While some people may question whether the Community Reinvestment Act remains relevant today, others firmly believe it still serves a purpose. Financial institutions tend to take their CRA commitment very seriously and work to meet its requirements.
The Community Reinvestment Act was signed into law in the 1970s after complaints that banks took deposits in low-income neighborhoods but did not make many loans there. The goal of the legislation was to encourage lending, homeownership and business expansion in the low- to moderate-income neighborhoods bankers serve. Banks are reviewed periodically by the Federal Reserve to ensure they are meeting three requirements, for lending, investment and services.
Ruhi Maker, co-founder of the Community Reinvestment Act Coalition at the Empire Justice Center, calls the law a useful tool. The coalition keeps track of data on all of the major banks in Rochester, analyzes it, compiles a report and meets with the banks to make recommendations.
“At first, in the ’90s, the conversations were contentious,” Maker says. “There had to be a building of trust. Then as years went on the banks found it useful. We actually map out by census and tract where they are lending.
“Most of these banks are from outside the area. … The top decision-makers aren’t here. So it was a productive dialogue.”
The coalition believes it can work with a bank to help meet the needs of the community.
“The coalition is out in the community and knows what its needs are. It can make recommendations to the bank,” Maker says. “We can review products and services. For example: Does the bank have affordable checking? Programs to help lower-income folks become a homeowner? Are branches located in the city in lower-income neighborhoods?”
Beverly Fair-Brooks, regional CRA officer for M&T Bank Corp. in Rochester, says her bank works to make sure it has the right products, services and partnerships.
“We have an internal team from mortgage, small-business lenders, retail branches. … We work together to identify needs when the community is seeking financial resources, so we can work with customers to meet CRA guidelines,” she says.
M&T also talks with others to identify needs in its communities. Partners include the Rochester City School District and Consumer Credit Counseling of Rochester. Financial education is an important
part of the services M&T offers, and Fair-Brooks says the bank sets up financial literacy programs through its partners.
“We partner in the community to offer workshops on savings, credit, budgeting, identity theft, to make sure we are meeting the needs of the low- to moderate-income neighborhoods we serve,” she says.
Many people are able to buy homes through the First Home Club, which provides down payment assistance to qualified first-time buyers. The program offers $4 in matching funds at closing for each dollar saved in a dedicated account—up to $7,500 in matching funds—to an eligible first-time homebuyer.
M&T also provides grants in the Affordable Housing Program through the Federal Home Loan Bank of New York as part of its commitment to comply with the Community Reinvestment Act, Fair-Brooks says. Two recent projects total more than $1 million.
Other investments include a $540,000 grant that will help the Charles Settlement House with the Stadium Estates project, including the construction of 45 affordable housing units for low-income and very low-income families in the city. Construction is set to begin in the summer.
A vacant school building in Canandaigua was just redeveloped into two supportive housing buildings for veterans with a $565,925 grant. The Cadence Square project, in the southwestern corner of the Canandaigua VA Medical Center campus, now has a building with 26 new units for low-income individuals and a building with 17 units for low-income families. The project culminated with a ribbon cutting on Feb.17.
Like M&T, First Niagara Bank has officers who are dedicated to meeting the requirements of the Community Reinvestment Act.
“CRA has always been very important to us as we expanded into Rochester,” says Suzanne Nasipak-Chapman, Rochester market executive at First Niagara. “It gave us more branches in city neighborhoods.”
She adds that the bank also helped neighborhoods acquire much-needed financial resources.
“When we finished our HSBC acquisition, rather than just close branches in the city where there were two within a mile and a half of each other, we got a credit union opened for the neighborhood,” Nasipak-Chapman says. “It’s the Lexington Credit Union, the result of a sit-down with then-City Council president Lovely Warren.”
Other neighborhoods have benefited by having First Niagara Bank in the community, Nasipak-Chapman says, such as the Joseph Avenue Neighborhood Association, which received a revitalization grant.
“It’s wonderful to have some resources where we can make an impact,” she says. “We need to work with community leaders to determine what projects fit the guidelines for CRA funds. Our CRA officers have identified some programs and they have reached out, and other times people come to us for the funds.”
Like M&T, First Niagara Bank offers the First Home Club. It also offers services to educate homebuyers and help them navigate the process. Financial literacy is a top priority as well, and the bank has mentoring grant programs with the Rochester City School District and St. John Fisher College to reach children and young people from low-income families.
Connecting with as many people in the community as possible is a goal for Five Star Bank, which is why the bank forms relationships with groups such as the American Heart Association, Habitat for Humanity and the American Diabetes Association.
“We try to make sure we are affiliated with organizations that can get the resources into the communities,” says Charles Guarino, senior vice president and director of marketing at Five Star Bank. “We also have conversations with the United Way. … We are very focused on small and medium-sized business.”
The bank also offers help to first-time homebuyers.
“It’s a product that is a unique mortgage offering. There is minimal out-of-pocket expense, a maximum 20-year term, maximum $300,000 loan and the process is streamlined,” Guarino explains. “With a lot of changes in the mortgage industry, this is attractive.”
A Five Star committee with representation from lending, retail branches, credit,
compliance and senior leadership works to ensure that the bank is committed to CRA compliance. The group meets monthly to review the budget set aside for such projects.
The committee looks at issues with a fresh eye, Guarino says, because there are many great causes in the community and the bank wants to give where help is needed most. Generally, activities related to children and education get top priority.
“In December we purchased 678 coats and donated them to ... K-8 elementary kids in the city school district just in time for Christmas,” Guarino says. “It was one of the most heartwarming projects, and we plan to continue it this year. We’re very focused on community involvement.”
Though bankers carry on with the requirements of the Community Reinvestment Act, the legislation has come under fire. Some experts have asked that it be repealed, and others have blamed it for the subprime mortgage crisis. Since implementation in 1977, the law has been updated several times, mainly with regulatory reforms but also with legislative reforms. The most recent was the Higher Education Opportunity Act, which was passed in 2008 and involves low-cost higher education loans to low-income borrowers.
As the guidelines for CRA are constantly re-evaluated, local banks and their officers say they continue to monitor the needs of their communities and do their best to match the funds where they are needed the most.
“It would be great to see the benefits broaden to include more senior programs,” Chapman says. “We currently can’t provide CRA funding for that group under the guidelines. It’s so good that we can help so many others.
“Maybe the government can revisit the guidelines so we can include more seniors, too. But for now we are proud of the CRA work we are doing.”
Lori Gable is a Rochester-area freelance writer.
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