How To Use It

Identify Community Need

CRA has a language of its own but the regulations are essentially focused on a very simple question: Is there equal access to capital? A community analysis should focus on answering basic questions such as: Is there a reasonable amount of lending for the variety of people who make up the neighborhood? Have investments and charitable contributions gone to real community needs, such as for jobs and housing?

To move a CRA campaign, the community must identify its needs through:

1. surveys of neighborhood residents, church members, community-based organizations and community newspaper readers to evaluate if banks are serving low-income residents;
2. data analysis, using public lending data such as that available on home mortgages (Home Mortgage Disclosure Act (HMDA) or small businesses; and
3. review of survey and data information at community meetings to identify community needs and goals.

A community survey should review the income levels of borrowers,

Many local community organizations have a staff member or volunteer with the skills and knowledge to collect and analyze the data to answer these questions. If not, someone at a nearby university or college may be able to provide the needed analytical skills. Another resource is the Community Affairs office of the Federal Reserve or the FDIC.

Survey Current Practices

The key to community reinvestment advocacy is identifying the lending, financial services, and investment needs of your community. Federal regulators use these three criteria to assess the compliance of financial institutions with the provisions of the CRA. Some of the questions to survey for include:

Lending Needs

• What are the business, housing and consumer loan needs of your community?
• What are banks doing in your community to meet community needs?
• Are neighbors being approved for loans? If not, is it discrimination or ignorance on the part of the lending institution? 
• Does bank staff go out in the neighborhood to visit community organizations and businesses? Are they learning about community needs?

Investment Needs

• What investments or charitable contributions would add to the economic vitality of the community? 
• Do community-based nonprofit organizations receive charitable grants from banks? 

• Do community and nonprofit housing development organizations get investment support from banks?

Service Needs

• What are the neighborhood service needs regarding branches (full service and in-store), technology, mortgage and business counseling, ATMs, etc.? 
• Are there neighborhood bank branches? Are they full service branches?
• Does the Bank support mortgage and business loan counseling?

Analyze Data

Analyze HMDA data and compare to your community survey data. The following chart comprised from HMDA data illustrates home purchase lending for Oakland, California in 1998.

Comparative Loan Denial Rates for the City of Oakland, California

Reviewing this information reveals inequities:

• African American households received a proportion of home loans representing less than half their portion of the city population. They were denied loans more than twice as often as whites.
• Latinos and Asian Americans got loans proportionally less than their share of the population and were denied more often than whites.
• Applications taken from all people of color were significantly below their representation in Oakland. This means that the results of outreach efforts to potential homeowners of color were not proportionately adequate.
• African Americans were denied 2.3 times as often and Asian Americans, and Latinos were denied 1.3 times as often as white applicants. This indicates that the bank underwriting process may unfairly judge applicants of color.

These inequities need to be addressed in negotiations. Fairness requires new products that better meet the needs of people of color, true diversity among loan officers, and focused marketing to reach the previously underserved. These needs can also form the basis of letters to bank regulators.

Mount a Campaign

• Build a coalition to advance your campaign. The broader the coalition is, the greater its power and the more varied the issues upon which it must collaborate. If the coalition is too broad, it may not be able to agree on key issues or tactics. If it is too small, it may have too little power. 
• Prepare a list of community needs and recommendations to bank officials. Advocacy teams should include people with expertise in the issues to be discussed and those whose position or organizational affiliation will be impressive to the banker. The banker is likely to look for areas where bank products can be redirected to avoid negative publicity.
• Meet with the local branch manager. Neighborhood need is central to a CRA campaign. This approach is particularly useful if it is a local bank where managers have real power. While big banks no longer give significant authority to branch officers, the local branch staff may help identify the key decision-makers. In any case, advocates will need the support of the regional manager of retail banking or of the CRA official. When possible, consult with other groups locally, regionally or nationally that have relationships with the bank in question.
• Be a persistent, concrete, and persuasive advocate. Financial institutions may not quickly adopt recommendations for new products and approaches to meeting community needs. Bank staff often try to exhaust community activists by extending discussions and meeting dates. Work to understand the financial sector's culture and language and to address their interests and concerns. While bankers may see themselves as open to new opportunities, the educational process takes time.
• Persuade banks and savings and loans to expand their current lines of business rather than create new lending programs. In other words, if the financial institution does not do business lending, don't expect it to be easy to get them to agree to meet small business credit needs. Demanding new products may not be practical, and alternative approaches should be explored.
• Explore other avenues if rebuffed by local bank officials, such as assistance from the bank's regulator, or an appeal to the CRA officer at the state or national headquarters of the bank. Obtain assistance from other organizations that have a relationship with the bank. If these methods don't yield results, more aggressive approaches may be necessary.
• Set minimum goals between the bank and the coalition  Understand that the relationship is part of a long-term process. In Stockton, California, activists failed to win an end to the Bank of America's business relationship with an anti-union corporation, but they did secure increased support for local nonprofit groups, increased marketing through local minority-owned media, and continued operation of the bank's branch in South Stockton.
• Do not sell the neighborhood (and its potential) short by compromising too quickly with a bank. Identify short- and long-term potential for the community and the bank.

Craft Specific Agreements

To accomplish its goals, a CRA agreement (bankers may prefer the term "community commitment") must contain clear and specific goals. In other words, the agreement or letter from the bank to community leaders must be written in a manner that is measurable and indisputable. It should be filed with the appropriate regulatory agency. Here are some examples regarding language of the agreement.

• Avoid the general term " affordable housing ," as in "$50 million annually for affordable housing loans." While there is a specific amount of money to be lent over a specific amount of time, there is no definition of the kind of housing to be financed under the agreement. 
• Specify for whom single (one to four units) or multi-family housing (five units or more) is affordable . Specify affordable rental housing or affordable homeownerships. Specify to whom loans will be made. Consider limited equity, rent-restricted, or market-rate properties.
• Use language that allows clear evaluation of accomplishments : for instance, "$100 million minimum annually for multi-family rental housing loans with 66 percent of loans to very low-income tenants and nonprofit housing developers."
• Avoid calling for unspecified " charitable contributions ," as in "charitable contributions of $200,000 annually to nonprofit organizations."  This language is too vague regarding community needs. 
• Set minimum contribution amounts with mechanisms for increasing contributions: "Charitable contributions equal to 2% of net income or no less than $1 million annually, of which 40% is allocated to nonprofit organizations creating housingand fostering economic development." The specific targeting of those contributions to affordable housing and economic development will form an

Leverage Agreements During Mergers

Utilize the regulatory scrutiny financial institutions face at the time of mergers to forge key CRA agreements. Documentation is a key part of the CRA process.  his process usually begins by filing a letter protesting the merger: To see the type of information that would be included in a protest letter, click here