BROWARD HOUSING COUNCIL CRA PERFORMANCE BY BROWARD BANKS IN MEETING HOUSING CREDIT NEEDS

BROWARD HOUSING COUNCIL CRA PERFORMANCE BY BROWARD BANKS IN MEETING HOUSING CREDIT NEEDS

CRA IMPLEMENTATION WORKSHOP January 23, 2015 2 South Florida Context Areas of Opportunity Overview of HMDA Data Lending Disparities in Southeast Florida A Regional Overview Findings from CRA/Housing Credit Needs Report Recommendations

Major Reports Citied: 3 GROWING EQUITY & OPPORTUNITY IN SOUTHEAST FLORIDA Seven County Regional Analysis of Impediments to Fair Housing conducted for the SEVEN50 regional planning initiative Seven50.org Carras Community Investment, Inc. THE COMMUNITY REINVESTMENT ACT, BANK PERFORMANCE IN HOUSING LENDING AND INVESTMENT IN BROWARD COUNTY A report prepared for the Broward County Housing Council BrowardHousingCouncil.org Carras Community Investment, Inc.

4 South Florida Context

Key Indicators 5

Key Indicators 6

Key Indicators 7

Key Indicators 8

Key Indicators 9

Key Indicators 10

Areas of Opportunity 11

Poverty is linked to race and ethnicity throughout the region. Predominant race is white, there are half as many white people in poverty than African American and Hispanic. Where people live in the region is related to race and ethnicity. Whites make up majority of Treasure Coast, Monroe County, higher income census tracts along coast and western urban growth boundary Broward Areas of low opportunity have racially concentrated areas of poverty. Concentrations of poverty in low opportunity neighborhoods reduce social and economic mobility.

13 Home Mortgage Disclosure Act (HMDA) Data

What is HMDA? 14 The Home Mortgage Disclosure Act (HMDA) is a Federal law enacted in 1975 Requires certain financial institutions to collect and publically disclose mortgage data to the public including information about: Applications Originations Purchases

Purpose of HMDA 15 The law is intended to: shed light on whether local lenders are adequately serving their communities housing finance needs to facilitate enforcement of the nation s fair lending laws to guide investment activities in both the public and the private sectors

What data is collected? 16 In most instances, lenders are required to report data about: The loan application the type and amount of the loan application whether the loan was originated or denied, and, in some cases its interest rate The property to which the loan relates type (single-family vs. multi-family) location (including the census tract) The applicant's ethnicity, race, sex, and income The sale of the loan, if it was sold

17 Southeast Florida Lending Profile

South Florida Banking Market 18 Since CRA passed in 1977, much has changed Massive consolidation in the past decade Dominated by regional and national institutions Makes it much harder for regulators to hold banks accountable to local credit needs More challenging for bank and community communication with banks

SEFLA Regional Analysis of Impediments to Fair Housing 19 Fair & Equal Lending Disparities Housing/Len ding Discrimination Cited as the 2 nd and 3 rd greatest impediment to Fair Housing Access in the Region (Data Source: Seven50 Fair Housing and Equity Assessment and Regional Analysis of Impediments to Fair Housing)

Analysis of Impediments 20

Loan Denial Disparities By Race and Ethnicity 21 African American Miami-Dade: 1.15 Broward: 1.42 Palm Beach: 1.52 Hispanic Miami-Dade: 1.08 Broward: 1.15 Palm Beach: 1.38 (Data Source: Seven50 Fair Housing and Equity Assessment and Regional Analysis of Impediments to Fair Housing)

22 Subprime/High Cost Lending Subprime lending is defined as higher than average rate loans given to persons who are of higher credit risk due to less than satisfactory credit. Subprime lending is more prevalent in minority-majority neighborhoods than in non-minority majority neighborhoods Because of the apparent concentration of subprime loans in minority neighborhoods (among minority loan applicants) it has been argued that subprime lenders target minority communities through reverse redlining

