Washington Mutual works toward support goal
By Donna Kimura

Washington Mutual has invested about $35 billion in the first two years of a 10-year commitment to help underserved communities with loans and other financial support.
The healthy start puts the company ahead of pace to deliver on its promise of providing $120 billion in community support by 2009.

"We have had two very good years," said Robert J. Flowers, president of community investment and development.

Bank leaders say their pledge is an ambitious, but reachable target that would exceed the company’s requirements under the Community Reinvestment Act.

The CRA is a 1977 law that requires banks and savings and loan institutions to take action to help meet the credit needs of the communities they are chartered to serve, especially low- and moderate-income communities.

Washington Mutual’s plan touches on all the major areas in which the bank does business, including:

o Single-family lending – The bank plans to provide $81.6 billion in affordable housing loans to minority racial and ethnic borrowers, borrowers in low- to moderate-income census tracts and borrowers earning less than 80% of area median income. Of this amount, $30 billion is specifically targeted for low- to moderate-income borrowers.

o Small business and consumer lending – The company is committing $25 billion in loans to small businesses and consumers who have low to moderate incomes. These two areas have been combined because Washington Mutual leaders say that in many markets home equity is one of the strongest sources of capital for small business owners.

o Multifamily lending – The plan calls for $12.1 billion to go toward the development of apartments and manufactured home parks in low- to moderate-income census tracts or serving families earning less than 80% of area median income. There has been no minimum loan size for the multifamily loan program.

o Community investment – Washington Mutual plans to provide $1.3 billion in investments and in loans to community development and low-income housing initiatives, tax-exempt housing revenue bonds, minority financial institutions and community banks, and financial institutions targeting minority racial and ethnic communities or other community needs. Low-income housing tax credits fall into this area. Washington Mutual has a goal of investing about $100 million into tax credit funds this year.

It’s not just the size of the commitment nor the way the money will be used that make the program stand out, according to bank officials.

"What makes our commitment different from other institutions is that it is part of the business plan," Flowers said. "It’s committed to residential lending, business lending, consumer lending and equity investing."

Other institutions have set up separate entities to oversee CRA responsibilities, but Washington Mutual has integrated it into its core business so all line managers are involved in community reinvestment.

Washington Mutual leaders boast that their $120 billion commitment, which began in 1999 after its merger with H.F. Ahmanson & Co., the parent company of Home Savings of America, is "many times greater" than what is required under the CRA.
The bank has consistently received "outstanding" evaluations from the federal Office of Thrift Supervision, which reviews CRA performance, as well as generally good marks from independent watchdogs.

"WaMu is meeting its CRA commitment in overall dollar terms," said Alan Fisher, executive director of the California Reinvestment Committee, a San Francisco-based group working to revitalize the state’s low-income and minority communities by increasing access to credit and deposit services. "Its investments and grants have become very positive in the last year or so."

His praise is tempered, however, when he considers what more can be done.
Asked to point out an area that the bank needs to improve, he answered, "While its overall single-family lending dollars are positive, it is very weak in its lending to African-American and Latino borrowers."

Fisher added that "another weak point is its small-business lending, but this is understandable as it is a change for a savings and loan to do business loans."

Washington Mutual leaders say they are looking to improve its minority lending. Flowers specifically cited lending to African-Americans and Latinos as an area where he would like to boost volume. To help in this effort, the bank along with several other financial institutions has joined a Congressional Black Caucus Foundation initiative called With Ownership, Wealth. The goal of WOW is to create a million new African-American homeowners by 2005 by communicating homeownership opportunities and by offering a wide array of mortgage products.

At the heart of the company’s 10-year commitment is the pledge to provide more than $81 billion in home loans with $30 billion targeting low- and moderate-income borrowers. In the first year, Washington Mutual provided more than $4.3 billion in loans to people living in low- and moderate-income neighborhoods.

The company used a mix of loan programs, grants, community partnerships and homebuyer education programs to reach customers.

Another way that the bank is targeting minority and low- to moderate-income borrowers is by establishing home loan centers with loan consultants who reflect the market and are often bilingual. This has helped to attract Latino customers in Southern California as well as increase Asian customers in the San Francisco Bay Area, he said.

While the purpose of the CRA is to help lower-income families and underserved neighborhoods, the bank’s motivation is not simply to meet the mandate or to gain positive public relations, Flowers said.

Washington Mutual benefits by increasing its business lines and expanding into new communities.

"It’s good business," said Flowers, who began his career at the company as a loan representative. "These are loans that are profitable."

As an example of what can happen when expanding into an underserved community, Washington Mutual points to the opening of its Watts Financial Center in 1997. The center is located in one of the first commercial office developments built in South Central Los Angeles in more than 30 years. In just the first three months, more than 650 families and individuals opened accounts.

Community reinvestment also has sparked Washington Mutual to create several innovative programs for groups with special needs, including Native Americans. The bank is working with several Native American tribes and tribal organizations to make it easier for Native Americans living on reservations to obtain home loans. It also is involved in a new program that features Native Americans educating other tribal members about credit.

That’s not the only program to receive recent support.

Washington Mutual also recently joined forces with PMI Mortgage Insurance Co. to launch a $200 million pilot loan program to expand homeownership opportunities for low- and moderate-income borrowers in California, Texas, Florida, Washington and Oregon.

Under this program, borrowers will be able to buy a single-family home with as little as a 1% downpayment. Pre- and post-purchase counseling will be required. To be eligible, borrowers may have an income no greater than 80% of the area’s median except for certain counties in the San Francisco Bay Area where the maximum income will be 100% of area median. Washington Mutual will serve as the lender while the loans are insured by PMI.

In another example of its support, Washington Mutual provided $13.1 million in permanent and rehabilitation financing for a 39-building, low-income apartment complex in Renton, Wash., this year. Royal Hills originally was built in 1969 as family housing through the U.S. Department of Housing and Urban Development.

Under the new financing terms, the apartments will remain low-income HUD housing, with units available to households with incomes ranging from 45% to 60% of the area median income.

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