Identify Community
Need
CRA has a language of its own
but the regulations are essentially focused on a very simple question:
Is there equal access to capital? A community analysis should focus on
answering basic questions such as: Is there a reasonable amount of lending
for the variety of people who make up the neighborhood? Have investments
and charitable contributions gone to real community needs, such as for
jobs and housing?
To move a CRA campaign, the
community must identify its needs through:
1) 
surveys
of neighborhood residents, church members, community-based organizations
and community newspaper readers to evaluate if banks are serving low-income
residents;
2) data analysis,
using public lending data such as that available on home mortgages (Home
Mortgage Disclosure Act (HMDA) or small businesses; and
3) review of survey and
data information at community meetings to identify community
needs and goals.
A community survey should review
the income levels of borrowers,
Many local community organizations
have a staff member or volunteer with the skills and knowledge to collect
and analyze the data to answer these questions. If not, someone at a nearby
university or college may be able to provide the needed analytical skills.
Another resource is the Community Affairs office of the Federal Reserve
or the FDIC.
Survey Current
Practices back to top
The key to community reinvestment
advocacy is identifying the lending, financial services, and investment
needs of your community. Federal regulators use these three criteria to
assess the compliance of financial institutions with the provisions of
the CRA. Some of the questions to survey for include:
Lending Needs
- What are the business, housing and consumer loan needs of your
community?
- What are banks doing in your community to meet community needs?
- Are neighbors being approved for loans? If not, is it discrimination
or ignorance on the part of the lending institution?
- Does bank staff go out in the neighborhood to visit community
organizations and businesses? Are they learning about community needs?
Investment Needs
- What investments or charitable contributions would add to the
economic vitality of the community?
- Do community-based nonprofit organizations receive charitable
grants from banks?
- Do community and nonprofit housing development organizations get
investment support from banks?
Service Needs
- What are the neighborhood service needs regarding branches (full
service and in-store), technology, mortgage and business counseling,
ATMs, etc.?
- Are there neighborhood bank branches? Are they full service branches?
- Does the Bank support mortgage and business loan counseling?
Analyze HMDA data and compare
to your community survey data. The following chart comprised from HMDA
data illustrates home purchase lending for Oakland, California in 1998.
Reviewing this information reveals
inequities:
- African American households received a proportion of home loans representing
less than half their portion of the city population. They were denied
loans more than twice as often as whites.
- Latinos and Asian Americans got loans proportionally less than their
share of the population and were denied more often than whites.
- Applications taken from all people of color were significantly below
their representation in Oakland. This means that the results of outreach
efforts to potential homeowners of color were not proportionately
adequate.
- African Americans were denied 2.3 times as often and Asian Americans,
and Latinos were denied 1.3 times as often as white applicants. This
indicates that the bank underwriting process may unfairly judge applicants
of color.
These inequities need to be addressed
in negotiations. Fairness requires new products that better meet the needs
of people of color, true diversity among loan officers, and focused marketing
to reach the previously underserved. These needs can also form the basis
of letters to bank regulators.
- Build a coalition to advance your campaign. The
broader the coalition is, the greater its power and the more varied
the issues upon which it must collaborate. If the coalition is too broad,
it may not be able to agree on key issues or tactics. If it is too small,
it may have too little power.
- Prepare a list of community needs and recommendations to bank
officials. Advocacy teams should include people with expertise
in the issues to be discussed and those whose position or organizational
affiliation will be impressive to the banker. The banker is likely to
look for areas where bank products can be redirected to avoid negative
publicity.
- Meet with the local branch manager. Neighborhood
need is central to a CRA campaign. This approach is particularly useful
if it is a local bank where managers have real power. While big banks
no longer give significant authority to branch officers, the local branch
staff may help identify the key decision-makers. In any case, advocates
will need the support of the regional manager of retail banking or of
the CRA official. When possible, consult with other groups locally,
regionally or nationally that have relationships with the bank in question.
- Be a persistent, concrete, and persuasive advocate.
Financial institutions may not quickly adopt recommendations for new
products and approaches to meeting community needs. Bank staff often
try to exhaust community activists by extending discussions and meeting
dates. Work to understand the financial sector's culture and language
and to address their interests and concerns. While bankers may see themselves
as open to new opportunities, the educational process takes time.
- Persuade banks and savings and loans to expand their current
lines of business rather than create new lending programs. In
other words, if the financial institution does not do business lending,
don't expect it to be easy to get them to agree to meet small business
credit needs. Demanding new products may not be practical, and alternative
approaches should be explored.
- Explore other avenues if rebuffed by local bank officials,
such as assistance from the bank's regulator, or an appeal
to the CRA officer at the state or national headquarters of the bank.
Obtain assistance from other organizations that have a relationship
with the bank. If these methods don't yield results, more aggressive
approaches may be necessary.
- Set minimum goals between the bank and the coalition Understand
that the relationship is part of a long-term process. In Stockton, California,
activists failed to win an end to the Bank of America's business relationship
with an anti-union corporation, but they did secure increased support
for local nonprofit groups, increased marketing through local minority-owned
media, and continued operation of the bank's branch in South Stockton.
- Do not sell the neighborhood (and its potential) short by
compromising too quickly with a bank. Identify short- and long-term
potential for the community and the bank.
Craft Specific
Agreements back to top
To accomplish its goals, a CRA
agreement (bankers may prefer the term "community commitment") must contain
clear and specific goals. In other words, the agreement or letter from
the bank to community leaders must be written in a manner that is measurable
and indisputable. It should be filed with 
the
appropriate regulatory agency. Here are some examples regarding language
of the agreement.
- Avoid the general term
" affordable housing ," as in "$50 million annually
for affordable housing loans." While there is a specific amount
of money to be lent over a specific amount of time, there is no definition
of the kind of housing to be financed under the agreement.
- Specify for whom single (one to four units) or
multi-family housing (five units or more) is affordable
. Specify affordable rental housing or affordable homeownerships.
Specify to whom loans will be made. Consider limited equity, rent-restricted,
or market-rate properties.
- Use language that allows clear evaluation of accomplishments
: for instance, "$100 million minimum annually for multi-family
rental housing loans with 66 percent of loans to very low-income tenants
and nonprofit housing developers."
- Avoid calling for unspecified " charitable
contributions ," as in "charitable contributions of $200,000
annually to nonprofit organizations." This language is too vague
regarding community needs.
- Set minimum contribution amounts with mechanisms
for increasing contributions: "Charitable contributions equal to 2%
of net income or no less than $1 million annually, of which 40% is allocated
to nonprofit organizations creating housingand fostering economic development."
The specific targeting of those contributions to affordable housing
and economic development will form an important resource for your equitable
development goals.
Leverage Agreements
During Mergers back to top
Utilize the regulatory
scrutiny financial institutions face at the time of mergers
to forge key CRA agreements. Documentation is a key part of the CRA process.
his process usually begins by filing a letter protesting the merger: To
see the type of information that would be included in a protest letter,
click here
