Mr. ROSENTHAL. Mr. Schochat. STATEMENT OF MICHAEL SCHOCHAT, VICE PRESIDENT, Mr. SCHOCHAT. Thank you, Congressman, Mr. Chairman, members of the committee. On behalf of the Chemical Bank, I would like to express our appreciation for the opportunity to appear before this committee to discuss Chemical Bank's commitment to the development of its New York City community, including low- and moderate-income neighborhoods. Chemical Bank is an equal opportunity lender, and through the years has maintained an outstanding CRA performance, both in its active position against discriminatory lending practices and its efforts to address community credit needs through special programs and services. The urban services group, for which I am responsible, was organized in January 1981 in order to coordinate the outreach efforts of the urban affairs department, urban finance department, and the Community Reinvestment Act administrative area. Officers of my area are guided by the principles that govern all credit decisions for Chemical Bank, but they go further to assist a small business person, a housing developer, or local not-for-profit organization in finding resources he or she may not know existed or may otherwise not have formal access to. Our group coordinates a vital network between Chemical's branches and corporate structure, as well as community planning boards, not-for-profit organizations, Government agencies, and concerned citizens. In this centralized capacity, it is able to initiate and respond to innovative program ideas for addressing special housing needs, community service, and economic development projects. Chemical Bank's Streetbanker program, consisting of nine fulltime employees, works directly in communities throughout the nine-county areas to determine their credit needs. These communities are located not only in geographic target areas like BedfordStuyvesant and the South Bronx, but also consist of communities of people such as senior citizens, exoffenders, abused women, racial and ethnic minorities. The Streetbankers use their expertise in three capacities: In making contributions decisions, approving loans for bridge financing, and offering technical assistance. The contributions are made, for the most part, to small not-for-profit community service organizations. These grants are used as seed capital and matching grants and are judged on two criteria: One, the grant's benefit to the community and the benefit to the bank in terms of increased economic and social health of its marketplace. In this area, during 1980, 169 contributions totaling $286,410 were made. During 1981, contributions totaling $369,200 were given to 192 organizations. Now let me emphasize, these are grassroots organizations within the communities. The average grant at these grassroots levels range from $1,000 to $2,500 in grant giving. The projected budget for 1982 is $588,750, more than 25 percent increase over 1981 levels. The lending function of the Streetbankers has been one of responding to credit needs in nontraditional lending situations. Lending against receivables such as voucher payments from a public funding source and responding to credit needs of nontraditional borrowers such as a small dance company or exoffender program. As each lending situation has been tested and has become less risky and more manageable, these business opportunities are turned over to the branches. For example, now branches readily entertain loan requests from arts organizations with "Yes letters, a type of pending grant, from the New York State Council on the Arts. Because of the success of this affirmative lending program, State, city, and Federal funding agencies frequently refer their contracted agencies to the Streetbankers and to Chemical Bank. During 1980, 65 loans totaling $2 million were made and during 1981, $2,117,000 in loans supported 62 organizations. Let me add to the record, since 1971, since the inception of the Streetbanker program, over $25 million worth of loans were made to these institutions. And the record speaks for itself, that only about $70,000 to $100,000 worth of loan writeoffs were accumulated as a result of the loans. Chemical Bank's and the Streetbankers' credibility among the public sector and the community at large is further augmented by the Streetbankers' capacity to provide technical assistance, which is not really readily measured in dollar terms. As public dollars have become smaller because of Government cutbacks and inflation, problems in subsidizing and actually providing human services have proliferated. Streetbankers try to resolve these problems by finding additional sources of funding for not-for-profit groups, developing management plans, focusing public attention on the service the not-for-profit groups are providing, and creating a network of related organizations which help to increase their voice in the community, to name but a few. The urban affairs department will also make contributions inkind, such as printing brochures and donating used furniture. In effect, the purpose of urban affairs has been to focus the efforts of personnel skilled in retail services, lending and the political process who could then apply traditional banking tools to solve some of the human problems encountered in the marketplace in New York. These Streetbankers literally go into the streets, homes and businesses of targeted urban and suburban areas and get to know the people who live and work there. Their goals are to both build a foundation of trust from which to fulfill the objectives of community development, as