November 21, 2008
[Page: E2326] GPO's PDF
---
SPEECH OF
HON. BARNEY FRANK
OF
IN THE HOUSE OF REPRESENTATIVES
THURSDAY, NOVEMBER 20, 2008
REMARKS BY JOHN C. DUGAN--COMPTROLLER
OF THE CURRENCY BEFORE THE
``..... Indeed, all of these efforts are fully in keeping with the OCC's mission and the way that we approach our regulatory and supervisory responsibilities, including those under the Community Reinvestment Act. CRA supports banks doing what they do best and what they should want to do well--making viable lending and investment decisions, with acceptable rates of return, consistent with their business plans, I their own communities.
Given recent public discussion, it is appropriate to ask about the role that CRA plays in the credit challenges we face on so many fronts. In my view, it plays a very positive role. Unfortunately, however, current market disruptions have clouded the accomplishments that CRA has generated, many of which we recognized last year during its 30th anniversary. There are even some who suggest that CRA is responsible for the binge of irresponsible subprime lending that ignited the credit crisis we now face.
Let me squarely respond to this suggestion: I categorically disagree. While not perfect, CRA has made a positive contribution to community revitalization across the country and has generally encouraged sound community development lending, investment, and service initiatives by regulated banking organizations.
CRA is not the culprit behind the subprime mortgage lending abuses, or the broader credit quality issues in the marketplace. Indeed, the lenders most prominently associated with subprime mortgage lending abuses
[Page: E2327] GPO's PDF
and high rates of foreclosure are lenders not subject to CRA. A recent study of 2006 Home Mortgage Disclosure Act data showed that banks subject to CRA and their affiliates originated or purchased only six percent of the reported high cost loans made to lower-income borrowers within their CRA assessment areas.
Over the last ten years, CRA has helped spur the
doubling of lending by banking institutions to small businesses and farms, to
more than $2.6 trillion. During this period, those lenders more than tripled
community development lending to $371 billion. Overwhelmingly, this lending has
been safe and sound. For example, single family CRA-related mortgages offered
in conjunction with NeighborWorks organizations have performed on a par with
standard conventional mortgages. Foreclosure rates within the NeighborWorks
network were just 0.21 percent in the second quarter of this year, compared to
4.26 percent of subprime loans and 0.61 percent for conventional conforming
mortgages. Similar conclusions were reached in a study by the
Of course, not all single-family CRA mortgages performed this well, because these loans have experienced the same stresses as most other types of consumer credit. Nevertheless, a number of studies have shown that when these loans are made in conjunction with a structured homebuyer counseling program, mortgage performance is substantially improved. Affordable CRA multi-family projects utilizing low-income housing tax credits have also performed well, with an average foreclosure rate through 2006 of 0.08 percent on the underlying mortgages.
During the community tours I have taken over the past three years, I personally witnessed the positive impact that CRA partnerships have had in transforming communities, expanding homeownership, and promoting job creation and economic development. These partner ships between communities and financial institutions have also helped house senior citizens and people with special needs, built community facilities, and assisted small businesses serving low-income areas.
In the Anacostia community of D.C., an area of
economic resurgence that I have toured on several occasions,
CRA projects also act as catalysts for other
investments, job creation, and housing development. Such infusion of capital
into these markets leverages public subsidies, perhaps as much as 10 to 25
times, by attracting additional private capital. Many of these CRA equity
investments can be made under national banks' public welfare investment
authority. These bank investments have grown significantly over the
years--totaling more than $25 billion over the past decade. Indeed, the OCC
recently held its Managers Conference at the Grand Masonic Lodge on
Interpreting national bank public welfare
investment authority, OCC recently issued an approval related to energy
conservation that may be of interest to
Your Green Communities initiative, and others like
it, may be able to take advantage of these tools to obtain additional resources
under the public welfare investment authority, CRA, and other available
incentives to build many more sustainable homes and communities across the
country. The research and examples described on your Web site demonstrate that
moving to a green economy can generate a significant number of jobs, stimulate
economic growth, and create a healthy environment in communities that
As the credit market stabilizes, CRA-driven
initiatives can also help us tackle challenges such as the preservation of
homeownership opportunities and rental housing development. Opportunities also
lie ahead for bank partnerships with
Our nation has accomplished much since CRA's
passage. Perhaps even Jim Rouse could not imagine how much the flow of
CRA-related capital and credit has contributed to affordable homeownership,
jobs and business development, and healthy neighborhoods. In today's
challenging economy, the need for the positive results that CRA has generated
are even greater, and the same is true for organizations like
Thank you very much.''