Filed original legislation

The state’s Joint Committee on Banks and Banking has recommended passing a redraft of a bill requiring elements of the Community Reinvestment Act be applied to mortgage companies.

The redraft retains the spirit of the original legislation filed by Rep. Jarrett T. Barrios, D-Cambridge, last year. From here, the redrafted bill will be sent to a Senate committee for consideration.

Main points of the redraft call for the law to be applicable to any non-bank mortgage lender that is licensed and regulated by the commissioner of banks and makes more than 500 residential mortgage loans in any given year.

According to David J. Cotney, deputy commissioner of consumer compliance at the Division of Banks, the committee estimates about 24 lenders out of the approximate 350 licensed lenders in the state would be affected.

The commissioner would assess whether the lender has satisfied the housing credit needs of the communities, including low and moderate-income families.

Additionally, the redraft would establish an 11-member commission made up of designees from the governor, the speaker of the House, the Senate president and representatives from the Massachusetts Affordable Housing Alliance, Citizens Housing and Planning Association, Massachusetts Association of Community Development Corporations, Association for Community Organization for Reform Now, Massachusetts Bankers Association, Massachusetts Mortgage Bankers Association and Massachusetts Mortgage Association, as well as someone from academia. The mission of the committee would be to evaluate the lending practices of non-bank mortgage lenders and report to the commissioner of banks.

‘Unlike Entities’

“Mortgage companies choose the communities in which they market their loan products. This often results in certain communities being underserved,” said Sen. Andrea F. Nuciforo, D-Pittsfield. “Requiring mortgage companies that have a large presence here in Massachusetts to comply with CRA will make these companies take a second look at underserved markets.”

Kevin M. Cuff, executive director of the MMBA, called the redraft “the best of a bad situation,” referring to the 500 or more thresholds that he said many Massachusetts-based mortgage companies do not reach.

CRA was originally established to ensure that banks, which took deposits from the community, reinvested in those same communities.

“Since the companies don’t take deposits, they do not have the access to capital such as a traditional bank,” Cuff said. “Subjecting mortgage lenders/brokers to CRA-like requirements would be comparing two unlike entities.”

But Kevin F. Kiley of the MBA said banks and mortgage companies are acting more alike than ever. “Most loans are sold on the secondary market,” he said. “We support expanding it from a standpoint of equity, given the fact that there’s been such dramatic changes in the market.”

He said mortgage lenders and brokers are able to “cherry-pick” the areas where they want to do business.

Charles A. Ferraro, president of DeWolfe Mortgage Services, said, “There seems to be some implication that mortgage companies don’t want to make loans to these areas, but there’s plenty of regulation out there in terms of fair housing and fair lending to take care of that.”

And MMA President James C. Dougherty reiterated his organization’s opposition to the implementation but not the spirit of the bill. Banks currently receive CRA credit for the mortgages sold to them by mortgage companies, he noted, and mortgage companies don’t have access to the same set of products and services available to banks.

Finally, Dougherty added, mortgage companies do business in such a wide geographic area it would be very difficult to determine which communities they must serve for CRA. If companies were forced to assume an excessive market-area definition, he said, it may spread some companies too thinly.

Committee Backs Applying CRA Elements to Mortgage Firms

by Banker & Tradesman time to read: 2 min