Governor Hochul Signs Legislation Expanding New York Community Reinvestment Act to Non-Depository Mortgage Lenders
Governor Kathy Hochul today signed legislation (S.5246-A/A.6247-A) to ensure equal access to credit by expanding the New York Community Reinvestment Act (CRA) to cover non-depository lenders.
When the CRA was enacted in 1978, banks originated the vast majority of mortgages. Since the 2008 financial crisis, non-depository lenders have dramatically increased their market share, and nonbanks are now responsible for a majority of mortgage originations in New York State and nationally.
"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," Governor 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."
Acting Superintendent of Financial Services Adrienne A. Harris said, "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. 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. I thank Governor Hochul and the New York State Legislature for modernizing the New York CRA."
In February 2021, the Department of Financial Services issued a report on its investigation into potential redlining in the Buffalo metro area and found that nonbank mortgage lenders, which were not covered by the New York CRA, Banking Law § 28-b, were failing to serve their whole communities. The CRA is a law intended to encourage covered institutions to meet the credit needs of their whole communities including through the Department's evaluation of their lending activities.
The DFS investigation revealed that certain lenders had little or no engagement with local communities of color and made scant efforts to engage them. DFS found minimal or no marketing directed to minority borrowers and no effort was made to serve majority-minority neighborhoods within the metro area. DFS also found lenders made little or no effort to track how well they were serving minority communities.
Borrowers of color and low- and moderate-income communities remain underserved. This update to the state CRA is vital to encourage major participants in the mortgage market to better serve any New Yorker who seeks to buy a home.
Majority Leader Crystal Peoples-Stokes said, "We must continue to invest in our local communities, especially those that largely consist of people of color as the pandemic has exacerbated economic inequities. This law is designed to build a stronger, fairer economic system by expanding access to homeownership to our disenfranchised communities of color."
Senator Tim Kennedy said, "Redlining, in the form of institutionalized racism that it is, has unjustly targeted communities of color for decades in the City of Buffalo and across all of New York State. This legislation seeks to hold lending institutions accountable, and to ensure they truly serve the communities where they do business. I was proud to introduce and fast-track this legislation this past session alongside Assembly Majority Leader Peoples-Stokes, and I thank Governor Hochul for swiftly signing it into law."
Barika Williams, Executive Director, Association for Neighborhood and Housing Development (ANHD), "The Community Reinvestment Act (CRA) has long been one of the most important laws we have to hold banks accountable to equitably serve and reinvest in low- and moderate-income communities and communities of color that have and continue to face redlining and disinvestment. ANHD thanks Governor Hochul and New York State Legislature for now expanding the CRA to cover non-bank mortgage lenders to increase access to the responsible credit and financial resources our communities need."
Neha M. Karambelkar, Western New York Law Center said, "This legislation is a significant step for New Yorkers, specifically underserved communities of color, to ensure that they have the opportunity for homeownership and equal access to financial products. This is an important accomplishment for the Governor and the New York State Legislature to ensure the effectiveness of the CRA for minority and low- and moderate-income communities."
Kathryn Franco, Chair, Niagara Community Reinvestment Coalition said, "It is more critical now than ever to ensure communities of color have expanded opportunities to access credit as we work to emerge from a global pandemic which has battered and added uncertainty to the economy. The expansion of the New York CRA to cover non-depository mortgage lenders furthers access to credit to aspiring homeowners and provides the regulatory reinforcement required to further ensure community protection from extractive or exploitive practices."