WASHINGTON -- Many bankers in the Washington, D.C., area should breathe a sigh of relief at the industry's successful push to eliminate the market share test from Community Reinvestment Act reform.
A fair-lending group, in a study released last week, said the market share test would have left seven of the area's 15 most active banks with less than satisfactory CRA ratings.
The same study, produced by the nonprofit Community First Inc., also showed that seven of the 15 most active mortgage companies in the Washington area also would fail the market share test.
Community First president John M. Hamilton said the study demonstrates how valuable the market share test could have been. "Some have said the test is flawed," Mr. Hamilton said. "Perhaps it just gives results that are unpopular."
The group contrasted an institution's market share for low- and moderate-income census tracts against its share for high- and middle-income areas.
The comparison showed that Acacia Federal Savings Bank, Citibank, Household Bank, NVR Savings Bank, and Chase Bank of Maryland deserved "substantial noncompliance" ratings. Columbia First and New American Savings Bank got "needs to improve" ratings.
The four worst-scoring mortgage companies were: NationsBank Mortgage Co., First Washington Mortgage Co., Norwest Mortgage Co., and B.F. Saul Mortgage Co. All received "substantial noncompliance" ratings.
These banks and mortgage companies all made more loans in higher-income areas than in lower-income ones, the test showed.
Three banks were graded "outstanding" under the market-share test: First Union, Riggs National, and NationsBank. The top two mortgage companies were: Margaretten & Co. and Ahmanson Mortgage Co.
Diane M. Casey, executive director of the Independent Bankers Association of America, discounted the value of the study, saying it lacked credibility because the group did not have detailed agency rules to follow.
"This may, or most likely may not, represent what regulators would find," Ms. Casey said.
The study also ignored two factors, she said. First, it failed to account for loan demand in each census tract. Second, it did not credit banks for nonmortgage lending.
"This is a very arbitrary test," Ms. Casey said.