Subprime Lending Disparities By Race and Ethnicity 23 African American Miami-Dade: 0.71 Broward: 1.64 Palm Beach: 1.42 Hispanic Miami-Dade: 1.42 Broward: 1.37 Palm Beach: 2.14 (Data Source: Seven50 Fair Housing and Equity Assessment and Regional Analysis of Impediments to Fair Housing)

24 Broward County CRA Report

Broward Banking Market 57 banks in the Broward banking market including 32 Large (CRA- defined), 12 Intermediate Small (CRA-defined) banks, and 13 Small (CRA-defined) banks. Large banks have 424 branches, Intermediate Small bank and Small Banks have a total of 50 branches; Of all bank deposits in Broward County ($39.4 billion) 89.4% ($36.7 billion) are in the 12 largest banks 44% of all deposits in two banks Bank of America and Wells Fargo.

Loan Originations 26 Number of Loans Over Time in Broward County 102,758 98,096 88,940 55,330 22,651 21,943 21,777 21,134 2004 2005 2006 2007 2008 2009 2010 2011 (Data Source: Policymap)

Median Loan Amount 27 Median Loan Amount Over Time $250,000 $200,000 $150,000 $100,000 Broward Florida National $50,000 $0 2004 2005 2006 2007 2008 2009 2010 2011 (Data Source: Policymap)

Lending By Race 28 White borrowers are generally much higher than the number of loans made to minority populations. For example, in Lighthouse Point, where 192 total loans were originated in 2011, 2 were made to African Americans and 18 to Hispanics (including White Hispanics). In Pompano where 28% of the population is African American, only 7% of originations were for African American borrowers. In Fort Lauderdale where 31% of the population is African American only 5% of originations were made to African American borrowers.

Lending by Race 29

High Cost Loan Originations 30 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2004 2005 2006 2007 2008 2009 Q1-Q3 2009 Q4 2010 2011 Broward Florida National (Data Source: Policymap)

Concentrations of High Cost Lending 31 Map shows the areas that had higher concentrations of high cost lending: Lauderdale Lakes Lauderhill North Lauderdale Broadview Park (notably all predominantly minority communities)

High Cost Loans and Race 32 High Cost Loans, 2011 by Race 60% 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 Q1-Q3 2009 Q4 Percent of all loans to Whites that were high cost Percent of all loans to African Americans that were high cost (Data Source: Policymap) 2010 2011

33 Identified Needs & Key Findings

Key Identified Financing Needs 34 Housing Credit Needs Forum Supply of affordable and supportive housing Gap financing for 4% and 9% Low Income Housing Tax Credit transactions More portfolio mortgage products that address needs of lower income borrowers and first time buyers Community land trust mortgages Counseling programs for homebuyers (pre and post foreclosure) Affirmative marketing of mortgage products to low and moderate income communities Lines of credit to non-profit organizations Equity investments in collaborative funds for housing development.

Key Findings 35 Performance Evaluations (CRA Exams) provided little up-to-date information relative to Broward performance. Many banks are new to the Broward market e.g. BB&T, TD Bank, PNC, Chase. Reached out to the top large banks and requested information in their CRA Public Comment File related to Broward County and housing. No bank was able to provide any information from this File including most recent CRA Performance Evaluation (public section), list of current branches, list of services at branches, a map of their assessment area, and information on loans.

Findings Continued 36 All large banks surveyed were asked if they would like to provide further data relative to their performance and assessment of community (housing) credit needs in Broward County and the response was tepid. The minimal data that was provided through these reports mostly provided Home Mortgage Disclosure data for lending to single family homeowners. Scant data or evidence was provided to innovative and creative qualified community investments. The Broward banking market with 57 financial institutions, many of them the largest in the country, is a significant one that is rapidly expanding with new branches, products and services. All banks in Broward have received a CRA Performance Evaluation rating of Outstanding or Satisfactory Florida Community Land Trust Lending Patterns in CSoOuFnLcAil

Findings Continued 37 The Broward banking market has recently stabilized after the tumultuous Economic Recession of 2008 to 2013 with many new institutions that have greatly expanded or have taken over failing or failed institutions. While Performance Evaluation is relatively available on regulatory web sites, these Evaluations often provide little data or information that is applicable to Broward County market needs and responses. None of the largest 14 banks utilize the CRA Public Comment File or provided what was in the File as required by their Regulators Innovative and creative responses particularly for CRA Investments are rare and overall community development lending and investment relative to affordable housing production is extremely limited. Home mortgage loan originations are rising but still pale in comparison to pre- Economic Recession activity especially to minority homebuyers

Findings (Continued) 38 Lending to African Americanand Hispanic borrowers indicates a significant disparity from the percentage of home mortgage originations to White borrowers. High-cost loans (i.e. subprime) have dropped dramatically since 2007 however the higher concentration of such loans persists in minority areas and communities.

