ELIZABETH WARREN UNITED STATES SENATE WASHINGTON, OC 20510-2105 p 202- 224-4543 MASSACHUSETIS COMMITTEES BANKING, HOUSING, AND URBAN AFFAIRS HEALTH, EDUCATION, LABOR, AND PENSIONS ~nitrd ~tatrs ~rnatr ARMED SERVICES 2400 JFK FEDERAL BUILDING 15 NEW SUDBURY STREET BOSTON, MA 02203 P· 617-565- 3170 1550MAIN STREET SUITE 406 SPRINGFIELD, MA 01103 P: 413--788-2690 SPECIAL COMMITTEE ON AGING www.warren.senate.gov April 24, 2018 The Honorable Martin Gruenberg Chairman Federal Deposit Insurance Corporation 550 17th Street, NW Washington, DC 20429 Dear Chairman Gruenberg, On March 30, in recognition of the Fair Housing Act's fiftieth anniversary, President Trump declared April 2018 as National Fair Housing Month and announced that his "Administration intends to deliver on the promise outlined by the Fair Housing Act, by ending prejudice and unlawful discriminatory practices in the sale, lease, and financing of housing." 1 As one of the agencies charged with ensuring compliance with the Community Reinvestment Act (CRA), a law designed to address the disgraceful historical practice ofredlining,2 the Federal Deposit Insurance Corporation (FDIC) has a critical role in making sure that the institutions it supervises are serving their customers fairly. I am writing to request information about how the FDIC is executing this mission. Fifty years after the Fair Housing Act became law, housing discrimination remains a serious problem in the United States. According to a recent study by the Center for Investigative Reporting and Reveal, minority borrowers are more likely to be denied a mortgage than similar white borrowers in 61 metropolitan areas-even after controlling for loan amounts, neighborhoods, and applicants' income. 3 To combat housing and lending discrimination, it is critical that federal regulators uphold and enforce the rules put in place to protect American communities. The CRA was enacted to curb lending discrimination and to ensure that banks help meet the credit "needs of the communities in which they are chartered to do business."4 The FDIC, along with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve (the Fed), is tasked with developing regulations and evaluating banks' compliance with the CRA as 1 President Donald J. Trump, " President Donald J. Trump Proclaims April 2018 as National Fair Housing Month," The White House (March 30, 2018) (Online at: https://www.whitehouse.gov/presidential-actions/president-donald-jtrump-proclaims-april-2018-national-fair-housing-month/). 2 https://www.minneapolisfed.org/communitv/cra-resources/history-of-the-cra-new 3 Aaron Glantz and Emmanuel Martinez, "For people of color, banks are shutting the door to homeownership," Reveal (February 15, 2018) (Online at: https://www.revealnews.org/article/for-people-of-color-banks-are-shuttingthe-door-to-homeownership/). 4 12 u.s.c. § 2901 part of its exan1ination program. 5 Any institutio11 regulated by these three agencies with assets valtted at $1.252 billion or more is subject to data collection that allo\VS FDIC, OCC, and the Fed to evaltiate these banks' compliance \vith the CRA. 6 The three regulator)' agencies conduct comprehensive tests and determine if a ba11k has one of four ratings: Outsta11ding, Satisfactory, Needs to I1nprove, or Substantial Noncomp\iance. 7 Earlier this nlonth, tl1e Treasury Departn1ent released a set of recom111endations to the primary CRA regulators, on how to ''n1odernize" that law. 8 Recent reports also indicate that the FDIC l1as bee11 working with the OCC and the Federal Reserve on '"an h1teragency redo" ofCRA rules, and is close to releasing those changes. 9 'fhe OCC l1as already taken action- in October 2017 it issued a new Policies and Procedures iv1anual that vveakened its ability to penalize "brulks s11spected of discrin1inatory lending" 10 by allo\ving lenders to avoid double downgrades and penalties if they promise to take action. You recently warned that "the danger is that changes to regulations could cross the line into substantial weakening of requirements." 11 I agree. In order to better understand the FDIC's approach to the CRA and 110\V the agency intends to f1dfill the President's vo\v to "deliver on the promise outlined by the Fair Housing Act." I ask that you pro\'ide answers to the followi11g questions no later tl1an May 8, 2018: 1. I-low 111any the CRA examinations has the FDIC conducted in each of the last five years? a. What percentage of banks received each of the four ratings i11 each year? b. l-Iow often on average elapses between CRA exami11ations? 2. Please list any and all changes the FDIC plans on making to regulations or proced11res governing CRA enforcen1ent, and l1ow those changes allow the agency to better regulate "unlawful discrin1inatory practices in the sale, lease, and financing of housing." a. Does the FDIC pla11 to incorporate any of the reco1nmendations fi·on1 the Treasury Depart111ent in to its refOrn1s? 5 12 u.s.c. § 2902 °Community Reinvestment Act "20 18 Reporting Criteria" Federa/ Financial lnstilulions Exa111ination Council (Online at: https://\V\VW .filec.gov/cralrcporter 18.htm). 7 12 U.S.C. § 2906 8 Treasury Department Press Release, ''Treasury Releases Co1n1nunity Reinvest1nent Act Modernization Reco1nmendations," Depur/111e111 of the Treas111:i 1 (April 03, 20 18) (Online at: https://home.trcasury.gov/ne\\·slr.ressreleases/sn103 36). 9 Allison Bisbey "New CRA proposal scheduled for release in Murch: OCC's Otting" (February 27, 20!8) (Online at: https://\V\V\\'.a1nericanbanker.cornlnews/new-cra-proposal-scheduled-for-release-next-1nonth-occs-otting). 10 Ben Protess and Jessica Silver-Greenberg, "Under Trump, Banking Watchdog Trades Its Bite for a Tan1er Stance," The Ne11' York Titnes (Noveinber l 5, 2017) {Online at: https://\VW\v.nyti1nes.co1n/2017/1 l /l 5/business/bank-regulation.html) ; "Policies and Procedures Manual ""Impact of Evidence Discriminatory or Other Illegal Credit Practices on Co1n1nunity Reinvest1nent Act Ratings," Office of the Co1nJJlroller of.the C'urrency (October 12, 2017) (Online at: https://w\vw.occ.gov/publications/publications-bvtype/other-publications-repo1is/pp1ns/ppm-5000-43.pdf). 11 "Remarks by Martin J. Gruenberg, Chairn1an, Federal Deposit Insurance Corporation on Financial Regulation: A Post-Crisis Perspective; Brookings Institution; Washington, D.c;· Federal Deposit Insurance Co1poration (Noven1bcr 14, 20 i 7) {Online at: https://\\'\VW. fdic.gov/news/news/speechcs/spnov 1417 .html). 3. Are you, or any other FDIC employees, consulting with or discussing changes to CRA enforcement policies with any outside entities - including lobbyists or representatives of the banking or financial services industry - in revising the CRA enforcement rules? If so, please provide a list of any and all meetings where these changes were discussed, and a list of all participants. 4. Please provide a list of all meetings that have taken place as a result of the "interagency redo," including topics of the meetings and the participants. 5. How does the FDIC measure the effectiveness of the agency's efforts to reduce housing discrimination? Please provide an analysis of the agency's performance over the last two years. 6. Please describe any FDIC initiatives in place, beyond CRA enforcement, to address housing discrimination. Sincerely, States Senator