With the passage of an ordinance which will require banks and financial institutions receiving deposits of county funds to provide information regarding community reinvestment activities, the stage is set for responsible lending to increase in Essex County
By Phyllis Salowe-Kaye
In the past week, with the full support of the County Executive, the Essex County Freeholders took an important step forward that should be emulated by every county and city in New Jersey. With the passage of an ordinance which will require banks and financial institutions receiving deposits of county funds to provide information regarding community reinvestment activities, the stage is set for responsible lending to increase in Essex County.
Congress enacted the Community Reinvestment Act in 1977 to encourage depository institutions to help meet the credit needs of low and moderate income neighborhoods. For over 30 years New Jersey Citizen Action has been a leader in New Jersey, working with banks to ensure they comply with the Act. NJCA has negotiated agreements with more than 30 institutions resulting in commitments of $40 billion in below-market rate mortgages, discounted home improvement loans, construction and permanent financing for nonprofit affordable housing developers and small business loans for women and minority-owned businesses
The ordinance should enable the county to flag an institution like Hudson City Bank, which recently agreed to pay $33 million to settle civil charges in a case of redlining, a practice where an establishment refuses a loan or insurance to someone because they live in an area deemed to be a poor financial risk. The action was brought jointly by the U.S. Department of Justice and the Consumer Financial Protection Board, which will not tolerate racial discrimination in the extension of credit.
Essex County has a history of making sure that banks are held accountable and invest in the communities in which they operate. In 1999, when New Jersey Citizen Action notified the freeholders that one of the banks that held county deposits had made more than a thousand mortgages, of which only two were approved for African American borrowers and none in the City of Newark, the freeholder board removed $12 million from the bank and deposited the funds into another that had a strong record of meeting the lending, investment and service needs of all county residents.
Essex County's ordinance is timely and relevant, with the case of Hudson City Bank, which allegedly wrongfully discriminated against prospective African American and Hispanic borrowers by denying residents in predominantly minority neighborhoods in New Jersey, Pennsylvania and Connecticut fair access to mortgage loans and credit. Despite their poor lending record, Hudson City Bank is still on the list of banks approved to receive deposits from Essex County. This situation should hopefully change with the enactment of the county's ordinance, and demonstrates the need for every city and county to be deliberate when making decisions as to where taxpayer dollars are deposited.
The billions of dollars deposited into financial institutions can be leveraged to ensure that community reinvestment will take place where it is most desperately needed. This is an incredibly powerful tool elected officials have in their toolbox. The practices and products that are developed by banks and financial institutions have a measurable effect on the tax base, the quality of life and the overall economic viability and competitiveness in our neighborhoods. There is an obligation that depositories commit to fair and non-predatory practices when making loans and providing services.
The Essex County Freeholder Board, led by President Britnee Timberlake, will be reviewing the lending practices of banks to ensure that taxpayer dollars are placed in financial institutions that have truly earned the county's business. The ordinance needs some fine tuning and hopefully that will take place over the next few weeks before the final vote on October 21. New Jersey Citizen Action applauds Essex County for setting the bar in New Jersey to ensure banks reinvest into communities where they operate. Now it's up to others to step up to the plate too.
Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action.
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