WASHINGTON–The issue of applying the Community Reinvestment Act (CRA) to credit unions was raised during a congressional hearing, the second time in less than a month such a proposal has been discussed in Congress and by the CFPB.
One congressman said he believes the banking industry has a point in demanding credit unions also comply with CRA.
During a hearing by the House Committee on Financial Services on the CFPB, both Rep. Emmanuel Cleaver (D-MO) and CFPB Director Rohit Chopra expressed support for credit union compliance with CRA, something the CU community vehemently opposes.
Cleaver’s support for CRA for credit unions stems from a report late last year that Navy Federal Credit Union has engaged in mortgage lending bias against African-American homebuyers.
That report in December 2023 from CNN said it found Navy Federal approved more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, based on the most recent data available from the Consumer Financial Protection Bureau, but less than 50% of Black borrowers who applied for the same type of loan were approved.
Navy FCU Responds
In March, Navy FCU released the results of a third-party examination of its mortgage lending policies and said it found no bias had occurred.
Before that report was issued, however, members of the Congressional Black Caucus met with representatives of Navy FCU to discuss the CNN report’s allegations, and after the meeting said they cam away “unsatisfied.”
‘An Embarrassment’
Disregarding what Navy FCU said its review had turned up, Cleaver cited his meeting with Navy FCU and said in a comment directed at Chopra, “…I think it should be an embarrassment to the federal government and to them, for that matter, they approved…75% of all white borrowers and 50% of Black and brown borrowers. And (the minorities) had the same income as the…majority…The disparity is just embarrassing.
“Even in 2024 bigotry is still around, and it poisons our past and it terrorizes our future, and so I'm still very concerned about what's happening,” Cleaver said.
Cleaver told Chopra he believes the CFPB should be reviewing Navy Federal for compliance with CRA, from which federal credit unions are exempt.
‘What Say You?’
“In the statement you gave to the final rule implementing the Community Reinvestment Act, you said it's time for state legislators to accelerate efforts to ensure certain non-bank entities have Community Reinvestment-like requirements, particularly in sectors where there are significant public subsidies or support for business activities,” Cleaver said. “Credit unions are exempt. Bankers have been demanding that they be included since I've been here, which is 20 years. What say you on the whole issue about coming up with some kind of similar process to CRA that would be used (for) credit unions like Navy Federal?”
CFPB Director Responds
In response, Chopra said he wanted to be careful, and noted the CFPB has enforcement authority over credit unions of more than $10 billion in assets.
“…More generally, it's very hurtful to people when they think that even in serving in the military, working hard, serving their country, that they still may face discrimination,” Chopra said. “So, we take this very seriously. And with respect to CRA, we have seen many states enact CRA for certain non-banks. Banks are required to do it, but many of those institutions that are not banks are getting a lot of direct or indirect benefits, and we should really see if a more level playing field is appropriate.
“The majority of mortgage lending is now outside of banks, and so we should really look hard, whether by Congress or continue by the states,” Chopra continued. “…The banking lobby is no fan of the CFPB, but I think they would also agree that we should have stronger CRA requirements for other mortgage lenders that enjoy those benefits.”
Following Chopra’s comments, Cleaver said he is “100% certain” the bankers would agree. He then repeated some of the mortgage approval claims around ending discrimination that was made in the CNN report.
Earlier Demand for CRA Compliance
In May, CUToday.info reported that sources in Washington said Sen. Elizabeth Warren (D-MA) intends to propose legislation aimed at making housing more affordable and ending housing discrimination, with provisions that would also add a host of new Community Reinvestment Act-like requirements for certain federal credit unions, including around mergers.
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