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H.R. 1479 - ‘‘Community Reinvestment Modernization Act of 2009’’

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posted on Sep, 18 2009 @ 09:43 AM
Introduced in March by Rep. Eddie Johnson - TX, this bill was discussed in the House Financial Services Committee on September 16.

What is this bill? How will this affect the citizens? A good idea? A bad idea?

Some strong arguments from both sides of the aisle, I wanted to present 3 views on this legislation and hopefully get a better idea on the impact and/or merits should this get to the floor for a vote.

First is an obviously Pro-HR 1479 view...

The Community Reinvestment Act is one of the most important tools for building wealth and revitalizing neighborhoods— that’s the message of leading experts testifying before the House Financial Services Committee (HFSC) today at the hearing on “Proposals to Enhance the Community Reinvestment Act.” Expansion of CRA is on HFSC Chairman Barney Frank’s agenda this year, and is supported by a broad coalition of municipal leaders, civil rights advocates, and housing organizations, led by the National Community Reinvestment Coalition. Nearly 130 mayors and the U.S. Conference of Mayors have also signed a resolution supporting expansion of CRA.
“CRA expansion would promote sustainable housing and small business development. It would create jobs and revitalize communities across America,” said John Taylor, President and CEO of NCRC, who will be testifying today. “Mortgage companies and other lenders should be held responsible for the loans they make to communities, especially in light of the predatory and irresponsible behavior that deepened the pockets of Wall Street and damaged the lives of millions of Americans. As Congress debates financial reform, oversight of the financial system must include measures to ensure that safe and sound lending reaches underserved communities. The Community Reinvestment Act is a model for responsible lending that should be strengthened and expanded.”

CRA has leveraged trillions of dollars for low- and moderate-income communities since its enactment in 1977, and has had a broader impact on the overall economy by creating jobs, expanding affordable housing opportunities, and promoting small business development. The law encourages lenders to meet the capital and credit needs of underserved communities, while explicitly prohibiting lending that is not consistent with safety and soundness concerns. This aspect of the law and its discouragement of predatory lending ensure that CRA motivates responsible and profitable lending.

NCRC is supporting the Community Reinvestment Modernization Act of 2009 (H.R. 1479),which has more than 50 co-sponsors in the House of Representatives.

Who is the NCRC?

Sounds well intended...

Here is an opposing view on the legislation..

A number of experts believe that aggressive enforcement of the 1970s-era Community Reinvestment Act contributed to the mortgage meltdown, and thus to the greater financial crisis, by requiring financial institutions to lend to unqualified borrowers. Now, the Democratic majority in the House of Representatives is responding to that situation by proposing to expand the scope and power of the Community Reinvestment Act.

This morning House Financial Services Committee chairman Rep. Barney Frank held a hearing on H.R. 1479, the "Community Reinvestment Modernization Act of 2009." The bill's purpose is "to close the wealth gap in the United States" by increasing "home ownership and small business ownership for low- and moderate-income borrowers and persons of color." It would extend CRA's strict lending requirements to non-bank institutions like credit unions, insurance companies, and mortgage lenders. It would also make CRA more explicitly race-based by requiring CRA standards to be applied to minorities, regardless of income, going beyond earlier requirements that applied solely to low- and moderate-income areas.

Republicans on the committee strongly oppose the plan. "Instead of looking to expand the number of institutions that must abide by Community Investment Act regulations," California Rep. Ed Royce said in prepared opening remarks at today's hearing, "I think we should reassess the role this and other government mandates played in the financial collapse and consider scaling it back.

In my readings form the examiner sites, they seem to lean to the right..

After that piece, the legislation doesn't look like a good idea...

Throw in this piece which asks some good questions..

The questions you should be asking are:

Why don’t bankers know and disclose how their different products are performing?

Why is it that the Federal Reserve, the OCC, the OTS and other regulators appear to have no idea how CRA loans are actually performing over the last few years? Data from ten years ago cannot be the basis for making decisions on multi-trillion dollar programs.

Why is it that Comptroller Dugan just three weeks ago delivered remarks at the Interagency Community Affairs Conference where he asserted that CRA is not toxic lending, yet he failed to cite any broad-based quantitative evidence?

Why is it after requiring banks to demonstrate that they make extensive use of “innovative and/or flexible lending practices” in order to receive a rating of outstanding, not one regulator had the common sense to track the performance of these admittedly innovative and flexible loans?

Platitudes are not sufficient. I have presented a prima facia case that CRA is toxic lending which leads to unsustainable loans which leads to an unacceptable level of foreclosures.

Gale Cincotta’s views on FHA 11 years ago are now equally applicable to CRA and AH lending:

“We have been fighting abuse, fraud, and neglect of the FHA program that has destroyed too many neighborhoods and too many families’ dreams of homeownership for more than 25 years.”

Section D of H.R. 1479 calls upon the Federal Reserve to create a loan performance database.

I respectively submit that before you take any action on H.R. 1479, you demand that the appropriate regulators request detailed CRA performance data from Wells Fargo, JP Morgan Chase, Citibank, Bank of America, Fannie Mae and Freddie Mac. These six institutions should be able to provide performance information for an estimated 70% or more of outstanding CRA loans.

These programs have subprimed America.

The pain and hardship they have spawned is immeasurable. What is measurable is exactly how the trillions of dollars in past CRA and AH loans are performing.

-asked by Edward Pinto, chief credit officer of Fannie Mae 1987-89 - at the commitee meeting on the 16th.

Does the country need this bill? Is it as mentioned in the 2nd article, part of the problem the country is in economically? Are the questions raised by Mr Pinto ones that deserve answers before this legislation moves forward?

I don't have the answers, but having looked at the bill, once again our elected have created something that is very difficult to swallow, when will they start writing bills that the average citizen can read and comprehend without a team of fact finders and attorneys.

For those interested in perusing the bill you can find it here:

H.R. 1479

I know that this will probably be passed, but is this what our Congress should be focusing on at the moment, have they really figured out what caused the economic collapse last year? Was the Federal Government partly to blame? If so, does this bill help to prevent the same in the future, or does it open the door for future collapse?

I am 100% for helping the underprivileged out, but right now I think the Congress needs to push the PAUSE button, take the time to review all it has done the past 20 years, and how some of their actions played a role in the trouble we are in today.

Stop printing worthless money, stop spending what they don't have, and take a few days to go back to school and learn to understand a couple of important documents..

Declaration of Independence & the US Constitution.

It's not too late.

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