To the Editor:
NCRC appreciates that Carol Parry Fox and Amy Brachio have engaged your readers in a dialogue about how CRA exams should evaluate nontraditional lending institutions without a branching network ["
But we take issue with one of the major recommendations that involves treating nontraditional institutions like wholesale and limited-purpose banks.
The CRA exams for wholesale and limited-purpose banks do not even evaluate traditional lending to homeowners and small-business owners. Instead, the emphasis is on loans for community development and economic development purposes. While these loans are laudable, treating nontraditional banks as wholesale and limited-purpose banks would leave them off the hook for making home and small-business loans to low- and moderate-income individuals and communities.
Recently, NCRC and an NCRC member, the Woodstock Institute, commented on a CRA exam of the nontraditional lender NetBank. As a result of its acquisitions of Market Street Mortgage Corporation and RBMG, NetBank is the 27th-largest mortgage company in the United States. Applying the wholesale and limited-purpose CRA exam to NetBank would be inexcusable, since it would then exclude the residential lending activities of one of the largest lenders in this country.
NetBank itself recognized the inadequacy of the wholesale and limited-purpose exam and instead proposed a strategic plan option. NCRC and the Woodstock Institute acknowledged that the thrift was proposing assessment areas covering 11 states, but we took issue with the conservative goal-setting proposed by the thrift, which would have resulted in stagnant or declining lending performance.
The dialogue among the thrift, community groups, and its regulator (the Office of Thrift Supervision) about lending goals would not have been possible if the wholesale and limited-purpose exam had been applied.
Parry Fox and Brachio also propose that activities outside the assessment areas be counted if a nontraditional lender has adequately served its assessment area. While having some initial appeal, this concept actually is an implicit recognition by the regulators and the banks that assessment areas are increasingly becoming inadequate when defined as areas strictly around branches. Why not simply define assessment areas as geographical areas encompassing the great majority of an institution's loans?
NCRC believes the CRA statute's mandate for banks to serve the credit needs of all communities in which they are chartered provides regulators the authority to redefine assessment areas in this manner. This would be true CRA reform.
