Banking Superintendent Richard H. Neiman Calls on Banks to Ensure Credit Access in Underserved Communities
In Speech Before Regional Interagency Committee (RIAC) Breakfast, Stated That Nonprofits can Support Banks Responsibly Expand Lending
May 19, 2009
New York, N.Y.: Noting the current stress and uncertainty in the financial system, Richard H. Neiman, Superintendent of Banks for New York State, called on banks to step up their partnerships with nonprofit organizations such as Neighborhood Housing Services (NHS) to ensure credit access to underserved New York communities and create business opportunities for responsible lending.
Neiman made his remarks today at the annual Regional Interagency Committee (RIAC) breakfast at the Marriott Marquis Hotel in Times Square to an audience of financial regulators, banking executives, real estate professionals and nonprofits.
“I believe the most important reason to reinvigorate partnerships between nonprofits and banks is to ensure that consumers have access to affordable credit choices. The abundance of credit opportunities that we saw in recent years were often in the form of irresponsible or predatory lending, often by non-bank lenders, which led to a disproportionate number of foreclosures in many minority neighborhoods.” said Neiman.
Credit access in these same communities is now being threatened due to tightened underwriting standards, the foreclosure crisis and a decline in property values.
“Communities are understandably concerned that the pendulum will swing back too far in the opposite direction, leaving them shut out of credit choices and victimized again,” said Neiman.
He stated that just as nonprofits are important partners for the state in implementing housing initiatives and in foreclosure prevention, nonprofits are ideal partners for banks to prevent the credit contraction that is jeopardizing low- and moderate-income neighborhoods. Banks should see nonprofit partners in a new light, beyond the traditional lens of Community Reinvestment Act (CRA) compliance.
Neiman said that now is the right time for banks to prudently grow their business and lending in underserved areas can be a positive part of that plan. By partnering with nonprofits, banks increase their ability to make responsible and profitable loans in two important ways: risk mitigation and trust-building.
Nonprofits can prepare homeowners for successful homeownership through financial education and counseling, expanding safe and sound lending opportunities for banks. They can also mitigate risk by perform the detailed, time-consuming underwriting that is necessary to differentiate a good-but-nontraditional application from a poor credit risk, said Neiman.
And at a time when many consumers are now wary of financial institutions, nonprofits can play an important role in increasing confidence in banks and developing customer loyalty, especially in those communities that feel they were targeted for predatory lenders.
The annual RIAC breakfast is hosted by NHS of New York City, a leading provider of homeownership education and financial assistance for first-time low- and moderate-income home buyers. In the past year, NHS invested $185 million in New York City neighborhoods and provided education to more than 11,000 residents.
The New York State Banking Department is the regulator for all state-chartered banking institutions, virtually all of the United States offices of international banking institutions, all of the State’s mortgage brokers, mortgage bankers, check cashers, money transmitters and budget planners. The aggregate assets of the depository institutions supervised by the Banking Department are more than $2.4 trillion.
In addition to regulating banking institutions, the Banking Department is active in informing and educating all New Yorkers on banking matters. To contact the Banking Department, please call 1-877-BANK-NYS or visit our Web site at www.banking.state.ny.us.
Superintendent of Banks, Richard H. Neiman Addresses the Regional Interagency Committee on Bank and Nonprofit Partnerships