well as to market and provide banking services. The Streetbankers also develop relationships and establish partnerships with public officials, politicians and foundation heads to capitalize on the resources available in the public and private sectors. These resources and contacts allow the Streetbankers to promote community development which leads to an improved economic environment necessary for a stable and profitable retail marketplace. The other section of my team and Chemical Bank's team is the urban finance department, which was established in 1974. This group works with customers to devise acceptable methods for ob taining financing, specifically through Chemical's conventional and special loan programs. The cornerstone of the urban finance area is the use of the bank's funds to leverage, and let me emphasize, to leverage other available funding, private and public, to insure the viability of a project and provide the greatest possible benefit per dollar invested. The key to the urban finance department success has been the partnership it has been able to form with community groups whose members have the greatest stake in housing development and community preservation of New York City. Statistics show that without firm backing in the neighborhoods new and renovated housing could be caught in the same web of deterioration that has already captured existing housing. The urban finance department specializes in financing new construction as well as rehabilitation of New York City properties, with particular emphasis on housing for low- and moderate-income families and individuals. The issue of displacement of original tenants in occupancy is a significant factor in the decision to finance a project. In 1981, the department financed 3,000 units of housing, comprised of rental units and tenant-owned cooperatives for primarily low- and middle-income residents. As of December 31, 1981, the total dollar outstanding for the urban finance department was $40,500,000 and total commitments extended extended approximated $70,300,000. These figures include lending for moderate and substantial rehabilitation of existing housing stock as well as for new construction. Examples of Chemical Bank's involvement in the housing rehabilitation programs includes: In conjunction with the South Bronx Development Office and the Local Initiatives Support Corporation, a new housing program was developed for the construction and permanent financing of 293 new two-story three- and four-bedroom row houses in the South Bronx. Chemical's commitment for the construction and permanent financing, that is the end loans, of those particular homes is approximately $15 million. The homes will be located on four sites which were previously city owned land. The purpose of the program is to provide new housing in an area of deteriorating housing stock, and to make affordable mortgages to low- and moderate-income families through the use of section 235 subsidies, an Urban Development Action Grant and Community Development Block Grant Funds. These homes are FHA insured. Chemical Bank developed the procedure for application whereby the South Bronx Development Office and Cornell Cooperative Extension of New York City are involved in counseling and screening applicants for income eligibility. Under section 235 guidelines, families with 80 percent less than median incomes will qualify for subsidies. The program has a section 235 reservation total of 250 units. Therefore, 43 dwellings will be insured under nonsubsidized sections 203, 221, and 245 programs. The FHA interest rate is at present 151⁄2 percent and the discount agreement is 1 percent from the buyer and 6 percent from the builder. The Urban Finance Department has approved a proposal for a similar project using section 235 subsidies for the construction of 441 manufactured single family homes on three subdivisions in Brooklyn. Our commitment for this construction financing is approximately $24 million. Mr. ROSENTHAL. Mr. Schochat, if you do not mind, we are going to include the rest of your testimony in the record. Mr. SCHOCHAT. Sure. Mr. ROSENTHAL. It certainly is an impressive record. Mr. SCHOCHAT. Thank you. I just might add for the Honorable Howard Golden who testified before, the project I just finished reading is located in three of the most devastated areas of Brooklyn. One is East New York, Brownsville, and also Prospect Park. Mr. ROSENTHAL. Well, obviously, by comparison with your colleagues, Chemical made a total of 13,954 home loans in 1980 in the Greater New York Area for a total of $846,799,000. Its total lending for real estate loans in 1980 was over $2 billion. And deposits from the four boroughs of New York City was slightly over $1 billion as of June 30, 1980. So, by comparison to the other banks and comparing the size of your institution, you are way ahead of them. Mr. SCHOCHAT. Thank you very much. We also have a new service that we started in 1981 as a result of Mr. Golden's testimony, which is called the mixed use real estate loans, which mixes commercial and private properties and one-tofive units, extending loans to owners who want to renovate and upgrade that property. And we are one of the few leading banks that has offered this service and I believe the other banks have entertained this too. Mr. ROSENTHAL. Does the fact that Chemical is moving into the Florida market through a merger, an investment in Florida National, is that going to have any impact on what you do in New York City? Mr. SCHOCHAT. None whatsoever, sir. [Mr. Schochat's prepared statement follows:] |