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New Yorkers Need Prompt, Responsible Action from Banks

March 24, 2020

ANHD Weighs in on Banking Policy in Response to COVID-19

New Yorkers rely on banks in their daily lives for banking services, loans, mortgages, and a place to safely store their money. This applies to all sectors - individuals, businesses large and small, landlords, non-profits, and municipalities. Low-income people, Black and Brown New Yorkers, small businesses, and tenants have been struggling for years to access affordable banking and services. These struggles are greatly exacerbated during this crisis.

The COVID-19 pandemic is forcing New York State to implement a “pause” closing businesses and restricting person-to-person contact. While necessary for the sake of public health and slowing the spread of the virus, the pandemic response is rippling through New York’s economy and is already having a significant impact on residents and businesses. Shuttered storefronts mean a loss of revenue for small business owners. Workers are already seeing a decrease in income as they face layoffs or cut hours. The economic damage caused by this loss of revenue and income will compound as people struggle to afford bare necessities.

In light of the COVID-19 pandemic response, banks must take proactive steps to mitigate the resulting economic fallout. Banks already have an obligation under the Community Reinvestment Act as responsible corporate actors to respond appropriately to protect the most vulnerable. Now, is no exception.

The Association for Neighborhood Housing and Development (ANHD) calls on banks and policy makers to implement measures that include:

  • Support for affected small businesses and their employees
  • Protection for tenants in multifamily buildings
  • Access to basic banking services
  • Support for low-income homeowners
  • Support for non-profit affordable housing providers and other non-profit community development organizations
  • Actions taken through the Community Reinvestment Act (CRA)

 

Support for Affected Small Businesses & Their Employees

Small businesses are suffering because of COVID-19. Many small businesses – especially those led by people of color and immigrants – have long struggled to stay open in light of rising costs and lack of access to financing. Many small businesses and their employees are now being hit hard as they reduce employees or shut down entirely. In order to weather the storm, they need financial support, including action from banks:

  • Suspend loan payments and commercial mortgage payments for at least 90 days for businesses that are suffering a slowdown or closure due to COVID-19. Waive fees and interest accrued and extend the loan to reflect the amount due.
  • Waive monthly maintenance fees on business accounts.
  • Suspend outstanding overdrafts and any overdraft fees moving forward.
  • Allow business owners to use out-of-network ATMs without additional fees to avoid unnecessary trips to the bank.
  • Provide grants to Community Development Financial Institutions (CDFIs) that serve small businesses. Provide them additional capital to serve small businesses as needed with grants and zero-interest loans.
  • Banks should continue and expand grants for non-profits serving small business owners and employees affected by COVID-19, particularly those working with low-income and immigrant small business owners. They should provide grants to entities that are providing grants directly to small businesses.

 

Protection for Tenants in Multifamily Buildings

Low-income tenants have long been vulnerable to displacement by landlords looking to bring in higher-paying tenants. During this extreme financial duress, that pressure is sure to increase.  The State’s recent eviction moratorium is a positive step, but true protection for low-income tenants will require additional measures by banks:

  • Ensure all borrowers know about and follow the eviction moratorium.
  • Monitor vacancies that take place during the COVID-19 crisis and report to the Department of Financial Services (DFS) if a landlord is evicting tenants.
  • DFS must ensure banks continue to follow their responsible multifamily lending and CRA guidelines and update the guidance to include a mandate that their borrowers respect the eviction moratorium.
  • Fund organizations that are working with tenants to respond to the crisis.

 

Access to Basic Banking Services

Banks make tens of billions each year in monthly maintenance, overdraft, and ATM fees. During normal times, this is a hardship for low-income clients, and now it’s even harder for people to make ends meet. Banks should respond swiftly:

