Kafi M. Lindsay Vice President and Market Manager Community Development 1215-5851?4606 FMS-5856605 kaii.lindsay@pnc.com a) PNC March 27, 2018 The Honorable Kenyatta Johnson Philadelphia City Council Room 580, City Hall Philadelphia, PA 191 07 Dear Councilman Johnson: PNC Bank, National Association is pleased to acknowledge receipt of your letter, dated March 22, 2018, regarding a hearing by the Council?s Committee of Legislative Oversight on March 29, 2018 on potential racial disparities in home lending. As discussed with your staff, PNC shares your goal of ensuring that all potential borrowers are treated fairly regardless of their race or ethnicity, and we recognize that homeownership can both provide an important path for minority and low- and moderate-income individuals to build wealth and help stabilize neighborhoods. For these reasons, PNC maintains a robust fair lending program, which is regularly reviewed by our Federal regulators, as well as numerous programs designed to help minority and LMI individuals prepare for and achieve homeownership and overall ?nancial success. While I am unable to participate in the March 29?1 hearing, I wanted to share with you the following information regarding Core Values, comprehensive fair lending program, and demonstrated commitment to the entire Philadelphia community, as well as information regarding the inherent limitations in the data underlying the recent report by Reveal from The Center for Investigative Reporting. I and my colleagues would be pleased to meet with you at a later mutually acceptable date to discuss and collaborate on these important topics. Core Values and Commitment to Fair Lending PNC is a Main Street banking organization that is headquartered in Pittsburgh, and focused on traditional banking activities, including retail banking, consumer and residential mortgage lending, corporate and institutional banking, and asset management. Our business model is focused on serving our customers and communities, including our home State of and its two largest cities, Pittsburgh and Philadelphia. PNC ?rmly believes that discrimination of any kind is wrong and we have strong programs to ensure that all of our credit decisions are based on sound credit-related factorsmnot on a borrower?s race, sex, age, national origin or marital status. Our commitment to fair treatment starts with Core Values. At PNC, Diversity and Inclusion is one of our core values. This means that we value our differences, and work together to create a diverse and inclusive workplace where everyone can contribute to the success of our company. The PNC Financial Services Group 1600 MaiketStreet Philadelphia P?hnsyivania 19103 PNC is proud that its commitment to diversity and inclusion has been recognized by some of the leading national voices in this area. For example, PNC made the list of 50 Best Companies for Diversity in 2018 as ranked by BLACK PNC has earned spots on the Working Mother 100 Best Companies list for sixteen years and the NAFE Top Companies for Executive Women lists.2 In 2018, The Human Rights Campaign gave PNC a perfect score on its Corporate Equality Index for the consecutive year and PNC also earned the designation as a Best lace to Work for Equality? Re?ecting our Core Values, PNC maintains an extensive fair lending compliance program designed to prevent discrimination on the basis of any prohibited factor, including race or color, religion, national origin, sex, marital status, familial status, handicap, age, and other factors. Our fair lending compliance program includes robust fair lending policies and procedures, employee training, compliance monitoring, and Internal Audit reviews, among many other elements. We conduct rigorous fair lending monitoring, which includes both robust statistical analysis and individual loan application reviews in our lending markets, including Philadelphia and in general, to help ensure that our credit decisions are based on sound underwriting factors, and are not based on a borrower?s race or other prohibited factors. The Reveal Study and Its Limitations Recently, Reveal from the Center for Investigative Reporting published a white pap er analyzing public data reported under the Home Mortgage Disclosure Act4 from 201 and 2016 for conventional residential mortgage loans.5 Based on this data, the report concluded that, for all lenders analyzed in the aggregate, people of color are more likely to be denied a conventional mortgage than white applicants, and prospective African American and Hispanic borrowers in the City of Philadelphia (?the City?) were signi?cantly more likely to be denied a conventional home purchase loan than white applicants. We take any allegation of discrimination seriously and have carefully reviewed the study and its conclusions. As noted above, the study and its conclusions are based solely on HMDA data. While this data includes certain information that is helpful in assessing an institution?s compliance with the fair lending laws?such as the borrower?s income, the loan amount, the borrower?s race and ethnicity, and the lender?s decision on the application?the data does not include a wide range of other information that is critical in assessing the creditworthiness of an applicant. For example, the data analyzed by Reveal does not include the following information that is important to assessing the borrower?s ability to repay the loan and the credit risk of the requested mortgage: Credit score of the borrower; Credit history of the borrower; Employment status and employment history of the borrower; Other ?nancial assets of the borrower; Available at 8f. 2 Available at 3 Available at 13. 