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The problem with CRA is not that it "obliges" banks to lend to people who can't afford it. The problem is that if you don't lend enough money to minorities (wh

• bilbo0s 18y ago
  Again, CRA is centered around the concept of NEIGHBORHOOD investment. Not investment in minorities. When you say: <<"The problem is that if you don't lend enough money to minorities (who disproportionately can't afford it), the federal bank regulators can block you from acquiring/being acquired by other banks.">> I'm confused as to which part of the act you are speaking about. Perhaps you could post the link to the relevant statute, and we can discuss this based on the data. Regarding the links you provided, again, what is the relative default rate? This is the key piece of data we need. Even better, would be the absolute amounts of money that were defaulted on. That said, I would observe that it is interesting, wouldn't you say, that default rates on FHA HUD loans should be so public, and default rates on the Fannie and Freddy backed stuff so closed. Even more interesting that, as I said in response to your other post, Ginnie Mae should still be solvent considering Fannie and Freddy are basket cases. Finally, I am uncertain as to how the links you provided support the assertion that CRA precludes banks who don't lend to minorities from acquiring or being acquired. If you would elaborate on the connection I could determine better whether or not I agree with you.
  • defen 18y ago
    Have you actually read the CRA? I guess I'll spell it out for you. From the NCRC pdf linked above, "Since the passage of CRA in 1977, lenders and community organizations have signed over 428 CRA agreements totaling more than $4.2 trillion in reinvestment dollars flowing to minority and lower income neighborhoods." From the CRA (http://www.fdic.gov/regulations/laws/rules/6500-2515.html http://www.fdic.gov/regulations/laws/rules/6500-2515.html) 802.a.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;"` 803.3 - `the term "application for a deposit facility" means an application to the appropriate Federal financial supervisory agency otherwise required under Federal law or regulations thereunder for--` 803.3.E `the merger or consolidation with, or the acquisition of the assets, or the assumption of the liabilities of a regulated financial institution requiring approval` 804.a `SEC. 804. (a) IN GENERAL.--In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall-- (1) 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; and (2) take such record into account in its evaluation of an application for a deposit facility by such institution.` See also this WSJ article (entered into the Senate record) http://thomas.loc.gov/cgi-bin/query/R?r106:FLD001:S05028 http://thomas.loc.gov/cgi-bin/query/R?r106:FLD001:S05028 "Last week the Senate passed a bill over-hauling the regulation of banks, including a provision sponsored by Sen. Phil Gramm (R., Texas), chairman of the Banking Committee, to reform the Community Reinvestment Act. Mr. Gramm's provision has stirred controversy, to say the least. Last month hundreds of ``community activists'' descended on his house, where they pounded on the windows, trampled the landscaping and left the yard covered with garbage." "The 20-year-old CRA requires banks to serve their entire community. Regulators take banks' CRA compliance into account when deciding whether to approve applications for mergers or expanded services. In the recent wave of bank consolidation, banks have made billions of dollars of loan commitments and signed agreements with numerous community organizations in order to be seen as complying with CRA."
    • bilbo0s 18y ago
      I'm not trying to make you angry here, but intellectual honesty demands that I point out the fact that these clauses do not state that banks must lend to minorities. They state that banks must meet '...the credit needs of its entire community, including low- and moderate-income neighborhoods..." A 'low- and moderate-income' neighborhood in the process of redevelopment has a surprisingly large credit need, though not much of it goes to the 'low- and moderate-income' people living there. I have already gone over the redevelopment thing above. Further, the clause goes on to state, '...consistent with the safe and sound operation of such institution;'. Which is the loop hole that most financial institutions use to get out of their CRA lending obligations when no redevelopment is happening in qualified neighborhoods. In short, banks don't have to lend if they think lending will affect their safe operation. So you have submitted a set of clauses that say that banks must lend to economically disadvantaged neighborhoods. The clauses you reference do not say that banks must lend to economically disadvantaged people. This is my material point, and the pivot on which the majority of urban redevelopment turns. Just as an aside, lending encompasses more than just mortgages. For example, I can also qualify for a lot of CRA, or TIF type help if I construct . . . say . . . a small business incubator in one of these economically disadvantaged neighborhoods. The only reason I say that is because I am starting to get the feeling that you believe the entire USD4.2 Trillion was given on mortgage loans for minorities.
      • sktrealty 18y ago
        I feel like I'm reading comments from a (smarter) alternate universe version of myself. I run a small real estate company in Atlanta and bilbo0s is nailing the CRA on the head. Minorities could not walk into a bank and get a mortgage because they were a minority. That is patently false. However, in my neck of the woods, Atlanta, GA (in Fulton County one of the 35 worst), money was made by developers who "invested" in low income areas. Areas like the West End and Lakewood saw tons of development during the real estate boom, and then developers disappeared, after they removed the equity from these homes. There are now streets in these neighborhoods where the average price of a home sold is under $35,000, but the foreclosed properties are listed at more than $300K. @bilbo0s, I would LOVE to talk to you. I'm doing a foreclosure bus tour in a month, and I would love to be able to explain the CRA situation as eloquently as you did on this forum. You can email me at broderick at sktrealty dot com.