A plan by New York banking regulators to amend the state's Community Reinvestment Act rules would hurt low-income neighborhoods, a group of 80 organizations and state officials charged this week.
The proposal would allow banks to fulfill their CRA obligations by making mortgage loans to middle-income individuals in mid- to high-income areas. This would depart significantly from federal CRA rules, according to an Oct. 14 letter to state regulators from the New York City Community Reinvestment Task Force.
The plan "is guaranteed to result in the siphoning of millions of dollars from low- and moderate-income neighborhoods," New York Sen. Franz S. Leichter, a Democrat from Manhattan and the Bronx, said in a prepared statement Wednesday.
The banking industry supports the proposal.
"The rule would recognize that even in higher income areas, there can be shortages of credit," Michael P. Smith, president of the New York Bankers Association, said in an interview.
- Olaf de Senerpont Domis and Dean Anason