Beyond the Community Reinvestment Act

Conversations around the Community Reinvestment Act (CRA) tend to gravitate toward “modernization” or some other form of modification, in response to the Fed’s announcement last year of Advance Notice of Pending Rulemaking and a request for public comment. While we are deeply interested in the vitality of the CRA, our commitment to the communities in which we serve has always gone beyond it.

Established in 1977, the CRA was revised in 1989 to require public disclosure of a bank’s ratings along a four-tier system. Our rating is “Outstanding,” the top level of descriptive performance. Further, we concur with the findings of a report by the Congressional Research Service that improvements in serving low- to moderate-income (LMI) communities are thanks to factors over and above the act itself. The CRA has contributed to greater service to LMI communities without impairing bank profitability or prompting banks to overextend credit, and yet the CRA is only one of the operational factors in play.

The Advantages of Independence

We exercise our independent responsibility as a bank to balance the risk with the value of each investment in the communities we serve. From this position, we find that fulfilling the goals of the CRA provides a useful framework and suggests productive aiming points.

We are reminded, too, that often the best way to use a target is to aim beyond it. And so, the CRA becomes a beginning. Flagstar’s people devote expertise, time, and talent to the communities we serve, in addition to the firm’s financial resources.

The Dedication to Listen

“Keep your ear to the ground.” It is a cardinal rule at Flagstar that we listen to the communities in which we do business, to understand what may be holding people back from getting a mortgage.

It is fundamental to us that we are committed to the success of every community which we do business. We work harmoniously and productively with Fannie Mae, Freddie Mac, and Ginnie Mae – so much so that I serve on the Freddie Mac Advisory Board, working on affordable housing issues – yet as a commercial bank, we can exercise more flexibility in our own portfolio.

The Flexibility to Respond

The ability to respond to community needs has taken shape in programs such as Community Comeback, which is a five-year, multi-faceted initiative in Pontiac, Michigan. With loans structured to accommodate renovations to bridge the “appraisal gap” and to assist with closing costs for qualified participants, Community Comeback grew far beyond our initial $10 million commitment. Visible elements of the program, such as the Flagstar Strand Theatre for the Performing Arts remain.

Pontiac is just one example, yet it is a handy one, as it is a community 10 minutes from our headquarters. Yet there are many others, too, such as these, as our engagement continues in the form of not only jobs preparedness, workforce preparedness, and programs in support of small business and startup development, but also in efforts such as these:

• Establishing programs for down payment assistance, grants, and flexible mortgage requirements.
• Closing the digital divide in Inkster, Michigan , through a $1 million pledge to the Strategic Alliance Community Development Corporation.
• Building an affordable tiny home in Detroit in partnership with Cass Community Social Services.
• Supporting lending circles that break the cycle of predatory payday lenders.
• Volunteering 4,200 hours each year to build financial literacy at a local level.

Through our initiatives here, we seek to set an example of awareness and involvement that extends throughout our network of colleagues and associates, and which extends beyond the dimensions of the CRA. By offering personalized financing solutions to make homeownership more affordable, we are helping the very communities that the Community Reinvestment Act is designed to support.