New York Community Bank (NYCB) has taken an important step forward by submitting a “CRA Plan” to bank regulators in anticipation of their acquisition of Astoria Bank. Regulators are increasingly looking for a forward-looking CRA plan as part of any merger and acquisition application – a stance strongly supported by ANHD. The New York Community Bank plan is the most significant in recent years because of the bank’s size and importance in certain markets. ANHD and our member groups who entered into the negotiations with the bank applaud the new CRA Plan because it lays out specific community benefits across a number of areas, and breaks new ground creating more accountability for loans to owners of apartment buildings who engage in abusive behavior towards their low- and moderate-income tenants.
In September 2015, New York Community Bancorp applied to the regulators to merge two internal subsidiaries, then in December 2015, the bank applied to acquire Astoria Bank. ANHD submitted formal objections to both mergers, urging the regulators to require a CRA plan as a condition of any approval. Rather than wait for the regulators to require the plan, NYCB responded to ANHD’s concerns by voluntarily agreeing to enter into a CRA plan negotiation process.
Representatives from the bank sat down with ANHD members – neighborhood-based affordable housing developers, tenant organizers, and community-based economic development groups – to collaboratively draft a plan for NYC. The plan encompasses a wide range of CRA activities, including branching and bank products, small business and residential lending, multifamily lending, and community development loans and investments. The plan has been filed with the bank’s regulators, thus making it public and enforceable by the regulators.
NYCB is the largest multifamily lender in NYC, with a particular emphasis on more affordable rent-regulated multifamily buildings. While the bank has indeed been more responsive to community organizers in recent years, they are still lending to some bad-actor landlords. Thus, we are particularly pleased with their commitment to responsible lending through quality underwriting, stronger vetting of current and potential borrowers, and regular communication with tenant organizers to identify and deal with bad-actor landlords who harass and evict tenants.
Highlights of the plan are outlined below. Key to the plan’s success is the ongoing collaboration with community organizations and tenant organizers. This provides a regular forum to evaluate what is and isn’t working and, in the case of multifamily lending, identify and deal with bad-actor landlords in a timely manner to address problematic conditions and behaviors, or avoid lending to them entirely. ANHD looks forward to working with NYCB to implement this plan and make it a success.
Key elements of the three-year NY Community Bank CRA Pledge
■ Apply to open two new Banking Development District branches; offer low-cost bank accounts and develop an account with no overdrafts; offer a secured credit card; and be more flexible with ID requirements.
■ Increase residential lending to low-and moderate-income borrowers and take steps to increase lending in LMI neighborhoods as well as to minority borrowers and communities: $8-$10 million in single-family mortgages annually to LMI borrowers; offer SONYMA, FHA, FNMA, and a portfolio co-op product; partner with nonprofit counseling agencies and conduct targeted marketing.
■ Maintain NYCB’s small business loan and banking products. Partner with CDFI’s to expand access to credit and support for small businesses via an official second look program and $4 million in EQ2 investments to lend to small businesses.
■ Responsible multifamily lending
• Debt Service Coverage Ratio of 1.2 or above, based on current rents and realistic maintenance costs.
• When evaluating a loan application, inspect the building itself and review conditions of the building and others owned by the prospective borrower. Identify potential bad-actor landlords by the following practices:
– Analyzing Housing violation counts, DOB violations, and other indicators on established lists such as UNHP’s Building Indicator Project (BIP) database and HPD’s distressed asset list.
– Evaluate and consider using additional Housing Quality Records as they become available in the future.
– Scrutinizing landlords on the public advocate’s “Worst Landlord List“,under investigation by government agencies, and other similar reference sources.
– Media reports based on Internet searches and input from tenant organizers
– Regular information and engagement sessions with tenant organizers and tenant leaders to identify problem landlords and practices, including questionable renovation/construction records, and SRO landlords.
• When issues arise from any of the above sources, secure a plan by the borrower to address them or else decline to make the loan. NYCB will also consider new measures to discourage borrowers from taking out additional debt without properly notifying and getting approval from NYCB.
• NYCB declines proposed applications where prospective borrowers fail to meet these requirements. The mortgage loan brokers with whom they work know the standards and communicate that to the market in order to extend the impact of these policy restrict
ions, forcing improved compliance in the rent regulated housing finance market.
■ Maintain current grant levels of combined NYCB and Astoria and add an additional $500,000 per year as part of a new, targeted grant-making program.
■ In addition to the standard multifamily loans that qualify for community development credit, NYCB will participate in the FHLBNY’s Affordable Housing Programand HPD programs; expand LIHTC investments; and make additional loans/investments to support affordable housing and equitable economic development. They will seek opportunities to partner with nonprofit developers in these areas.
The Community Reinvestment Act has produced impressive outcomes, but the law does have some shortfalls. CRA plans are an important tool to make the Community Reinvestment Act more effective and create better outcomes for our neighborhoods. One shortfall of the CRA is that most banks are evaluated over very large geographic areas and provide very little data or details on the banks’ activities by year, local geographies, or area of reinvestment. Another shortfall is that is that 98% of all banks large and small pass their CRA exams with at least a “satisfactory”, which reduces the influence of the law on the bank industry. CRA ratings alone are not enough to hold banks accountable.
A CRA plan that is specific to the local areas a bank serves is a meaningful way to address some of these shortfalls and can help banks demonstrate a strong commitment to community development. Such a plan should be required by regulators as a part of any merger approval process. A plan is most effective when it is developed in consultation and partnership with nonprofit community development practitioners and community organizations because this process helps banks better understand local community needs.
ANHD applauds New York Community Bank for a groundbreaking CRA plan that will help the bank to truly meet local credit needs.
Blogger: Jaime Weisberg, Senior Campaign Analyst, ANHD
Blog team: Benjamin Dulchin, Lena Afridi, Armando Chapelliquen, Jonathan Furlong, Emily Goldstein, Ericka Stallings, Jaime Weisberg, Barika X. Williams. Editors, Anne Troy, Abou-Baker Diakite