. 

In 

ACORN Housing Corporation 

846 N. Broad St. 

Philadelphia, PA 19130 

(215) 7654048 

Testimony of George Butts 

ACORN 

President of 

Housing Corporation 

Support of the Proposed Acquisition 

By NationsBank of BankAmerica 

July 9, 1998 
It is not the usual role of ACORN Housing Corporation to testify to the Federal 

Reserve Bank in favor of the merger of banks. We are living in a country where the 

homeownership rate for white households is 72%, but the homeownership rate for black 

households is 45% and Hispanic households is only 42%. Redlining and unfair barriers to 

credit have profoundly impacted our communities and we will continue to speak outon ~- 

these issues. ~~ 

-. ~..-Ware here today because NationsBank stands out as a leader in the COIIIIII~~~~~ 

reinvestment field. They are leaders for some very specific reasons. 

First, Nation-$&k has recognized that community organizations are the vehicle 

for real access to the community. We have too many banks which believe that an 

occasional loan to a community development corporation and a small grant means a 

partnership. NationsBank has invested in buildii the ird?astructure for nonprofit 

community organizations to grow and produce. For us that means that our housing 

counseling program has grown with Nations from five cities to now eleven cities across 

the country We have expanded the housing staff working in Nations cities &om ten to 

thirty two. 

Second, NationsBank has produced. The ACORN Housing Corporation / 

NationsBank partnership alone has produced over $236 million in mortgages. Virtually ah 

these loans were to lower income households, with small downpayments, with 

nontraditional credit, with cash on hand, and with older, urban housing stock. And these 

loans perform well with low delinquencies. 

Third, NationsBank has been flewible~ They were the first multistate lender to 

negotiate their mortgage underwriting standards with us. And their step forward did a lot 

to bring our kind of underwriting standards for low income people into the mainstream of 

the mortgage market At the time these things were pretty radical, but today no one 

thinks twice about the appropriate use of low downpayments, nontraditional credit, food 

stamps as income, voluntary child support, cash on hand, or steady income rather than the 

same job for two years. In the early days, plenty of lenders talked the t* but Nations 

rewrote their mortgage program and within a year we were doing 300 and 400 mortgages 

a year in cities like Houston and Dallas, Texas where other lenders told us low income 

people couldn’t handle owning a house. 

Fourth NationsBank is innovative. We are now talking with them about providing 

significant predevelopment and interim financing. Nonprofits lose out on the bidding for 

affordable multifamily housing projects to wealthier for profit speculators, unless we can 

move quickly to evaluate and acquire. Nations is hammering out a 30 day, fast track 

development mnd so that more multifamily properties around the country can be 

purchased, upgraded, and maintained as affordable housing by nonprofits. 

And NationsBank views their commitment to our communities as part of their 

business. Many lenders view their community reinvestment as a legal obligation, rather 

than a core market. With their new $350 billion dollar commitment and their aggressive 

50,000 unit target, we are seeing them view our communities as a market on their own. 
For me, the single event that best illustrates the NationsBank commitment to our 

communities occurred a few years ago when the Community Reinvestment Act was under 

attack in Congress by radical right-wing Republicans, NationsBank was the only national 

bank that took a public stand in support of the CRA-and when I say public I’m not just 

talking about writing letters, either. Cathy Bessant sat next to me in front of a hostile 

House Banking Committee and told the Congressmenexactly what they didn’t want~to ~~~_ ~~ 

hear. She testified that NationsRank was against any effort to weaken the CRA. 

NationsBank was bucking the industry mainstream, but the message was clear 

NationsBank saw the underserved markets covered by the Community Reinvestment Act 

as their market. 

