s through 2010, fewer than 3 in 10 members were people of color.

Overall worker co-op numbers, to be sure, remain modest. At present, Hoover and Abell estimate that there are 7,000 worker co-op member-owners. Yet it is clear that cooperatives, once largely overlooked in the community development field, are now an important part of the community wealth building discussion. As Sanjay Pinto argued in a recent Surdna Foundation report, Ours to Share: How Worker-Ownership Can Change the American Economy, “We see this moment in history as an ideal time to push for greater investment in the formation and expansion of worker-owned businesses as one method for closing the income and wealth gaps and increasing economic activity.”

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Need Capital For Your Creative Placemaking Project? There’s a Loan for That

Posted by Lillian M. Ortiz on July 5, 2016

New Jersey communities are teeming with creativity. From as far south as Cape May, up to the north where you can find municipalities like Newark and Morristown, art has been touted as a way to help revitalize disinvested communities, and even the local economy. It’s fitting that the Garden State would also be home to what’s believed to be the first long-term, affordable loan geared toward creative placemaking projects.

By 2018, New Jersey Community Capital expects to have amassed a $12 million revolving fund, the Creative Placemaking Fund, with the help of investors like the Kresge Foundation, Wells Fargo, and others. The 28-year-old CDFI expects to reach its goal by setting yearly benchmarks, and so far, it has exceeded its first-year target of $5 million, according to NJCC President Wayne Meyer. (He’s also confident NJCC will surpass its second year goal, too.) That was a pretty big accomplishment, especially considering the fact that investors typically see a lot of risk associated with this type of lending, Meyer says.

That’s because arts-related groups are typically thinly capitalized, and there could be lot of change occurring within an organization. Those issues both worry investors, and create complicated lending situations.

While arts-related groups generally rely on donations and grant funding, in New Jersey, some of the big arts funders have pulled out of the state, according to Jeff Yuen, NJCC’s director of resource development. For instance, the Prudential Foundation was one of the “huge arts funders,” but they no longer fund that sector.

That has left some organizations scrambling.

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The Devils in the Details: Key Issues in Implementing the New AFFH Rule

Posted by Dan Immergluck and Mindy Kao on July 5, 2016

For most of the Fair Housing Act’s history, its requirement to “Affirmatively Further Fair Housing” has been largely dormant. With the advent of the new AFFH rules in July 2015, however, there is some promise that this provision might be taken more seriously.

We’re not here to speculate on whether HUD will actually employ strong sanctions under the new rules. Many advocates recognize that the rules can have utility beyond punishing the worst actors: They may nudge some communities to do be more cognizant of fair housing barriers. They may help well-intentioned local officials utilize better data and metrics to look carefully at how they utilize scarce housing resources.

But there are some critical issues with AFFH implementation that are going to need addressing.

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