Two representatives of predominately minority districts in the House have announced plans to introduce legislation that would impose Community Reinvestment Act mandates on insurance companies.
Jack Dolan, a spokesman for the American Council of Life Insurers, noted that no bill has been introduced on the topic as yet. However, he added that the ACLI believes the CRA does not work for the life insurance industry because insurance companies are not chartered to serve particular geographic areas.
“Our customers tend to represent the entire nation,” Dolan said. “In addition, there is no evidence that life insurers discriminate in providing protection and retirement security products, thus obviating the need for the imposition of CRA or similar requirements.”
Disclosure of plans to introduce the bill in the House came from a Dear Colleague letter obtained by National Underwriter that Democratic Reps. Eddie Bernice Johnson, Texas, and Luis Gutierrez, Illinois, sent to other members of the House.
In asking other members of the House to become co-sponsors of the “Community Reinvestment Modernization Act of 2007,” the 2 representatives said CRA mandates, currently confined to banks and thrifts, “remain an effective fair-lending tool in today’s rapidly changing financial services marketplace.”
But, they added, they believe that “despite the progress, minorities, women, and low- and moderate-income borrowers continue to receive a disproportionate amount of higher cost subprime loans.”
One purpose of the bill, they continued, would be to extend CRA mandates to “all affiliates of financial holding companies authorized by the Gramm-Leach-Bliley Act of 1999″–i.e., mortgage companies, insurance companies and securities firms.
“Applying CRA broadly throughout the financial industry will leverage trillions of additional dollars for wealth building, homeownership, small business ownership, and economic development in working class and minority neighborhoods,” they said.
“Finally, our bill will reduce pricing disparities in loans based on race, income and gender that threaten an increase in affordable homeownership opportunities,” they said. Extending it, they continued, would make “capitalism thrive in all neighborhoods by making financial markets more transparent and equitable.”
The Community Reinvestment Act now applies only to banks and thrifts and their affiliates. It requires them to serve the financial needs of their “market areas,” including the needs of low- and moderate-income residents.
Banks and thrifts are examined annually for their compliance with the law, although the examination requirements have been eased somewhat by a new law passed several years ago.
The institutions are examined on compliance with 3 tests: the lending test, the investment test and the service test.
The lending test requires institutions to make loans–for example, to build affordable housing–in their market area. The service test requires them to have facilities in all areas that they serve. And the investment test requires institutions to support development of affordable housing and other types of loans in their market areas–and making investments used to build affordable housing–outside the market area of the institution.