Reinvestment Act helps communities grow with help of banks
The Ann Arbor News
By Pamela Appea
Many bankers know giving something bank to the community is a good idea.
Whether it’s dispensing money to help a small Ypsilanti business get started or loaning the funding for a first-time Ann Arbor home buyer, bankers know this: What helps the community, helps local banks too.
But the success of programs like the Washtenaw HomeBuyers Program or putting a low down payment on a new house shouldn’t just be credited to the benevolence of bankers. Its also the law.
The Community Reinvestment Act, a federal law passed in 1977, mandates that banks and other financial lenders give back to the community.
More specifically, the act states that lenders have “continuing and affirmative obligations” to historically “underserved” communities, many of which have low-and moderate-income residents.
While certain aspects of the law have come under fire in recent years, nonprofit groups, activists and many bankers still see the need for it.
“The bankers I know are heavily involved in the community. Its high on their list of priorities,” said Joe Fitzsimmons, president and CEO of Nonprofit Enterprise at Work and a board member of National City Bank of Michigan/Illinois.
The NEW Center houses 20 nonprofits in its Ann Arbor office, in addition to working with hundreds of other groups across the county, like SOS Crisis Community Center and the Hands-on Museum.
Due in part to the law, some bankers serve on the boards of nonprofits as finance director, or they may help raise money, Fitzsimmons said.
Phyllis L. Desprez, vice president and CRA compliance officer at Bank of Ann Arbor, agrees that the act is still needed.
“It’s rewarding to see that there are avenues for people who don’t have the resources to put money down … We are very satisfied with our involvement with community reinvestment,” Desprez said.
Linda Brashears, vice president of community reinvestment at KeyBank, said that during the late 1970s and early 1980s, she came across bankers who thought the CRA meant they only had to put in a token effort.
“A lot of banks thought, “I can just give a donation and that will fulfill my obligation,” Brashears said.
But as community activists mobilized across the U.S., particularly in urban communities, laws became more specific , and banks became more committed to community reinvestment, Brashears said.
Recent federal legislation bolstered community-reinvestment regulation, giving lenders four rating categories to assess how well banks are doing.
The National Community Reinvestment Coalition states that in 1997 and 1998, 98 percent of lenders in the U.S. received a satisfactory or outstanding rating. The other two ratings are “needs to improve” and “substantial noncompliance.”
If a bank doesn’t comply with reinvestment regulation, it may be fined or barred from expanding its lending operations. But reinvestment advocates say with an overall complaint rating, banks across the U.S. may not strive to improve.
In Washtenaw and Livingston counties, most lenders are complaint with CRA standards. TCF National Bank of Illinois in Ann Arbor was given an outstanding rating in 1998, according to information on the Federal Reserve Board’s Website.
But Melvin L. Larson, a member of the now-dissolved Community Reinvestment Alliance of Ann Arbor, argues that still more needs to be done about community reinvestment and affordable housing in the area. At the same time, Larson said Ann Arbor lenders do more to fulfill CRA law than other communities of the same size in other parts of the U.S.
According to the Washington, D.C.-based National Community Reinvestment Coalition, one of the main ways the act has proven its worth over the years is by boosting the rate of home ownership.
The Housing and Urban Development department said the U.S. homeownership rate “rose to a record high” in the third quarter of 1999, with 67 percent of all families owning their homes. In the Midwest, HUD figures show that home-ownership rates increased from 72.1 percent to 72.2 percent in 1999.
A National Community Reinvestment Coalition study found that home ownerships has increased among minority groups, pointing to HUD figures and community-reinvestment programs.
The coalition said that despite an increase in home ownership among Latinos, Blacks and other low-income communities, the percentage of home owners in the group still falls below the national standard.
Dina Sanders, executive director of the Washtenaw HomeBuyers program, said the need for education on home ownership in Washtenaw County is crucial. With poor credit, buying a home may seem to be out of reach for many, Sanders said.
The HomeBuyers Program holds workshops on credit, realtor referral, and mortgages, and works closely with potential home buyers, particularly with low-income families. Seventy-five to 80 percent of the HomeBuyers clients are minorities, Sanders said.
According to Linda Brashears, who is also a board member of the Washtenaw County Community Reinvestment Officer’s Association, one of her main goals now is to help people with bad credit educate themselves on repairing bad credit.
“I see the next push the CRA group really needs to tackle is the credit issues,” she said.
Originally published Sunday, March 5, 2000
