- New York Gov. Kathy Hochul (D) signed a bill Monday to expand the New York Community Reinvestment Act (CRA) to nondepository mortgage lenders. The legislation aims to slash redlining in the Empire State and expand equal access to credit.
- New York joins Illinois and Massachusetts in applying CRA requirements to nonbank lenders. Connecticut subjects credit unions to a statewide CRA regime.
- "The expansion of New York's CRA to cover non-depository lenders is a win for consumers who rely on these lenders to finance their homes," said Adrienne Harris, the state Department of Financial Services' acting superintendent. "This law ensures borrowers have equal access to mortgage financing and provides a thoughtful framework for them to be part of the solution to achieve the American dream of homeownership."
When Congress passed the CRA in 1977, banks comprised the bulk of mortgage lenders in the country. But since the 2008 financial crisis, nonbank mortgage lenders have nabbed a significant market share of the home loan origination business — enough so now to be responsible for the majority of mortgage originations in New York and throughout the country, according to Monday's press release.
Federal policymakers, however, have not broadened CRA requirements to nonbank mortgage lenders on a national scale.
A February report on redlining in Buffalo by New York's DFS found borrowers of color and low- and moderate-income communities were underserved by the state CRA regime. The agency urged policymakers to address "this gap in the law between the treatment of banks and non-depository lenders."
The report uncovered what the agency saw as a lack of engagement between certain lenders and local communities of color in Buffalo. Nonbank lenders often made minimal efforts to market to nonwhite borrowers or to track their footprint in nonwhite communities, the agency found.
Federal Reserve Chair Jerome Powell in May decried the discrepancy between bank and nonbank mortgage lenders, pointing out that "like activities should have like regulation."
The Office of the Comptroller of Currency (OCC) announced in July it would collaborate with the Fed and the Federal Deposit Insurance Corp. (FDIC) to issue interagency rules and modernize the CRA.
"This expansion of the New York Community Reinvestment Act further strengthens this state's commitment to ensuring all New Yorkers have the opportunity for homeownership," Hochul said. "This legislation will ensure everyone has fair and equal access to lending options in their pursuit of purchasing a home, especially in communities of color which continue to be impacted by the effects of the pandemic and have historically faced many more hurdles when seeking a mortgage."
The addition of nonbank mortgage lenders to New York's CRA regime comes months after the state's Department of Financial Services began offering CRA credit to banks and credit unions that finance activities to bolster climate resiliency in low- to moderate-income communities.