4 12 U.S.C. 2801 et seq. 5 How Reveal identi?ed lending disparities in?deral mortgage data, Emmanuel Martinez and Aaron Glantz for Reveal from the Center for Investigative Reporting, available at disparities whitenaner 130214.pdf. 2 In Total debt-to-income ratio (DTI) of the borrower; - Loan-to-value ratio (LTV) of the proposed mortgage; and - Appraised value of the property.?5 For these reasons, the HMDA data analyzed by Reveal is not suf?cient, by itself, to determine whether a bank or other lender is discriminating against loan applicants based on race or national origin. This fact was acknowledged by the Federal Financial Institutions Examination Council in announcing the release of the 2016 public HMDA data: HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data do not include many potential determinants of loan application and pricing decisions, such as the applicant's credit histmy and debt-to-income ratio, the loan-to-value ratio, and other considerations? lmportantly, strong fair lending compliance programs, as well as our record of lending to minorities, are regularly and closely examined by our federal banking supervisors. As a large national bank, PNC is subject to regular fair lending examinations by both the Of?ce of the Comptroller of the Currency and the Consumer Financial Protection Bureau The OCC, for example, conducts an annual ?Fair Lending Risk Assessment? and an annual Fair Housing Act8 exam of PNC, which is speci?cally focused on our mortgage and home equity lending. Additionally, we undergo regular examinations by the CF PB for compliance with fair lending laws, including the Equal Credit Opportunity Act9 and the Fair Housing Act. In conducting these examinations, our federal regulators have access to all of the credit related information that we collect as part of the loan application process?even if this information is not required to be reported under well as our complete loan ?les for each application.10 Thus, our federal regulators have full access to the information necessary to assess our compliance with the fair lending laws and ensure that our credit decisions are not based on race, national origin or other prohibited factors. In addition to these fair lending laws, PNC is subject to regular reviews under the Community Reinvestment Act The CRA prohibits national banks, like PNC, from ?redlining?, which refers to denying or increasing the cost of banking to residents of minority 6 Public disclosure of these additional data elements would increase the risk that persons or entities could determine the identity of individual mortgage borrowers, potentially compromising consumer privacy and increasing the risk of identity the?. 7 FFIEC Announces Availability of2016 Data on Mortgage Lending, September 28, 2017, available at 7.11mi. 3 42 U.S.C. 3601 et seq. 9 15 U.S.C. 1691 et seq. ?0 Inieragency Fair Lending Examination Procedures, Of?ce of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, Of?ce of Thrift Supervision, National Credit Union Administration, available at {16 See also Comptroller's Handbook: air Lending, OCC, available at govioub ieationsipubl ications- lendi ngfnuh?cha?fa i r- and Supervision and Examination Manual, CFPB, available at 11 12 U.S.C. 2901 et seq. neighborhoods, and encourages banks to meet the credit needs of all community members, including residents of LMI neighborhoods.? PNC is proud that it has consistently earned an overall ?Outstanding? rating, the highest rating given by the OCC, since CRA examinations began. In our most recent CRA evaluation, PNC also received an ?Outstanding? rating in both the Philadelphia?Camden-Wilmington Multi- State Metropolitan Area and the State of Commitment to the Philadelphia Community At PNC we believe a commitment to serving our customers and communities means more than treating each loan application fairly-~it means a commitment to improving and developing the communities where we live and work. We are proud of our record of lending in the City of Philadelphia and the strong contributions we have made to the community. We are pleased to serve as an authorized depository of funds for the City of Philadelphia. In 2005, the City adopted legislation that requires the Of?ce of the City Treasurer to commission an annual report to examine lending practices of authorized City depositories.14 These annual reports include a comprehensive analysis of home lending (including both conventional and FHA