- New York Governor Kathy Hochul (D) on Monday signed a bill to extend the New York Community Reinvestment Act (CRA) to non-depositary mortgage lenders. The legislation aims to reduce redlining in the Empire State and extend equal access to credit.
- New York joins Illinois and Massachusetts in applying CRA requirements to non-bank lenders. Connecticut puts credit unions under a statewide CRA regime.
- “The expansion of the New York ARC to cover non-depository lenders is a victory for consumers who rely on these lenders to finance their homes,” said Adrienne Harris, acting superintendent of the financial services department of the State. “This law ensures that borrowers have equal access to mortgage financing and provides a thoughtful framework for them to be part of the solution to realizing the American dream of homeownership.”
When Congress passed the CRA in 1977, banks made up the bulk of mortgage lenders in the country. But since the 2008 financial crisis, non-bank mortgage lenders have captured a significant market share in the home loan origination business – now enough to be responsible for the majority of mortgage origination in New York City and across the country. country, according to Monday’s press release.
Federal policymakers, however, have not extended the CRA’s requirements to nationally non-bank mortgage lenders.
A February report on the redlining in Buffalo by New York’s DFS found that borrowers of color and low- and moderate-income communities were underserved by the state’s ARC regime. The agency urged policymakers to close “this gap in the law between the treatment of banks and non-depository lenders.”
The report revealed what the agency saw as a lack of engagement between some lenders and local communities of color in Buffalo. Non-bank lenders have often made minimal efforts to market non-white borrowers or to track their footprint in non-white communities, the agency found.
Federal Reserve Chairman Jerome Powell in May denounced the gap between bank and non-bank mortgage lenders, stressing that “similar activities should have similar regulation”.
The Office of the Comptroller of Currency (OCC) announced in July that it would work with the Fed and the Federal Deposit Insurance Corp. (FDIC) to issue interagency rules and modernize the ARC.
New York lawmakers, meanwhile, decided to update the statewide CRA regime.
“This extension of the New York Community Reinvestment Act further strengthens this state’s commitment to ensure that all New Yorkers have the opportunity to own property,” Hochul said. “This legislation will ensure everyone has fair and equal access to loan options in their quest to purchase a home, especially in communities of color that continue to be affected by the effects of the pandemic and have historically faced to many other obstacles when looking for a mortgage. “