SPRINGFIELD, Ill.–State-chartered credit unions and banks and most mortgage companies in Illinois are now subject to a new Community Investment Act law.
The new law is expected to apply to approximately 190 CUs, 300 state-chartered banks and between 500-600 mortgage companies licensed to operate in Illinois. Only a few states have a state-level CRA law similar to the federal rules, including Connecticut and Massachusetts. Federally chartered credit unions are exempt from both the state and federal CRA rules.
The law was backed by State Sen. Jacqueline Collins, who chairs the Senate’s Committee on Financial Institutions,.
“A lot of the predatory practices fall within mortgage companies, not that the others aren’t culpable, but the mortgage companies have been able to forever skirt oversight,” Collins was quoted by NextCity.org as saying.
The report said mortgage lenders in particularly have a “sordid history” of lending in Black neighborhoods, especially in Chicago.
Not all mortgage companies are the same, but as a group, mortgage companies have a sordid history in Chicago.
Report Highlighted Issue
According to the report, the law followed a report by WBEZ public radio that used Home Mortgage Disclosure Act data that “showed stark racial disparities in home mortgage lending.
“Among the findings, mortgage companies like Quicken Loans/Rocket Mortgage were now making the majority of home mortgages in Chicago,” NextCity.org reported. “And, from 2012-2018, banks, credit unions and mortgage companies collectively made more home loans in one majority-white neighborhood than in all majority-Black neighborhoods across Chicago combined.”
Added Collins, “Once I had the WBEZ study in front of me, I called for a hearing to address the issue, only two of nine banks invited testified, and only one provided oral testimony that day.”
The hearing took place in October 2020 when Collins said the idea of creating a state-based CRA law first came to her attention when it was raised directing testimony the acting director of the division of banking at the Illinois Department of Financial and Professional Regulation.
Fast Passage
According to the report, the speed at which the package passed surprised even community development and fair housing groups.
“There was really a demand, on all levels of government, local state and federal elected officials representing Illinois, wanting to do something to address this problem,” Brent Adams, senior vice president of policy and communications at the Woodstock Institute, a bank watchdog group based in Chicago, told the news outlet.
The report added that “one of the big issues that community development and fair housing groups have had with CRA regulations at the federal level has been the role of community voices in shaping what it means to be ‘meeting the credit needs’ of the communities where lenders do business.”
List of Factors
According to the report, the Illinois state-based CRA does contain a list of factors that state regulators will consider under Illinois’ new CRA law, but at the top of the list is, “activities to ascertain the financial services needs of the community, including communication with community members regarding the financial services provided.”
Similar to the federal CRA, the Illinois state-based CRA gives state regulators the power to consider CRA performance whenever a financial institution needs their approval for any decision.