39 Recommendations

Bank and Community Relations 40 Provide banks with local research relating to: Identified disparities in lending CRA Reports Consolidated Plans Affordable Housing Needs Assessments & Market Analyses, etc. And request that reports be placed on their CRA Public Comment File cil

Bank and Community Relations 41 Provide copies of all reports identified on the previous slide to the three bank regulatory agencies for inclusion on all CRA Performance Evaluations for banks in South Florida and to the State of Florida Chief Financial Officer. Conduct a joint workshops with large banks to define strategies for linking CRA activities with region-wide affordable housing needs. Create a permanent Community and Banking Council to continue to monitor and evaluate bank CRA performance, discuss issues, problems, challenges and opportunities and identify solutions.

Legislation 42 The proposed Community and Banking Council should review and advise regarding affordable housing legislation. Draft County/Regional Deposit ordinances that would require financial institutions receiving Government deposits to implement recommendations of this report.

Residential Lending 43 Encourage financial institutions in the creation of first-time homebuyer products with higher loan-tovalue ratios. Encourage the creation of mortgage loan products for community land trust homebuyers. Affirmatively market mortgage products to lowand moderate-income communities and individuals.

Home Buying Counseling 44 Provide grants to homebuyer counseling agencies. Create linkages to homebuyer counseling agencies and CRA home mortgage products including community land trust loans, first-time homebuyer loans, portfolio loans and other customized loan products for low- and moderate income homebuyers. Create and/or expand homebuyer counseling programs and initiatives.

Acquisition and Home Rehabilitation 45 Banks should offer loan products for acquiring distressed properties and home repair loans.

Multifamily Lending and Investment 46 Banks with distressed multifamily loans should implement a first look program to transfer distressed properties to affordable housing developers. For the development of affordable housing (30% to 80% of AMI), transitional and permanent supportive housing for homeless people: Banks should provide construction and/or permanent debt financing; Banks should make Low-Income Housing Tax Credits Investments; Banks should make investments in pre-development or acquisition loan funds; Banks should work collaboratively with government agencies in developing a mechanism to address gap financing needs; and, Banks should make Equity Equivalent loans (EQ2 s) with nonprofit housing development organizations.

Community Development Investing 47 Increase the volume of innovative community development investing including grant-making, purchasing stock or loans from community development financial institutions (CDFIs), and equity investments in affordable housing loan consortia with more flexible lending criteria, tax-credit equity funds and transit-oriented development investment funds that include mixed-income housing. Create an Investment Fund capitalized by local banks that can invest in low income housing tax-credit projects with flexible and innovative financing to help reduce gaps. Establish lines of credit for affordable housing non-profits to support their community development activities.

Foreclosures 48 Provide and increase funding support to HUD-Certified Counseling Agencies. Provide workshops and support for foreclosure counseling and education. Provides lines of credit to non-profit housing organizations to purchase foreclosed properties from banks and other lenders. Provide refinance loans to those who don t qualify for loan modifications, to lower monthly payments and stay in their homes.

Next Steps 49 Break out groups Discuss findings Answer questions: What are the priority, pressing issues that should be addressed? What type of collaborative initiative should be established to address housing credit needs? Who should be collecting data and benchmarking progress on key issues? Which recommendations should we act upon immediately?

50 Research Assistance: Anna McMaster Rebecca Walter Serge Atherwood FOR FURTHER INFORMATION CONTACT: James Carras, Carras Community Investment Inc. carras@bellsouth.net 954.415.2022