What are the responsibilities of a home mortgage lender to the community where it does business?
That is the fundamental question behind the Community Reinvestment Act (CRA,) a 35-year-old law designed to promote home ownership among moderate income families while encouraging civic involvement by the lenders.
The law was enacted in the 1970s when it emerged that some banks were drawing enormous deposits from certain neighborhoods, then lending those funds to more affluent areas. Activists complained that the banks were making money off the savings of depositors in places like Dorchester, Mattapan, and Roxbury, but taking no affirmative steps to ensure that residents in those neighborhoods would have access to home loans to buy their own homes.
There were some notable examples: Longtime community banks, among them the late, lamented 1st American Bank (formerly Dorchester Savings Bank), pioneered community outreach and neighborhood involvement by developing a model of community banking and investment that lives on today in local institutions like Meetinghouse Bank and Mt. Washington Bank.
But it literally took an act of Congress – the Community Reinvestment Act – to spur many of the large state-chartered and national banks to act responsibly. A host of community activist groups, with names like MURAG, Dorchester Tenants Action Council, Mass Fair Share and MAHA, gathered data to show that banks were purposely promoting a disparity between depositors and access to mortgage loans. A landmark 1989 report by state and federal bank regulators quantified the disparities, with the result that government agencies since than have issued annual public reports on the performance of banks in meeting credit needs in their communities.
At the forefront of these initiatives has been the Dorchester-based Massachusetts Affordable Housing Alliance (MAHA), an innovative, non-profit agency that has helped to educate and graduate to homeownership some 16,000 homebuyers since 1985.
The secret to the agency’s success is a fundamental one: right from the beginning, MAHA reached out to lenders and formed a partnership between the banks and the community activists, and it has been a successful relationship over more than two decades.
Those positive joint efforts were in evidence again this week, as MAHA executive director Tom Callahan hosted a group of bankers and local homeowners at the agency’s annual meeting. The guest list included many current and retired bankers, among them former State Banking Commissioner Andrew Calamare and the current United States Comptroller, Thomas Curry, himself a former state banking commissioner who now oversees more than 2,000 national banks and federal savings associations and about 50 federal branches and agencies of foreign banks in the United States.
There was both good news and some bad news on the agenda at the meeting on Dorchester Avenue on Monday night: The good news is that MAHA announced a “redesign” of the successful “SoftSecond Loan Program.” A more streamlined product, “ONE Mortgage,” fusing two mortgages into one, is expected to be available in April 2013.
But MAHA board member Thadine Brown raised a new and troubling matter: “Lending has changed, and CRA now covers a much smaller percentage of mortgage lending than it used to. This is because banks have community reinvestment responsibilities only where they have branches that take deposits.
Curry said his agency is aware of the issue, and that a study is under way in an effort to address the concerns.
– Ed Forry