CLEVELAND, Ohio — As three major banks approach the end of agreements that commit them to improving lending practices, local community reinvestment advocates are assessing how effective those pacts have been at helping the parts of Cuyahoga County that most need it.
Representatives from KeyBank, Huntington and Fifth Third, all of which have Community Benefit Agreements in place, spoke to that question Friday at the 30th annual Fair Lending and Vital Communities Conference at Cleveland State University’s Levin College of Urban Affairs.
Since they committed to CBAs in 2016 that collectively pledged $65 billion in investments over five years across the markets they serve, the three banks have made strides in certain areas locally, but have room for improvement in others, according to new research presented Friday by Frank Ford, senior policy adviser at the Western Reserve Land Conservancy.
Ford analyzed recently released 2018 Home Mortgage Disclosure Act data to assess the three banks’ home purchase and repair lending, as well as the amount of low-dollar loans and loans to low- and moderate-income households they made in Cuyahoga County, the city of Cleveland, the East Side, and inner-ring eastern suburbs.
“There is a need for people to get responsible credit to repair homes, to buy homes, and if they can’t get that, the [housing market] recovery we’re trying to have is going to be delayed,” Ford said.
Huntington Bank made more home-purchase loans across Cuyahoga County in 2018 than either Fifth Third or KeyBank — 960, compared with 624 and 293, respectively. But, Ford noted, KeyBank is “steadily improving.”
KeyBank is the top home-improvement lender of the three, but in 2018 made fewer home-improvement loans across all the locations Ford analyzed than it did in 2017.
Advocates are particularly concerned about lack of access to home-repair loans in neighborhoods that have suffered from disinvestment.
Last year, for example, Fifth Third made only one home-repair loan on the East Side. KeyBank made 24, down from 50 in 2017. Only Huntington increased its lending, from 13 in 2017 to 31 in 2018.
Ford noted that the plummet in East Side home values was the result of the irresponsible lending that preceded the foreclosure crisis. Now, “There are distressed homes there, but there are also decent homes there and they’re selling for $30,000, $40,000,” he said. “There is a problem with banks, for a variety of reasons, not wanting to make those loans.”
And looking at the number of loans at $50,000 or below — which Ford described as “a significant unmet need” — none of the three banks appears to have made great improvements from 2016 to 2018. In the eastern inner-ring suburbs, the three banks collectively made only 33 low-dollar loans last year.
Bank executives highlighted some of the ways they’ve sought to improve community lending over the last few years. Some of the measures they noted include:
* High loan-to-value mortgage programs, but with stronger borrower protections than the riskier loans offered before the foreclosure crisis.
* Regular completion of Community Needs Assessments that tell the banks what the unmet needs are in the markets they serve.
* Creation of new incentive structures so that mortgage loan officers are not incentivized to focus on higher-dollar loans.
* Loan products that look at nontraditional predictors of repayment, such as the borrower’s utility payment history.
* New positions at the banks that focus exclusively on low- and moderate-income borrowers.
Banking executives said the industry is trending toward accepting a wider variety of credit indicators. “There is a lot of work happening now across the industry on selecting different predictors of repayment, in a way that increases access to capital,” said Eric Fiala, senior vice president and director of corporate community initiatives at KeyBank. Given the “wealth of data” now available to banks, “how can we leverage that to provide more access as opposed to less?” he asked.
Barbara Anderson, chairwoman of the Greater Cleveland Reinvestment Coalition and moderator of the panel, said the banks did not provide much new information Friday, but she hopes to further engage with them in one-on-one meetings. “We really have to see some improvements,” she said, particularly on home-improvement and low-dollar loans.