Tag Archives: homeownership

Signing of CRA in 1977

City National Bank Shows Why Some CRA Proposals are Wrong

New Orleans      There’s a big split within the federal banking establishment about what to do about revisions to the 1977 Community Reinvestment Act.  This is not your run of the mill, chest thumping, and elbow pushing in Washington over turf and regulatory jurisdiction.  It’s actually very important, particularly to low-and-moderate income families and their hopes of obtaining decent and affordable housing.

Recent reports had the Office of the Comptroller of the Currency (OCC) moving forward without agreement from the other major players, the Federal Deposit Insurance Corporation (FDIC) and, most importantly, the Federal Reserve Bank, which is the primary enforcer of the banks CRA obligations in lending.  The OCC gang wants to give banks credit for putting big dollops of dollars somewhere close to lower income neighborhoods and letting the big one-off expenditures cover their CRA requirements without focusing on family lending.  The FDIC has joined them in large part.  The Federal Reserve has finally come out foursquare against allowing the CRA score to be tilted towards big community development projects such as loans to hospitals, universities, and other claimants and in favor of maintaining an emphasis on individual lending in lower income areas for home mortgages.  The OCC/FDIC plan would also allow banks to “buy” their way out of their obligations by claiming packages of loans in rural areas and to small businesses, even where they have no operations, rather than doing the hard work of upgrading the areas that need investment where they have operations and branches.  The OCC/FDIC plan would start with the dollar amount claimed by a bank as CRA eligible, rather than breaking the loans into the key baskets for evaluation that have been the sharpest teeth left in the Act over the last more than forty years grinding it down.

Looking at the acquisition of City National Bank (CNB) in Los Angeles by the Royal Bank of Canada (RBC) is a good example of why the OCC/FDIC changes would be disastrous.  The CNB community reinvestment work had been lackluster prior to the merger discussions, and numerous groups didn’t hesitate to make that known to the Federal Reserve.  RBC finally prevailed in the acquisition largely by agreeing to make a $11 billion investment in CRA loans over a multi-year period that is now going into its final year.  ACORN requested the public file on CNB’s CRA work recently to see how they have fulfilled their commitment.  I’ll keep you out of the weeds, although we’ll invariably comeback to CNB and RBC in the future, but they are failing on their commitment pretty drastically, and with the clock running out, it’s hard to see how they would be able to pass muster without a miracle.  This is largely the case because from the numbers it appears that they have continued to not take loaning in lower income areas seriously.  They claim that they have made some big community development loans and they have purchased some community development loans.

CRA was about raising all boats in lower income neighborhoods, especially for families, and not just shoring up some remote islands to look over vast oceans of poverty starved for loans and investment.   Looking at the public file, CNB/RBC seems to be betting and believing that the OCC/FDIC proposal has already succeeded, and that there will be no consequences to their failure to live up to their loan commitment to low income families and their neighborhoods.

The OCC/FDIC proposal must be stopped or the failure of CNB/RBC will be the rule, not the exception, and once again lower income families will be left in the cold while banks preen and pretend to have served the purposes of their charters.

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Please enjoy Never Enough Money by Martha Wash.

Thanks to KABF.

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Plundering Black Wealth with Predatory Land Installment Contracts

Columbus        An analyst for the Federal Reserve Bank in St. Louis on a panel with us at the Benjamin Hooks Institute at the University of Memphis listened to our remarks about the devastating impact of hedge funds and land installment contract companies in Memphis, and asked me if I had seen the study by the Samuel Dubois Cook Center on Social Equity at Duke University entitled, “The Plunder of Black Wealth in Chicago:  New Findings on the Lasting Toll of Predatory Housing Contracts.”  I hadn’t then, but I have now, and it’s a punch in the gut and a slap against the head for anyone who needs a wakeup about the devastating impact of these predatory rip-offs more than fifty years later which are making a comeback now.

Before I knock you out of your socks too, let me brace you a bit so that you’re sitting down when it comes.  This report is not a rhetorical polemic.  It is based on the Center and its collaborators going through 50,000 land records in Chicago in minute detail including court records and the whole shebang.  The report authors are careful to point out that there conclusions, even after this Herculean effort, are conservative.  In short, what I’m going to share is no back of the envelope baloney to make you hoot and holler with ACORN’s Home Savers’ Campaign for more reform, but hard, cold facts that cannot be contested, but must be addressed.

Here’s what the found in a nutshell:

  • Between 75 and 95% of the homes sold to black families in Chicago in the 1950s and 1960s were sold on contract.
  • On average, the price markup on homes sold on contract was 84%.
  • On average, African-American families paid an additional $587 (in 2019 dollars) more each month than they would have paid with a fair price and an FHA backed mortgage.
  • The average buyer paid several more points of interest on their loan compared to the average white buyer.
  • Over the two decades studied, the amount of wealth land installment contracts expropriated from Chicago’s black community was between $3.2 and $4 billion.

And, don’t forget, these were installment contracts where a missed payment could – and often did – lead to eviction, so that many of these families, paying a premium and being fleeced from start to finish, never ended up with the wealth that home ownership might have brought them even as they paid the price!  Oh, and this is just the numbers on Chicago, multiply that in urban areas across the Midwest and anywhere in the South and the rest of the country until the FHA stopped redlining in the mid-1970s.

Any doubts about the impact and injustice left or the need still to make families whole to start to close the wealth gap between black and white families in the United States?

I hope not, but here’s one more Gold Seal of approval supporting the truth of these numbers:  one of the collaborators was Jack Macnamara.  They list his name as being connected with Loyola University in Chicago, but that’s window dressing.  Macnamara was the lead organizer of the Contract Buyers’ League in Chicago which turned Chicago upside down around this issue in the late 60s and early 70s.

If Jack says these numbers are right, that’s enough for me.  You can put them on a picket sign and go to the bank with them!

 

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