NationsBank’s $350 biion, ten year community investment commitment is 

different from the commitments we see from other lenders. Nations senior management 

sat down for a day with us and the product of those discussions shows up in the single 

family, multifamily, and economic development commitments. We know NationsBank 

listened and responded and they have done the same with other groups. This is in contrast 

to the CitiBmravelers commitment, where they have yet to even agree to a meeting 

with us, where the NationsBank commitment in mortgage production alone equals the 

Citibank/Travelers total commitmen< and where CitiBank/Travelers puffed up their 

numbers with credit card debt. The NationsBank commitment also contrasts favorably 

with the Bank One-First ChicagoNBD, which has made no corporate-wide CRA 

commitment to low and moderate income communities. 

We have worked with NationsBank in projects lie the Sweet Auburn Ave. project 

in the Martin Luther Ring District of Atlanta, where some said the property values were 

too low to make new construction work, and they made it work. We worked with them 

in the Cherry Hill project in Baltimore where some said the neighborhood was too rough 

for homeownership and they made it work. They did not do it just by themselves, but they 

figured out how to make it work with community partnerships and creative products. 

When a Mexican-American family wanted to buy a $28,000 house in Houston, Texas, 

Nations was the first lender who let us use cash on hand, who lets us stretch their ratios to 

match what they were already paying in rent, and let their church give a gift for their 

closing costs. 

We support the NationsBank acquisition of BankAmerica because our experience 

with NationsBank is that they do more than talk. They will make credit work for low and 

moderate income people and they will work with the community institutions. The fight for 

affordable housing and fair access to credit is not over, not by a long shot, but 

NationsBank has been an ally and, among lenders, a leader in these struggles. We believe 

they will bring to the Bank America markets the same attitude of innovation, flexibility, 

and production. 

Thank you, 
, I 

. 

National Office 

1111 19111 Srreet. N.W.. Suite 1000 

Mshingmn, DC 20036 

Phone (202) 7s1670 

Far (202) 776.1772 

July 2, 1998 

(Via overnight carrier) 

Mr. A. Linwood Gill, III 

Vice President 

Federal Reserve Board of Richmond 

701 East Byrd Street 

Richmond, VA 23261.4528 

Reference: NationsBank-Bank of America Merger 

Dear Mr. Gill: 

I write, on behalf of the National Council of La Raza (NCLR), to inform you of our views 

regarding the proposed merger between NationsBank and Bank of America. NCLR is the 

nation’s principal national Hispanic organization, representing more than 200 affiliated 

community-based organizations that together serve more than three million Latinos each year 

in 32 states, the District of Columbia, and Puerto Rico. As an organization committed to 

reducing poverty and discrimination against and improving life opportunities for the more than 

30 million Americans of Hispanic descent, NCLR has a deep and profound interest in the 

outcome of this and other so-called “megamergers” taking place among the nation’s financial 

institutions. 

NCLR as a general rule does not take policy positions on mergers or financial industry 

consolidations per se. We have, however, addressed specific aspects of proposed 

“modernization” legislation and related rulemaking insofar as they may produce disparate 

impacts on Latinos and other low-income or ethnic minority communities. In this connection, 

we note below several aspects of the proposed merger that deserve considerable scrutiny by the 

Federal Reserve. 

At the outset, we acknowledge that both NationsBank and Bank of America have Community 

Reinvestment Act (CRA) track records that are well above industry averages. Both received 

“outstanding” CRA ratings from the Office of the Comptroller of the Currency. In addition, 

NCLR has considerable direct experience with both of these institutions. 
With respect to NationsBank, it has been a leader in a number of high profile national efforts 

focused on CRA and related activities. It sponsored the “Blueprint 2000” conference in 1992, 

which was something of a watershed in the history of the community reinvestment movement. 

Its Chief Executive Officer has been a highly-visible supporter of CRA and affirmative action. 

It has a strong and consistent record of direct support of national advocacy organizations and 

intermediaries involved in community reinvestment. Moreover, since its expansion from the 

deep south to areas of the country with significant Hispanic populations, NationsBank has 

supported a number of noteworthy affordable housing and homeownership programs, including 

several operated by NCLR affiliates. For the past year, NCLR and NationsBank have been 

engaged in highly promising discussions centered on facilitating pre-development or 

“recoverable grant” support to NCLR affiliates and the expansion of NCLR’s community 

development subsidiary. 

