TOM BEARDEN: So this is your new house.
NANETTE SONNIER: Yes.
TOM BEARDEN: Are you excited?
NANETTE SONNIER: Very much.
TOM BEARDEN: Nanette Sonnier is about to become a homeowner for the very first time. She's doing it through a nonprofit organization called the Southern Mutual Help Association, which works with banks to finance mortgages for low-income workers.
TOM BEARDEN: Did you ever think you could have your own home?
NANETTE SONNIER: No, never. Because I had no credit, I had no savings. So when I got the phone call that it had been approved, it just blew me away.
TOM BEARDEN: Sonnier lives in New Iberia, an economically depressed, rural community in southern Louisiana, known for sugar cane, Cajun music and Tabasco sauce.
Some of its neighborhoods were pretty much ignored by the banking community, until Congress took action three decades ago.
The Community Reinvestment Act was passed in 1977 to stop a practice called "redlining," where some lenders would refuse to do business in certain geographic areas.
The federal law requires lenders to offer loans, provide services and make investments in low- income communities. Banks must meet all three of those goals in order to receive a satisfactory rating from their bank regulators.
Since the CRA was enacted, banks have put more than $1.5 trillion into community development nationwide. But now, some federal regulators want to loosen the CRA rules, and community activists think that could be the beginning of the end of the CRA.
Lorna Bourg is the director of Southern Mutual Help. She says the CRA has forced regional banks to spend tens of millions of dollars in her region that they otherwise wouldn't have.
LORNA BOURG: The Community Reinvestment Act, as it is now, is good for business. It's good for all the segments in our community. I don't think we want an America where certain people perceive they can't get in to be a part of the American dream.
If our bank partners are not induced to invest in difficult markets, then they're going to cream off the top of the market, and that's what we used to see many years ago.
RUSTY CLOUTIER: As you know, we already do seven days a week to help out people...
TOM BEARDEN: One of Bourg's bank partners is Rusty Cloutier, president of MidSouth Bank in Louisiana.
Cloutier says CRA reporting requirements make it difficult for banks of his size to survive. He estimates he spends $75,000 a year just to fill out the paperwork to comply.
RUSTY CLOUTIER, MidSouth Bank: They keep putting these regulations on these small banks and saying you've got to jump through these hoops to protect the community, when in fact, what's happening is they're losing their community banks because they're saying that "if we've got to do all this stuff, that's not really servicing the community."
TOM BEARDEN: He says he has no problem with two of the three CRA requirements: Making loans and doing community service. It's the third requirement, investing, which he says is unfair.
Cloutier's bank is required to put about a half million dollars a year in approved CRA investments. These are usually grants to organizations, like Southern Mutual, which are involved in community development.
The banks often receive a lower rate of return on investments than they do on loans. But because many times there aren't enough projects in small communities to qualify for CRA credit, Cloutier is forced to put money into projects as far away as Detroit or Washington, D.C.
RUSTY CLOUTIER: We're glad to be involved in investing in our communities, but to hold us to an investment test of buying investments in other parts of the country just doesn't make a lot of sense to me.
TOM BEARDEN: Some community leaders concede that minor tweaking of the CRA might be in order, but they say what the federal deposit insurance corporation is considering goes too far.
The FDIC has proposed exempting about 850 banks that have assets under $1 billion from having to make CRA investments.
Large banks, over $1 billion, would still be required to do so. The FDIC's Donna Gambrell says the proposed change will not mean that community banks can abandon their CRA responsibilities.
DONNA GAMBRELL: What it does though, is give banks the flexibility to-- based on their own capacity, their resources, that they identify is needs within the community-- to say we may not have the resources or the capability to do investment, but we clearly have identified a need to make loans, community development loans in this community, and therefore that's where we're going to place our focus and our emphasis.
TOM BEARDEN: What's the genesis of this rule change? Where did it come from?
DONNA GAMBRELL: Well, I think that there's been a lot of discussion for a lot of years about the things about the Community Reinvestment Act that weren't working.
TOM BEARDEN: Mark Pinsky is president of the National Community Capital Association, which helps local organizations revitalize economically depressed areas. He predicts that many projects simply won't get funded if the requirements are dropped.
MARK PINSKY: We go out and talk to the banks and we ask them why they're doing this and there are people in banks, a lot of bankers who are really committed to this kind of work.
But as institutions, they'll tell you up front that the Community Reinvestment Act is the reason they're putting this money into these markets.
TOM BEARDEN: Pinsky points to projects like the Gateway Arts District just north of Washington, D.C. as one example.
Once a neighborhood overrun with pawn shops and liquor stores, it's now being rebuilt, in part from CRA investment money.
It will eventually have theaters, restaurants, low-income housing and workspace for artists. It's expected to create many new jobs, and additional investment possibilities.
MARK PINSKY: I once had a banker say to me a few years ago, "you know, we've finally come to understand that you're serving our under market, that you're developing a market that's going to be useful to us down the road."
We specialize in serving markets that are, as I said, just outside the mainstream and trying to season them so that those markets can enter the economic mainstream and so that the economic mainstream can find opportunity there.
We think everybody wins.
TOM BEARDEN: Back in Louisiana, Lorna Bourg says that the FDIC rule change would be especially disastrous for rural communities like New Iberia.
She says the area would go from having 21 banks that have to meet the CRA investment test, to just one.
LORNA BOURG: You know, we've had over $1 trillion in investment into our states and into our communities that never would have seen it if it hadn't been for the Community Reinvestment Act.
I think, you know, that's a pathway back to redlining that we had before. And I think from a rural practitioner's viewpoint, it's disastrous for America.
TOM BEARDEN: If it ain't broke, don't fix it?
LORNA BOURG: If it ain't broke, don't fix it, for sure.
RUSTY CLOUTIER: Congratulations my man. If they can see you now.
TOM BEARDEN: Cloutier, who was recently honored by the city of Lafayette for his civic work, says he will still invest in his community.
But he says activists are going after the wrong target; they should be demanding more investment money from urban mega-banks.
RUSTY CLOUTIER: Here's what amazes me. The community activists are spending all their time on this when the ten largest banks in America control 77 percent of the deposits.
I mean, that's where the money is. The fact is I do serve my community. We're going to raise about $250,000 next week to feed and house the homeless. We do that automatically.
We would do that if we had a CRA or not because those are just things that are right to do and to improve the community and to make it a better place to live.
TOM BEARDEN: He says the community will really suffer if small banks are forced to sell out to the large mega-banks.
RUSTY CLOUTIER: Was rural America better off when it had the local stores in town that supported everything or was it better off when Wal-Mart came in?
Was it better off when they had the local pharmacy or was it better off when the mega- pharmacies came in and took over the community?
SPOKESPERSON: Have a nice day.
SPOKESPERSON: You're welcome.
TOM BEARDEN: The FDIC could decide within the next several weeks whether to adopt the CRA Rule change.