New York loans may soon get credit for lending to wealthier “middle income” borrowers under proposed changes to regulations governing their operations in low income communities.
The rules, which dictate how regulators enforce the state's version of the federal Community Reinvestment Act, are supposed to force banks to better serve poor customers. Activists charge that the new rules, if enacted unchanged, will allow banks to shirk some of this responsibility by lending to the better-off at the expense of the impoverished.
Under the rules change, banks would receive state CRA credit for lending to people in households with annual incomes ranging from $37,840 to $56,760 or lending in neighborhoods where the average income is between $30,000 and $45,000. Today, banks must serve families with incomes that are far less than that in order to get good CRA ratings. Banks typically seek top ratings because they are useful in heading off challenges to mergers based on CRA complaints.
Regulators argue that the language will encourage banks to serve a population that also has a tough time getting a mortgage in New York City's expensive housing market. This provision was designed to help people such as nurses and firefighters, who may be making a good income, but still lack enough to buy a new home in the city and surrounding suburbs, said Andrew Keiman, director of the Banking Department's Community Reinvestment Unit He emphasized that banks will still be judged on their low- and moderate-income lending too.
“This is an additional activity,” added his colleague Stacey Cooper. “This is not in lieu of low-income lending.”
Activists, however, are already mobilizing to fight the provision. At a mid-September meeting the New York City Community Reinvestment Task Force at a mid-September meeting agreed to demand hearings on the proposal. They are also organizing a letter-writing campaign to the Banking Department. “We understand the critical need for lending in middle-income neighborhoods,” said task force member Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project. “But we don't believe this is in the purview of the CRA law. If you're concerned about helping low- and moderate-income people, you need to concentrate on that.”