Proponents of expanding and updating the Community Reinvestment Act (CRA) argued for the inclusion of non-bank depositories and more flexibility in how lenders receive credit for complying with the act’s regulations, while at least one opponent argued for repealing the act during a House Financial Services Committee hearing Wednesday.

The CRA is designed to encourage banks to lend to all communities in the region where they are located and prohibits discriminatory lending practices.

When the act was established in 1977, most banks were regional or state institutions. Now they’re national and international institutions and the CRA needs to be amended to take that shift into account, said John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC), an association of more than 600 community organizations that promotes equal banking services for low- and moderate-income individuals.

Massachusetts bank commissioner Steven Antonakes testified that credit unions should be included in the federal act, as they are in his state’s version of a state CRA, but warned “extending CRA to credit unions is not as simple as just cutting and pasting the bank regulations and applying them to credit unions.”

Antonakes said key differences in credit unions’ business operations, specifically industry unions that represent workers, rather than residents of a regional area, should be taken into account.

Some proponents of expanding the act argued banks should be required to include affiliate companies when they are evaluated for CRA compliance.

In a letter to the committee, National Association of Federal Credit Unions (NAFCU) president B. Dan Berger opposed that proposal and said that if all financial institutions acted like credit unions — taking deposits and lending to only their members — there wouldn’t be a need for banks to be regulated with the act.

Lawrence White, a New York University professor of economics, opposes the act and called for its repeal. He said the CRA’s goal of promoting bank lending in the communities where they are located is outdated and based on a perception of banks, “where competition was not especially vigorous and state and national regulations often impeded entry and prevented banks from branching outside their home communities, which thereby often created pockets of local market power.”

White said enforcement of equal and fair lending practices is already covered in the Equal Credit Opportunity Act, the Fair Housing Act, federal antitrust regulations and various state legislations.

When there is a case to be made for local lending initiatives, it should be accomplished through federally funded programs, similar to the Community Development Financial Institutions Fund, White said.

Another point of contention among the group of witnesses is what role the proposed Consumer Finance Protection Agency (CFPA) would have in enforcing the CRA. While Taylor from the NCRC advocated that if the CFPA is created, it should take over jurisdiction of enforcing the CRA, Leslie Anderson, president and CEO of Nebraska's Bank of Bennington and an officer of the American Bankers Association, opposed such a move.

“The CRA is not a consumer protection law and any re-assignment of CRA responsibility to a specialized consumer protection agency untutored in, and un-constrained by, a safety and soundness mission would unnerve the regulatory process,” Anderson said.

Some proponents of the amending the act said there should be increased incentives for banks that comply with the regulations.

Orson Aguilar, executive director of the Greenlining Institute, a non-profit group originally founded to stop the discriminatory lending practices of redlining, argued banks should be given more leeway in how they promote wealth building in their communities. By establishing more broad definitions, banks could promote job growth and philanthropy efforts for CRA credit.

Write to Austin Kilgore.

The inventory of unsold homes in San Francisco was at its lowest level in more than two years in August, according to the San Francisco Association of Realtors and the Rosen Consulting Group.

There was a 2.6-month supply of homes in August, down from the peak of 5.8 months' supply last November.

The monthly supply is derived from the number of homes for sale on the last day of the month, divided by the number of homes that went into contract during the same month. In other words, it's the months of supply based on the current contract rate.

“A low months of supply number, such as we have now, is a sign of a tight housing market and usually signals rising prices lie ahead,” said Ilse Cordoni, the association’s president.

The decrease in supply was driven by low mortgage rates, federal incentives and improved affordability, which have all brought buyers into the San Francisco market.

But prices declined in August to $705,000, down 9.7% from July 2009 and down 14.5% from August 2008. Since market supply is derived by properties that are in contract, but not closed, there is a lag between the two metrics, Cordoni said.

The supply of condos is also declining in the region, and there is now a 3.4-month supply, down from a 10.4-month supply in November 2008. The median price increased 12.5% from July to $680,000.

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Southern California home sales declined from July to August, but the median price paid for homes continued its four-month-long run of increases, according to MDA DataQuick.

There were 21,502 new and resale homes sold in Southern California’s six-county region that includes Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties during August. That is down 10.8% from 24,104 in July, and up 11% from 19,366 in August 2008.

It was the 14th month in a row that sales have increased on a year-over-year basis. MDA DataQuick said the monthly decline was unusual in July, as the month historically sees an increase, MDA DataQuick said.

“There’s still a lot of uncertainty out there about prices, interest rates and the availability of mortgage money,” said MDA DataQuick president John Walsh.

“Additionally, we don’t know if this drop in foreclosure resales is temporary. We’re hearing from public agencies and the banking industry that there’s still a lot of financial distress in the pipeline,” he added.

Foreclosure resales’ share of the market declined from 40.7% in July to 38.8% in August. Fewer foreclosure sales helped boost the median price paid for homes to $275,000, up 2.6% from $268,000 in July, but down 16.7% from $330,000 in August 2008, MDA DataQuick said. The month-to-month increases are on a four-month run after the monthly median price fell to a more than seven-year low of $247,000 in April.

Government-insured, FHA mortgages made up 37.4 percent of all purchase loans in August, up from 37.0 percent in July and 27.1 percent in August last year, MDA DataQuick said. Adjustable-rate mortgages (ARMs) accounted for only 3.9% and jumbo loans accounted for 15.6%.

Write to Austin Kilgore.