HomeFed Plans Lower-Income Loan Increases
Responding to criticism from federal regulators, HomeFed Corp. on Friday unveiled a preliminary plan that would increase the number of housing-related loans that its HomeFed Bank subsidiary makes in low- and moderate-income neighborhoods.
HomeFed intends to increase the percentage of single-family and multiple-housing unit loans made in those poorer areas to 25% of total loans during 1991, HomeFed President Robert Adelizzi said Friday. During 1989, 15.4% of HomeFed’s loan volume was in low- and moderate-income areas, according to a federal Office of Thrift Supervision report released on Friday by HomeFed.
In that report, the OTS gave HomeFed’s loan activity in poorer areas a passing grade based on seven of 12 criteria. But the OTS ordered the S&L; to show improvement in five other areas. The annual report was required under the Community Reinvestment Act of 1977, which directs financial institutions to address the credit needs of lower-income consumers.
HomeFed’s proposal to improve its performance in low- and moderate-income neighborhoods drew mixed reviews from activists who have been pushing the OTS to more strictly enforce the CRA.
“I think HomeFed is moving in a positive direction,” said Jim Bliesner, reinvestment director for a joint reinvestment task force operated by the city and county of San Diego. “If everyone (agreed to make 25% of loans in poorer neighborhoods) then we wouldn’t see these dramatic pockets of disinvestment in San Diego. . . . I think 25% is a reasonable industry norm.”
HomeFed’s plan drew criticism, however, from Tom Fox, executive director of the Normal Heights Community Development Corp, which in the past has clashed with HomeFed and other financial institutions on their lending to lower-income consumers.
“I think that HomeFed is attempting to do some damage control here,” Fox said. “I don’t see that they’ve addressed any of the criticisms in the (OTS) examination.”
Fox faulted HomeFed for failing to “create a process or a structure needed to assess local community credit needs.” Rather, HomeFed continues to “react” to individual situations, Fox said.
Fox also said that HomeFed did not create any new loan packages that are designed to deal with the special needs of poorer consumers. “They don’t seem to realize that the same home loan made for (upscale homes in) Del Mar (won’t work) . . . for Normal Heights, East San Diego or San Ysidro,” Fox said.
Although the OTS didn’t order HomeFed to make a set percentage of total loans in poorer neighborhoods, HomeFed set the 25% level as a “first step” because the OTS generally has approved CRA plans at institutions where a quarter of total loans are in low- and moderate-income neighborhoods, Adelizzi said.
Community reinvestment guidelines were set in 1977, but federal regulators have only recently begun to actively enforce them. “I think that the lenders are finally realizing that they have been a little asleep at the wheel” when it comes to CRA lending, Bliesner said. “I think the good ones will now take (the OTS’ interest) as a good opportunity to build new CRA plans,” Bliesner said.
HomeFed, which in late October met with concerned citizen groups about its CRA plan, intends to create a lending committee that will review any loan applications from members of minority groups that are rejected, Adelizzi said. The S&L; also has hired a marketing firm that will create an advertising campaign aimed directly at minorities.
The CRA lending committee will review loan applications from minorities that are rejected. The S&L; will then be able to “explain” to federal regulators why those loan applications are rejected, Adelizzi said. Although HomeFed rejects about 30% of its overall loan requests, about 37% of the applications from minorities are rejected, Adelizzi said.
