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Roma Bank, a $760 million mutual thrift institution based in Mercer County, New Jersey, was founded in 1920 by a group of Italian immigrants who settled in the Chambersburg section of Trenton. They formed the Roma Building and Loan Association. The object of the founders was simple: to encourage the promotion of savings and use the deposits to make mortgage loans to its members and the community.
After the Community Reinvestment Act became law, Roma Bank took the bold step of assigning priority to CRA compliance. Rather than complaining about CRA rules and the burden of compiling extensive compliance documentation, Roma Bank took the position that the law was not going to go away and financial institutions had to learn to integrate the CRA and its supporting regulations into everyday operations. From the beginning, the goal of Roma Bank was to strive for nothing less than an outstanding CRA rating.
Since the early days of CRA, Roma Bank’s CRA Committee — consisting of the bank’s president, chairman of the board, two senior vice presidents, the vice president of lending, and the supervisor of mortgage servicing — has met as often as necessary and at least quarterly. The thrust of the committee’s work has been to develop new and innovative approaches to providing CRA products and services. The bank also uses the talents of its marketing department to promote community awareness of its lending and savings products.
The CRA committee of Roma Bank embraces the use of loan geocoding to track changes in lending patterns. Roma Bank generates quarterly data that contain the number and dollar amount of loans originated in the bank’s CRA-defined assessment area of Mercer County and northern Burlington County. These data are compared against the results of lending patterns generated by the CRA compliance examiners of the Office of Thrift Supervision (OTS). If the data point to an adverse change, the CRA committee discusses potential ways of addressing it.
The key to a successful CRA compliance examination and an outstanding rating is innovation. For example, Roma Bank was the founding Mercer County member of a First Home Club (FHC) that was developed in partnership with the Federal Home Loan Bank of New York (FHLB-NY). The FHC matches savings deposits made by qualified participants on a three-to-one basis up to $5,000. The FHC’s objective is that savings deposits coupled with the FHLB-NY matching grants will generate sufficient funds to be applied toward a first-time purchase of a home.
Since the inception of the FHC in 2001, Roma Bank has made 23 home-mortgage loans totaling $1,842,000 to 23 first-time home buyers. Another 46 active participants are in various stages of the application process. While the dramatic rise in housing prices has become a formidable barrier to pre-qualifying participants in the FHC, Roma Bank eases some of the financial burden by waiving the mortgage-application fee and assuming a portion of the application expense, such as the cost of the appraisal.
Roma Bank has established a specific set of lending guidelines that include extended repayment terms (provided the term does not exceed the estimated useful life of the asset securing the loan), reduced debt coverage ratio for owner-occupied property (occupancy of the property by the owner is at least 51 percent), and consideration of start-up financing for small, women-owned, and minority-owned businesses located in low- to moderate-income communities.
Roma Bank deems it important that start-up businesses have a sound business plan, the principals have a stable and continuing history of employment or experience in a similar or related field with the ability to generate income sufficient to service debt, and the loan is collateralized. Graduation from an entrepreneurial training program recognized by the bank is a positive compensating factor for limited history of employment or experience. If necessary, Roma Bank may require the borrower to retain a business consultant and accountant throughout the life of the loan.
Roma Bank has responded to the needs of Trenton’s Hispanic population by developing its mortgage application forms in English and Spanish and hiring a Spanish-speaking customer service representative in its Chambersburg office in Trenton.
In another dimension of the bank’s community involvement, seven Roma Bank officers and directors are represented on nonprofit boards and committees, many of which directly benefit low- to moderate-income neighborhoods. The president of Roma Bank, New Jersey State Senator Peter A. Inverso, is also a board member of Angel’s Wings, a nonprofit that provides respite care for at-risk children under the state’s care.
Rising house prices have contributed to a slowdown in new home purchases in all of Roma’s assessment area. The challenge is to develop strategies to maintain the bank’s market share in new loan originations, especially in loans secured by residential housing units in low- and moderate-income neighborhoods. This challenge is one that confronts almost every financial institution located in a major urban market. Through its CRA committee, Roma Bank will continue to seek innovative CRA lending opportunities.