The State of Bank Reinvestment in New York City: 2015

An annual analysis of local bank reinvestment activity and the impact of the Community Reinvestment Act

06/23/2016
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The Association for Neighborhood and Housing Development (ANHD) is today releasing its annual report, State of Bank Reinvestment in NYC: 2015 analyzing how banks meet neighborhood credit needs and the local impact of the Community Reinvestment Act.

ANHD has a deep appreciation of both the need for and the benefits of effective bank reinvestment and policies that hold banks accountable to help meet the credit needs of our at-risk communities. Banks receive significant taxpayer-backed public benefits from the federal government. These benefits must come with the understanding that banks will provide their services equitably and meet the needs of the communities in which they operate. Our city differs county by county and even block by block, and reinvestment is most effective if the bank has a clear understanding of the local issues and needs of individual communities and how the bank’s reinvestment activity will address them.

The major findings of the Report (bulleted below) show that locally held deposits in the 25 largest banks in New York City increased 14% in 2014 and overall reinvestment dollars increased by 25%. This is a positive trend, but seven banks increased deposits and decreased reinvestment and, in all cases, quality matters just as much as quantity.  Much of the reinvestment growth comes from core consumer and commercial lending dollars, which often reflects a bank’s core business model.

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The report highlights examples of banks that are utilizing best practices, as well as some troubling trends, including racial disparities in home lending, multifamily loans to unscrupulous landlords, and lack of access to credit and basic banking for immigrants, seniors, and lower-income borrowers and neighborhoods.

The Report provides concrete ways that NYC banks can better meet the credit and banking needs of NYC’s low- and moderate-income residents and neighborhoods.  It also goes into detail on new developments in the Community Reinvestment Act (CRA) landscape that offer opportunities for regulators and local communities to better hold banks accountable:

  • CRA Plans: Regulators are increasingly requiring CRA plans for mergers and acquisitions.  This is a positive development and ANHD believes that it should go further: no merger or acquisition should be approved without a CRA plan for all a bank’s assessment areas, including new areas that result from the transaction
  • CRA Modernization through regulatory reform: Over the past few years, bank regulators have been reviewing CRA and other bank regulations and guidance.  If implemented well, these changes could lead to better enforcement of CRA across many areas, from bank branches and products to racial dis­parities in lending to community development activities and more.
  • HMDA Modernization:  The federal Home Mortgage Disclosure Act (HMDA) created one of the most important tools we have to analyze the home mortgage market to understand who is, and isn’t, getting access to credit and identify patterns of discrimination.  Thanks to ANHD and advocates nationwide, HMDA is expanding to capture more data on multifamily lending, race/ethnicity, pricing, loan types, and more.

 

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Major Findings

Local deposits continue to increase – up 14% in 2014, reaching $991 billion. Much of the increase was due to large increases in Manhattan and national wholesale bank deposits. In the outer boroughs, deposits rose much more modestly, up just 3.6% from $96.51 billion in 2013 to $99.94 billion in 2014. Seven banks increased deposits but decreased reinvestment in NYC.

The multifamily market remains strong, but the number of loans decreased 20% among banks in this study and by 13% in lower-income neighborhoods. The number of multifamily loans qualifying for community development decreased in 2014, but the dollar amount increased. While signs of physical and financial distress remain low, rising rents and sales prices, especially in historically more affordable neighborhoods, increases the pressure on lower-income tenants, putting them at risk of displacement.  Too many bank and non-bank lenders continue to lend to known bad actor landlords

With a few exceptions, the percentage of community development loans and investments under the economic development category is very small, highlighting the challenges with the category and the opportunity for activity to support quality jobs. ANHD believes that at least $1 billion more could be reinvested in NYC to support equitable economic development

The number of branches remained relatively stable across the City, but the distribution remains inequitable, with core Manhattan inundated, while lower-income neighborhoods still lack sufficient branches and ATMs. Three branches closed in the Bronx. Some new accounts appear more accessible to lower-income New Yorkers, but many remain out of reach. Only four banks currently accept the IDNYC as primary ID.

The number of Home Purchase loans went down 14% from 2013-14 and 6% from 2012-14. The decline to LMI borrowers was about the same in 2014, but down 11% from 2012. A large factor is the decline in lending by the Big 4 banks (Chase, Citibank, Bank of America and Wells Fargo) and HSBC. The share of lending by the Big 4 banks in NYC has been steadily declining citywide and nationwide, while the number of non-CRA-covered lenders is on the rise, particularly in FHA lending. Racial disparities persist; 22% of New Yorkers are Black and 29% Latino, yet on average the banks in this study made just 9.6% of home purchase loans to Blacks and 7.3% to Hispanics. Thousands of homeowners are still in, or at risk of,foreclosures, with the highest percentages in communities of color in Brooklyn, Queens, and the Bronx.

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