loans), small business lending, and branching patterns, as well as the community reinvestment and fair lending performance of banks authorized to receive City deposits under Chapter 19-201 of the Philadelphia Code. We are pleased to note that the City?s most recent public consultant?s report ranked PNC out of all City depositories on a composite score for prime home purchase performance and 2nd for small business lending, and found that PNC signi?cantly exceeded its 2015 CRA goals in Philadelphia?s LMI neighborhoods.? According to the report, PNC met or exceeded City benchmarks in percent of loans to African-American, minority tract, LMI tracts, and LMI borrowers for the sixth year in a row. '6 In addition, PNC ranked in percentage of loans to African-American and LMI borrowers. PNC also ranked 2"d for the percentage of loans to Hispanic borrowers and percentage of loans to borrowers in LMI tracts. 17 In addition to lending to all segments of the City?s population, we also work with committed partners to deliver ?nancial education, ?rst-time homebuyer education, and community outreach programs to the citizens of Philadelphia. 13 PNC recognizes that home ownership is critical for wealth building, particularly for minority and low? and moderate-income individuals and families. Accordingly, PNC provides ?nancial support for a number of housing counselling organizations throughout Philadelphia, the majority serving mainly people of color. 12 See ?3 Available at 1? Resolution No. 051161, December 1, 2005, available at fsi Annual Lending Shupdf. ?5 Examining the Lending Practices of Authorized Depositoriesfor the City of Ph iiodelphia. Cat'endm- Year 2015, at p. 14, 16, and 42, available at 161d, at 128. 17 Id. 13 For additional information see City of Philadelphia, Annual Request for Infommtion, Calendar Year 2016, Response provided by: PNC, available at CYZDI 3.pdf. W. PNC also makes available a wide variety of ?nancial education classes and related tools to consumers, small businesses, and nonpro?t organizations in Philadelphia through its community outreach and educational activities, and has developed strong strategic partnerships with educational, historical, and cultural institutions throughout the City. To highlight just a few of these initiatives and programs: - Partnering with the Federal Deposit Insurance Corporation, PNC has an agreement to co?brand and deliver its ?Money Smart? ?nancial literacy series on a variety of topics for adult and youth education, taught by bank employees, with many of these series also available in Spanish. Through Homebuyers? Club? we work with local non-pro?t housing counseling agencies, such as The Urban League, to provide ?rst-time home buyers with instruction and assistance in overcoming ?nancial challenges. Under the ?Bank On? program, PNC provides ?second chance? account opportunities to unbanked and underbanked Philadelphians with its low fee Foundation Checking and PNC Smart Access Visa Prepaid Card. active participation includes yOuth education with the ?Banking on Our Future? curriculum provided to many of Philadelphia?s public schools. Through the PNC Foundation, PNC also provides millions of dollars in support every year to support community development within Philadelphia. Over the last several years, the PN Foundation awarded grants to 95 organizations to bene?t Philadelphia residents. Selected community investment activities throughout the City include the following: PNC committed $350 million towards PNC Grow Up Great, 3. pro gram that improves the state of early childhood education in Philadelphia for underserved children. The Program recently launched a $1.15 Million Vocabulary Building Pilot Project in North Philadelphia designed to help families prepare young children for school. The ?Words At Play? program is a collaborative project led by The Free Library of Philadelphia, in partnership with The Franklin Institute, the Kimmel Center, the Philadelphia Museum of Art and the Philadelphia Zoo. Employees across the greater Philadelphia area have volunteered more than 40,000 hours to support the Grow Up Great initiative. PNC Arts Alive is a multi-year, multi?million?dollar initiative designed to support visual and performing arts organizations. PNC Arts Alive doubled investment in arts programming in the twelve?county Philadelphia and Southern New Jersey region. In 2011, PNC entered into a strategic alliance with the Barnes Foundation. This multi?million?dollar commitment enabled the Barnes to achieve its goal of relocating to the Parkway. Since opening its doors, the Barnes has attracted nearly 300,000 visitors and has been cited as a factor in the increase of attendance at Parkway venues. We look forward to the opportunity to meet with you to discuss these matters in greater detail, and to working with you and your colleague to continue promote fair lending and community development throughout the City of Philadelphia. Sincerely, - Ka? Lindsay Bcc: Greg Jordan Kieran Fallon Joseph G. Meterchick Ka? Lindsay Andrew Miller David Chamberlin