2. The Community Reinvestment Act: Opportunities to improve the community investment responsibility of the financial services industry Tom Feltner Vice President

3. Woodstock Institute: Applied research, policy development, and advocacy Informing communities about the financial services policy issues that impact them most Documenting patterns in the financial services industry and helping local organizations and media understand problems Giving communities the tools to make better, safer financial decisions

4. Woodstock Institute: Applied research, policy development, and advocacy

5. Woodstock Institute: Informing the policy process with key, practical information

6. Woodstock Institute: Informing the policy process with key, practical information

7. CRA Modernization: Overview of the Community Reinvestment Act 1975 1977 1989 1992-96 1995 Home Mortgage Disclosure Act (HMDA) 1977-87 1990 Community Reinvestment Act (CRA) Limited adherence to CRA requirements “ The Color of Money” story printed in Atlanta Journal Constitution New data added to HMDA Boston Fed analyses of CRA reports lending, investments, services test added 1989 CRA Exams made pub lic for the first time 2005 Regulators weaken exams

8. CRA Modernization : Expanding the scope of CRA Source: Avery, et al. “The CRA within a Changing Financial Landscape“ Recommendations The CRA should apply to mortgage companies, mortgage brokers, mainstream credit unions, insurance companies, securities companies and others Issues Percent of household financial assets deposited in CRA-regulated financial institutions continues to decline Increasing role and market share of non-CRA regulated mortgage lenders Mainstream credit unions, which have a mission to serve people of “modest means,” in many cases do not do so. Insurance companies, online bankers have few locations but sell financial products across the country Figure 1. Shares of Households’ Financial Assets Figure 2. Mortgages Originated by Institution Typ e

9. CRA Modernization: Improving CRA assessment areas Recommendation Assessment areas should be defined as any state, metropolitan area or rural county where that institution maintains retail office or is represented by an agent, or has a significant market share All exams should be full scope exams and include a comparative analysis, rather than a repetitive narrative Assessment areas could be different depending on the test. For example, the lending test should include majority of mortgage loans, services test should be based on location of deposits Issues Assessment areas are defined by the location of bank branches, not where financial institutions actually lend Mortgage lending is far more likely to occur through large mortgage banking affiliates or mortgage brokers. Insurance companies selling financial products currently only have a community commitment where they are headquartered Large online banks gather deposits and make mortgage loans across the country, but only have a physical presence where their headquarters are located. Source: Avery, et al. “The CRA within a Changing Financial Landscape“

10. CRA Modernization: Expanding the relevance of CRA ratings Recommendations Regulators should develop an interagency performance context for metro areas or states to determine CRA-related needs and opportunities. Performance contexts should be based on careful analysis of local employment, housing and other data and include a public comment process. Performance context should be used to evaluate the performance of each institution in meeting local needs. Issues 92 percent of all banks receive a satisfactory score

11. CRA Modernization: Expanding CRA compliance Recommendations If a bank receives a low satisfactory or lower, they should be required to submit a public improvement plan. For financial institutions that still do not improve, we recommend that they be unable to sell mortgages to the GSEs, be ineligible to contract with federal agencies, and/or pay any applicable fines to a national reinvestment fund. Issues Fewer CRA exams conducted by regulators The consolidation of the banking and thrift industry means fewer opportunities for actionable public scrutiny of a bank’s CRA performance. Fewer mergers of healthy institutions. Many recent mergers happened on an emergency basis with no opportunity for public comment. Figure 4. Number of CRA Exams conducted1990 to 2009

13. The Community Reinvestment Act: Opportunities to improve the community investment responsibility of the financial services industry Tom Feltner Vice President