Tag Archives: CRA

In South L.A., the share of black households experiencing severe rent burdens is about 50 percent.

Pulling CRA’s Teeth When It Needs to Bite Harder

New Orleans  Dine’ Butler and I had just finished our presentation about the impact of predatory land installment contracts and hedge funds in the Memphis real estate market at the Hooks Institute event at the University of Memphis recently.  As the crowd thinned out, a woman came up to us, not whispering, but holding her hand next to her mouth in an almost conspiratorial manner to say she wanted to thank ACORN for its work in the Home Savers Campaign, but more importantly for its many decades at forcing banks to honor their obligations under the Community Reinvestment Act.

She was now a consultant based in Memphis, but told us a story of the time she had worked at Bank of America’s headquarters in North Carolina in the CRA compliance unit.  She almost laughed confiding the fear and widespread panic that had gripped their department in the months before the annually scheduled meetings with ACORN’s representatives to review the agreement.  She felt ACORN made all the difference in the world in Bank of America’s commitment and implementation of programs under the CRA.  It was gratifying to hear her story, but it has made be more worried about the current efforts by the Office of the Comptroller of the Currency to weaken the Act once again.

Homelessness in America has risen significantly in the figures comparing 2017 and 2018, driven by an over 16% increase in homelessness in Los Angeles.  Reading a deeply researched piece in the New York Times (https://www.nytimes.com/interactive/2019/12/22/us/los-angeles-homeless-black-residents.html), it was impossible not see the African-American community as bearing the brunt of the problem.  Eight percent of black residents of Los Angeles were homeless at one point or another in 2019, among other Angelenos the rate was 1 in 100.  African-Americans make up 8% of Los Angeles County’s population but they are 42% of the homeless with more than 60,000 black Angelenos experiencing homelessness during 2019, according to county records.

How did this happen?  The authors mince no words.  When looking at the epicenter of the homeless crisis and its impact on African-Americans all the data points to South Los Angeles.  The root cause is exactly what the Community Reinvestment Act was passed to solve.

Through a practice known as redlining, real estate agents and lenders marked these neighborhoods as areas undesirable for investment, preventing residents there from obtaining home loans.

By 1970, three-quarters of Los Angeles County’s black population lived in just two dozen neighborhoods in South L.A. That concentration made the area a center of black culture and the site of a burgeoning black middle class.

When manufacturing jobs declined in the 1980s, black unemployment nearly doubled. Drugs and gangs ravaged the neighborhoods, kicking off a period of black flight. Harsh policing and high incarceration hollowed out the community.

In the 1990s, Latinos started moving to the area and the cost of living rose. Black residents moved to Inglewood and the Crenshaw corridor, or out of the county entirely.

These maps show the loss of majority-black neighborhoods in Los Angeles County over the last 50 years.

By 2000, South L.A. had a new racial makeup. Once predominantly black spaces were now majority Latino, and the black residents who remained were among the city’s poorest. The Great Recession hit them the hardest while the recovery offered them the least. About a third of South L.A.’s black residents now live in poverty.

We can’t solve today’s problems without going to the root.  The Community Reinvestment Act is one of the tools we can use, community organizations working with banks, to make sure that families finally were able to access decent and affordable housing.  We need a stronger set of laws and regulations today, as much if not more, than we did forty odd years ago.  We need a CRA with a bigger bite, not with all its teeth pulled.

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Source: Newsday

Community Reinvestment Still Matters, Why Gut it More?

New Orleans       Newsday, the big Long Island, New York newspaper, reported on a three-year investigation of real estate practices in this suburb that is well-known as one of the whitest suburbs in America.   Using a classic tactic to determine such racial discrimination, they sent out 100 teams of black and white testers in order to compare how racial differences might have led to disparate advice and steering into or away from white neighborhoods.  They found that real estate agents treated people of color unequally 40% of the time compared with white people.  In what may have seemed a throwaway comment, Newsday thought that their investigation should have been unnecessary, as another paper commented, because the work should have been done by the government or nonprofits.  Hats off to Newsday for doing the work, but shock and awe that they did not realize that no one in government is really guarding against racial discrimination in real estate, and nonprofits are drastically underfunded by HUD in the current administration on the issues of fair housing.

Case in point is the steady drive to eviscerate the Community Reinvestment Act (CRA) yet again, this time led by the Office of the Comptroller of the Currency.  Remember that the CRA since 1977 has been one of the few bulwarks against not only discrimination in housing lending based on race and ethnicity, but the only real incentive for banks to assure that they are investing and approving loans in lower income communities.

The Federal Reserve Bank is the overseer of CRA and its individual bank ratings.  The Federal Deposit Insurance Corporation (FDIC) is also a CRA player. For some spurious excuse, likely rooted in bad faith and worse politics, after years of meetings to find a path where all three agencies agreed, the OCC has broken ranks and is trying to move alone to rewrite CRA rules.  Nothing good will come of this.

According to the Wall Street Journal, the negotiations broke down over the critical issue of whether CRA activity should be measured by the number of loans made, advocated by the Federal Reserve, or the dollar amount of CRA lending in an area, which is the OCC’s position.  None of these regulators are heroes in this story, but the OCC’s position is especially suspect.  One can look at the way developers have manipulated CDBG funding in Detroit’s downtown census tracks or the way developers and rich investors are pulling trucks up for cash delivery to distort the enterprise zones, ostensibly for lower income areas, created in the Trump tax giveaway.  Dollars would presume real investment, even though not to the real CRA targets.

Additionally, OCC seems to want to use a metric that looked at lending ratios compared to bank deposits from families in lower income areas.  The last forty years have seen most banks shutter branches as part of their business model in our communities, while the number of payday lenders and check cashing outlets have exploded in lower income areas to fill the vacuum.  How could this be a realistic metric?

Hopefully, the OCC’s political game will run into some serious resistance.  In that sense we are lucky that the other agencies have not signed on.  The real problem, whether in Long Island or wherever you might live, is that discrimination of all kinds is still rife in low-and-moderate communities everywhere in the United States, and CRA is one of the few tools that still works, when it is allowed to do so.  We definitely ought to be doing some work to revise CRA, like forcing more financial institutions under its requirements and lassoing in all of the on-line, Quicken and Zillow types as well, but the OCC’s political play needs to be taken off the table ASAP.

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