Weekly update from the National Housing Conference

Dear Friend,

In this last of three notes on the Community Reinvestment Act (CRA), we look more closely at the fourth of NHC’s principles for successful CRA modernization. NHC believes that any new CRA regulatory regimen must:

CRA regulations must balance often competing requirements of clarity and flexibility. This is an issue the framers of the CRA and previous efforts at regulatory change have had to struggle with. If the regulatory requirements are too proscriptive, then they won’t be flexible enough to allow banks to make strategic business changes within their framework. If they are too flexible, they won’t provide the clarity that banks need to incorporate the value of CRA treatment when making lending decisions. This inherent tension is made even more complicated by the diverse set of regulated entities that the CRA regulations must address.

Consistency of definition is a critical component for aligning various federal programs, tax incentives and regulatory requirements. Banks must have confidence at the time they make financing decisions and develop new financing products that these activities will receive CRA credit. This information is critical to the most successful element of the CRA’s regulatory structure, often referred to as the “thumb on the scale.” 

Many types of community development investments are obvious, like the investment in LIHTC deals within CRA assessment areas, but others like unsubsidized affordable housing in low- and moderate-income census tracts require more clarification. For investments that do not fit into a uniform designation, a timely judgement should be delivered by the appropriate examiner that will be binding throughout the examination period and apply to similar investments presented to the same agency by the same bank.

Regulators must keep in mind that communities are complex ecosystems. One of the most important lessons learned over the past 40 years is that comprehensive community development strategies that address housing, small business investment and job creation are often interdependent. The CRA has provided significant help to disadvantaged communities but improvements must be made in how CRA can encourage more strategic coordination within communities as well as financial institutions resulting in a more holistic – and ultimately successful – approach to community development.

There’s no better time to join NHC! NHC is leading on exciting initiatives on CRA, black homeownership, housing finance reform and more. We are also developing a new 21st century housing bill. Make sure your organization’s interests are represented and join or renew today. We continue to work across partisan lines to address America’s biggest housing challenges, and this work is rooted in our greatest asset— our members. Organization memberships start at $1,000.

Sincerely,

David M. Dworkin

NHC President and CEO

Reminder: Register for the Restoring Neighborhoods Task Force webinar

The May Restoring Neighborhoods webinar is scheduled for next Tuesday, May 14 at 3:30 p.m. EDT. The webinar will feature a presentation from Laurie Goodman, vice president of housing finance policy at the Urban Institute on cash out refinances. Cash out refinances are a two-edged sword. On one hand, they allow people to monetize their single largest asset— their home equity. On the other hand, cash out refinance mortgages have historically performed much worse than rate/term refinances and have been prone to abuses. Prudently underwritten cash out refinances, and other forms of home equity extraction will prove to be a very valuable tool, as more people retire with most of their wealth in their home. Register here.

Congressional Democrats push for carbon monoxide detectors in public housing

On Monday, Senator Kamala Harris (D-Calif.) and Representatives Jesús “Chuy” García (D-Ill.) and Joe Cunningham (D-S.C.) sent a letter to the leadership of the House Financial Services Committee and Senate Banking Committee advocating for mandatory carbon monoxide detectors in federally subsidized housing. The three Democratic lawmakers introduced the Safe Housing for Families Act in March, which would require carbon monoxide detectors, and advocated for its passage in the letter. The letter came after a new NBC News investigation last week found that that two more people have died from carbon monoxide poisoning in HUD-subsidized housing in Michigan. This was on top of the 11 deaths found by NBC News in its original investigation into carbon monoxide poisoning in public housing.