New York expands CRA requirements to nonbank mortgage lenders

WASHINGTON — New York Gov. Kathy Hochul on Monday signed legislation expanding the state’s version of the Community Reinvestment Act to apply the anti-redlining law’s obligations to nonbank mortgage lenders.

The bill follows a recommendation earlier this year from the New York State Department of Financial Services that state legislators amend the law to capture mortgage lenders, which have taken significant market share of the mortgage origination business from banks since the 2008 financial crisis.

"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," Hochul said in a statement.

Adrienne Harris, the state’s acting superintendent of financial services, called the move “a win for consumers.”

Bloomberg News

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,” she said in a statement.

With the new legislation, New York joins Illinois and Massachusetts in subjecting nonbank mortgage lenders to CRA requirements. Each of the states has a state-level CRA framework mirroring the federal regime that assesses banks' lending and investment in low- and moderate-income areas. Connecticut also applies CRA to credit unions. Yet federal policymakers have so far resisted calls to expand CRA to nonbanks.

Discussions of including nonbanks in the CRA regime have heated up as federal banking regulators have weighed reforms to the law. The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency announced July 20 that they would embark on an interagency rulemaking effort to update CRA, the latest development in a deeply contentious reform process that began almost three years ago.

Fed Chair Jerome Powell even weighed in on the issue in May, indicating his support for Congress to subject non-depositories to CRA requirements.

"Like activities should have like regulation,” Powell said. “In terms of … the specific question, that's really one for Congress to make a decision about, but I like to think, though, that consumers require protection and low- and moderate-income communities require credit support, regardless of the nature of the institution.”