With respect to Bank of America, we note that the Hispanic Association for Corporate 

Responsibility has given it higher-than-industry-average ratings for its philanthropic efforts 

involving Hispanic organizations and its Latin0 employment record. We note further, in the 

interests’ of full disclosure, than a high-ranking Bank of America executive has served with 

distinction as a member of NCLR’s Corporate Board of Advisors. We also note that NCLR 

and several of its affiliates have been in long-standing discussions with Bank of America 

regarding a partnership to support a major homeownership initiative. While these negotiations 

have yet to come to fruition, NCLR remains hopeful that successful partnership can be 

established. 

Notwithstanding our considerable successful program experience with these institutions, NCLR 

believes that there are several broad policy issues that should be considered. First, we would 

request that the Federal Reserve carefully consider the impact of the proposed merger on 

enforcement of the fair lending laws. The Board has previously indicated with respect to one 

of the banks involved that unresolved questions regarding fair lending performance would be 

investigated further, and that it might subsequently require changes in the lending process. 

NCLR encourages the continuation of this policy in this case. 

Second, we request that the Board scrutinize the issue of “subprime lending” in the context of 

the merger. A number of credible sources have alleged that subprime lending subsidiaries may 

engage in predatory lending practices which have disproportionate, negative impacts on ethnic 

minorities and low-income communities. NCLR recommends that the Federal Reserve 

investigate whether and the extent to which such allegations are true, and if proven, require 

appropriate procedural reforms in conjunction with the merger. 

Third, NCLR requests a careful, comprehensive assessment of the merged bank’s plan to 

assure compliance with the spirit and the letter of the Community Reinvestment Act (CRA). 

We would note initially that a number of banks previously have submitted community 

reinvestment plans as part of their merger applications; we believe that the Board should 

require such a submission in this case, given the size and scope of the transaction. We note 

further that, while major CRA commitments that typically are announced during financial 

companies’ mergers are most welcome, they generally are not accompanied by any 
mechanisms to assure that such commitments are actually fulfilled. In this connection, we 

believe that a formal CRA plan included as part of a merger application constitutes an ideal 

accountability mechanism. 

Furthermore, we would request that, in determining the adequacy of such plans, the Federal 

Reserve consider: the extent to which previous CRA performance goals have been met; the 

extent to which such plans lay out in sufficient detail how the needs of specific groups, such as 

Hispanic Americans, will be addressed subsequent to the inevitable institutional and procedural 

changes that will take place as a result of the merger; and direct input from local, grassroots 

community groups, preferably through public hearings. With respect to the last point, we note 

that the Board has scheduled a public hearing on this matter, which NCLR greatly appreciates, 

With respect to measuring the extent to which the merged bank’s CRA plan adequately serves 

the nation’s growing Latin0 community, we would urge the Board to consider encouraging the 

establishment of a community development fund, constituting no less than 10 percent of the 

merged bank’s total CRA commitment, targeted to predominantly Hispanic communities. 

Inasmuch as the record demonstrates that Hispanic communities and organizations have not 

benefited fully from prior CRA commitments, we believe it would be highly appropriate, 

consistent with applicable laws, for the merged bank to establish clear goals for assuring that 

the credit needs of&l low-income Americans are addressed in the merged bank’s CRA plan. 

In conclusion, notwithstanding the considerable credibility that both NationsBank and Bank of 

America have as independent institutions with respect to CR4 performance, NCLR believes 

that the merger offers the Board an opportunity to address several important policy questions. 

To the extent that these issues are adequately and substantively addressed, the National Council 

of La Raza would be prepared to endorse the proposed merger. 

We request the opportunity to amend these comments as more specific information becomes 

available to us during your consideration of this merger application, and we thank you for the 

opportunity to present our views. 

Sincerely, 

/J-+-4/ 

Raul Y zaguPresident