CLEVELAND, Ohio — Housing and civil rights advocates are sounding the alarm about changes the Trump administration is proposing to a law that requires banks to serve low- and moderate-income communities, saying the changes could spell the return of redlining.

At issue are changes federal bank regulators are proposing to the Community Reinvestment Act, or CRA, a 1977 law designed to encourage banks to meet the credit and banking needs of all segments of the communities where they do business. The law was a response to the decades-long practice of redlining, a discriminatory practice in which banks would not lend in black neighborhoods.

The Office of the Comptroller of the Currency, along with the Federal Deposit Insurance Corp., recently submitted a rule change aimed at modernizing the CRA, which hasn’t been updated since 1995. The OCC is led by a former bank CEO who was appointed by President Trump.

While there’s widespread agreement that the law needs to be updated to reflect the many ways the banking industry has changed in the past 25 years, advocates have honed in on parts of the rule change they say would hurt low- and moderate-income neighborhoods.

For one, it would expand what activities count for CRA credit. Currently, activities that qualify for CRA credit include things like mortgage and small business loans, and community development projects that, for example, support affordable housing.

The proposed rule change would give banks credit for a broader list of activities, including investments in infrastructure projects and in projects that are in both low- and moderate-income areas and “opportunity zones,” which are federally-designated census tracts where investors can get tax breaks for investing in businesses and real-estate projects. Under the proposed rule, a bank could, for example, get credit for financing an athletic stadium in an opportunity zone.

“Those things are all fine, well and good, but they don’t have anything to do with community reinvestment,” said Nate Coffman, executive director of the Ohio CDC Association, a statewide membership group for community development corporations.

Another change would expand the geographic areas where banks could lend and still get CRA credit, which advocates say would encourage banks to lend in gentrifying areas rather than neighborhoods where investment is actually needed.

Chris Alvarado, executive director of local CDC Slavic Village Development, worries how that might affect his neighborhood, widely dubbed the “epicenter” of the foreclosure crisis.

“The banks would have a lot more freedom to determine where investments are made,” he said. “Downtown [Cleveland] includes census tracts that meet those low- and moderate-income measures, so our concern is … that lending institutions would not be incentivized to go into neighborhoods like Slavic Village, when they could make those investments downtown.”

It’s this provision that has advocates warning of modern-day redlining.

“We could go back to a time that allows the banks to cherry pick where they lend and where they don’t lend,” said Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio.

And proposed changes to the CRA’s scoring system have advocates worried that it would encourage lenders to focus on large deals, rather than smaller loans that are impactful at the neighborhood level.

Some updates would be welcome, advocates say, such as expanding the law to include non-bank lenders, and adding language that explicitly requires lenders to serve all races and ethnicities.

Cleveland City Council recently introduced a resolution detailing concerns about the same aspects of the rule change, and “urging protection of [the CRA] by ensuring that current efforts to modernize regulations do not undermine the intent of the law and its mission to protect low and moderate-income communities across the country.”

In its 40-plus-year history, the CRA has spurred hundreds of billions of dollars of lending in low- and moderate-income communities.

The National Community Reinvestment Coalition estimates the rule change would reduce home and small business lending in Ohio by $975 billion over five years.

The proposal is open for comment until April 8. After that, regulators will review the comments and possibly make a decision later this year.

The Plain Dealer reached out to several banks that serve Cuyahoga County for comment on the proposed changes. Those that responded, KeyBank and PNC Bank, noted their strong CRA track records and said they will be commenting on the proposed change via the OCC’s rule-making process.

“The need for community investment is tremendous right now,” a KeyBank spokesman said in a statement. “Many low and moderate income communities are struggling to keep the jobs they have and to create new ones, to help families buy homes and to provide options for affordable housing.”

The CRA, he added, “has been a critical tool to help drive investment in these communities.”

The proposal is likely to face concerted opposition from housing and civil rights groups in the coming weeks.

Tom Roberts, president of the Ohio Conference of Units of NAACP, said his organization will be joining with other groups to fight the rule change at the national level. Advocates have been reaching out to congressional offices to voice their concerns. And many who are opposed to the change will be weighing in during the public comment period.

“I just look at it as harmful,” Roberts said. “The CRA was passed in 1977 to meet a need. That need is still there. For regulators to go and change the intent of a much-needed law is harmful to moderate- and low- income families, for housing, and for businesses, and for that reason it’s a civil rights issue.”

To read the entire rule change from the OCC, visit https://www.regulations.gov/document?D=OCC-2018-0008-1515.

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