Texas Community Reinvestment Update 2007

Agency Strategies to Promote Community Reinvestment in Texas

Each member of the Community Reinvestment Work Group submitted to the Comptroller's office their agencies' strategies to promote community reinvestment in Texas in 2007 and 2008. These strategies do not necessarily reflect the views of all members of the Community Reinvestment Work Group.

Banking Strategies

Most of the financial institutions the Texas Department of Banking (Department) supervises are community banks. Banking regulations require community banks to meet the needs of their communities in order to compete with other financial service providers. Some of these branches are located in low- to moderate-income areas. The Department promotes banks' participation in community reinvestment programs and reviews banks' corrective actions taken on previously cited weaknesses noted in CRA examination reports.

The Department will support financial institutions participating in government-sponsored programs designed to spur community reinvestment. The Department has waived corporate fees for applicants that plan to serve low- and moderate-income areas.

Financial education, or the public's knowledge of financial matters, is an interrelated component of community reinvestment, since consumers who are uneducated about financial matters are ill-prepared to take advantage of community development opportunities and often become the victims of frauds and scams. Unfortunately, due to the lack of basic financial training, many Texans accumulate excessive debt at an early age or remain "unbanked" because of being intimidated or unaware of the benefits of banking services. These individuals, when growing in their own financial education development, improve themselves, their families and their community. The banking system also benefits through enhanced safety and soundness and from customers who are better educated about financial matters and better prepared to take advantage of business opportunities that become available.

To help address this financial education problem, the Department initiated a program to improve Texans' knowledge of financial matters. A financial education coordinator is now employed to serve as the point of contact for information exchange to address financial education issues in Texas. The financial education coordinator collaborates with financial institutions, federal, state and local agencies, minority groups, companies and non-profit organizations to assist Texans in becoming more knowledgeable of financial matters.

The Department's goal is to encourage state-chartered banks in Texas to provide financial education programs in their communities and assist where possible in providing information on available programs and training materials. A number of state-chartered banks have implemented their own financial education programs or are contemplating new programs, but the Department did not possess an inclusive list of these institutions.

In August 2006, the Department requested that all state-chartered banks complete an online survey about their financial education initiatives. Survey responses helped the Department identify those banks that have initiated financial education programs in Texas and those banks that may have other financial programs under development. A total of 154 banks responded to the Department's survey as of September 2006. Results showed that 60 percent of banks in Texas provide customer service in non-English languages and nearly 80 percent of banks in the state do not have a person to coordinate or provide customer financial education. While 60 percent of the state's banks do not conduct financial education training for their communities, almost 90 percent of the survey respondents indicated interest in providing financial education services to people in the communities they serve.[73]

The Department held a number of free banker outreach sessions to be held in Amarillo, Corpus Christi, Dallas, El Paso, Houston, McAllen and San Antonio in April and May of 2007. The goal was to bring together financial education coordinators from different regions of the state, provide financial education training to these coordinators and encourage statewide participation in common educational goals.[74]

Economic Development Strategies

The Small Business Assistance team in the Governor's Division of Economic Development and Tourism Division (EDT) will continue to conduct small business summits in various Texas cities to provide small business owners an opportunity to meet lenders and learn more about securing financing. The team also provides Web-based assistance through the Governor's Office Web site for individuals who are seeking information on starting and financing a business.[75] The Small Business Assistance team will continue to respond to telephone calls and correspondence from Texas citizens who want to learn more about securing financing.

In addition, EDT works with local communities and various state agencies (i.e. Texas Department of Agriculture, Texas Workforce Commission, Texas Commission on Environmental Quality and Texas Department of Transportation) on projects to create jobs and opportunities in Texas communities.

Housing Strategies

The Texas Department of Housing and Community Affairs' (TDHCA) strategies for community reinvestment include disaster relief to areas of east and southeast Texas negatively impacted by Hurricane Rita. The agency also uses increased capital from the TDHCA First Time Homebuyer Program, and through its 2008-09 Legislative Appropriations Request for securing bond fee proceeds to conduct affordable housing market studies and analyses statewide.

In 2006, TDHCA and the Office of Rural Community Affairs allocated $74.5 million in CDBG funds for housing and infrastructure needs in areas affected by Hurricane Rita. In April 2007, the U.S. Department of Housing and Urban Development approved Texas' plan for distributing CDBG funds. Most of the $428 million in federal funds will be directed to rebuilding affordable housing destroyed by Hurricane Rita in 2005.

The City of Houston will receive about $60 million for community and law enforcement expenses incurred for Hurricane Katrina evacuees. The $428 million approved for drawdown by Texas represents less than half of the original $1.2 billion requested for the cost of caring for 400,000 hurricane evacuees.

TDHCA agrees with the research results of recent studies showing that homeownership provides stability for families and communities. TDHCA helped stabilize a number of communities in 2006 with the allocation of $255 million in homebuyer funds. Nearly half of these funds went to Rita "Gulf Opportunity" zones and underserved communities. TDHCA will continue issuing bonds to support the release of more homebuyer funds to provide more stability for communities across Texas.

TDHCA continues to seek funds collected from bond fees from legislation passed in the 78th Legislature, Regular Session. Due to the omission of a budget rider in the state budget bill passed in 2003, TDHCA has been unable to access these funds. Texas Government Code Section 2306.259 directs TDHCA to conduct studies statewide that examine the effect of affordable housing on communities.

TDHCA also continues to allocate approximately $40 million in housing tax credits each year through its Housing Tax Credit program. This public-private partnership helps bring approximately 7,000 new and rehabilitated multifamily units into communities across the state, many of which are located in qualified census tracts.[76] TDHCA supports the use of private capital from tax credits for new and upgraded homes for families in underserved communities.

Insurance Strategies

The Texas Department of Insurance's primary community reinvestment goal is making insurance affordable and available to Texans. TDI's strategies to promote community reinvestment in 2005-06 include encouraging a competitive market by ensuring that consumers can choose from an array of fairly priced products. TDI has adopted new policy forms and endorsements for homeowner's insurance. Endorsements are options, generally to add coverage, in the insurance policy. This gives insurance companies more flexibility in the products they offer.

TDI will continue to study and analyze the effect of credit scoring on insurance availability and affordability in underserved areas. TDI's Consumer Protection Division sponsors educational programs to help consumers determine their available insurance options. The division also provides instructions on how to file a complaint if specific products are not offered in a consumer's area.

Other TDI programs help protect consumers from the loss of insurance even when an insurer becomes insolvent and is placed into receivership. Most insurance policies are covered by one of the state's guaranty funds, which pay claims for insurers that become insolvent. The funds cover up to $100,000 for individual life insurance and annuity policies and up to $300,000 for property and casualty insurance policies.

The 75th Legislature in 1997 required life and health insurance providers, but not property and casualty insurance companies, to report their investments in Texas. Although Texas law does not require separate disclosure of investments in low- and moderate-income communities, some insurers reported their investments voluntarily. The Community Reinvestment Report for 2005 found that insurers held almost $45.6 billion in Texas investments, and insurers identified $764 million of their total investments in economically disadvantaged areas.