  • Waive all monthly maintenance fees. Provide free money orders and remittances. Waive outstanding overdrafts and any overdraft fees moving forward.
  • Refuse to garnish wages or freeze bank accounts for any reason - people need access to any cash they have on hand.
  • Ensure access to bank branches and that they have sufficient cash for people to withdraw in person or by ATM.  Ensure basic safety procedures at branches for staff and customers, including hand sanitizer and frequent cleaning of machines and doors.
  • Waive all ATM fees at non-bank ATMs to allow people to bank closer to home.
  • Provide free check-cashing services to clients and non-clients, consistent with safe and sound banking.
  • Accept alternate forms of ID, including the IDNYC, for all transactions.
  • Waive late fees and interest payments on credit cards for anyone who can’t pay all or some due to COVID-19. For longer-term loans like auto or personal loans, implement loan forbearance, which means to extend the loan, suspend payment and interest due, and add the outstanding loan amount to the end of the loan. 
  • Don’t report late payments to credit bureaus, cease repossessions and collections.
  • Ensure all outreach materials and customer services are in multiple languages.

 

Support for Low-Income Homeowners

In order to prevent displacement and further financial hardship for low-income, Black, and Brown homeowners during this economic crisis, banks should be doing everything possible to ensure homeowners and tenants can remain in their homes.

  • All lenders should follow New York State’s banking guidance and the new interagency guidance for all mortgage servicers. Homeowners in 1-4 family homes who can’t pay their mortgages due to their own loss of job, hours, or business and/or those of tenants should be allowed to defer the payment and have any late fees and interest payments waived. The loan should be extended to account for the deferred payment and not require a balloon payment soon after the crisis abates. This should apply to all home loans – purchase, refinance, and home repair loans.
    • The process must be simple and swift for any homeowner who requests it.
    • Outreach and materials must be in multiple languages.
    • If 90 days is not enough time, banks must forbear/extend the loan further, and regulators must extend the period. People out of work for 2-3 months will not be able to resume payment so quickly.
    • Banks should provide a single point of contact to navigate the system, and regulators should have a hotline for people to get assistance if banks are not cooperative. All of these resources should be available in multiple languages.
  • Homebuyers in the middle of the process whose financial conditions have changed should be allowed a way to delay or cancel the purchase without consequences. 
  • New York State should expand the moratorium on foreclosures and foreclosure sales beyond 90 days.
  • Banks should continue and expand grants for non-profits serving homeowners affected by COVID-19, particularly those working with low-income and limited English proficient homeowners.

 

Support for Non-Profit Affordable Housing Providers & Other Nonprofit Community Development Organizations

Nonprofits are always on the front lines, serving the most vulnerable populations. ANHD members both serve and are led by low-income people of color who are hit hardest by this financial crisis. These organizations are now simultaneously having to attend to internal work and staff needs, while also continuing to serve the same populations with housing, loans, services, and supports. Banks should provide additional supports:

  • Provide loan forbearance / forgiveness for non-profit developers impacted by the COVID-19 for projects in progress that are now halted, multifamily buildings they manage, buildings they occupy, or loans and investments used to serve their clients and members.
  • Provide non-profits with flexible general operating support grants.
  • Waive grant requirements that couldn’t be met due to COVID-19.

 

Actions Taken Through the Community Reinvestment Act (CRA)

ANHD applauds the CRA regulators – including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) – for putting out this guidance encouraging banks to respond to the COVID-19 crisis. But OCC and FDIC must suspend the CRA "modernization" process until the crisis is over, and, as ANHD has long advocated, throw it out entirely and start over. The attention of all stakeholders has correctly shifted to responding to this crisis – regulation with as large an impact as the CRA cannot be moved forward during this time of crisis. Our additional recommendations to the CRA Guidance include:

  • Maintain grant levels for grantees and waive obligations that can’t be met now - allow for organizations to pivot and respond to the current crisis as needed, including both internal (operations and staff) and external (clients and members) supports.
  • Provide loan forgiveness for non-profit developers who can’t make mortgage payments due to residential and commercial tenants’ lost income.
  • Give responsible multifamily lending guidance to ensure borrowers are respecting anti-eviction ordinances and supporting tenants who cannot pay.
  • Allocate grants and zero-interest loans to non-profits and small businesses to weather the crisis and pay staff – loans should be forgivable or paid back post-crisis.

 

Prompt, responsible action by banks will make a huge difference in the lives of millions of low-income New Yorkers who are impacted by the COVID-19 pandemic.

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