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The Commitment Continues Our Commitment Lending Commitments Community Investment and Development Providing Affordable Housing Bringing the Commitment Home Innovative Solutions for Under-served Communities Educating Consumers for Life Providing Free and Low Cost Financial Services Responding to Local Needs Reinvesting in Our Communities Making Diversity Work for Everyone Maintaining an Ongoing Dialogue Responsible Lending Principles
The Commitment Continues In 1998, Washington Mutual (WaMu) made history by announcing the then largest-ever CRA commitment to the communities we serve. At the time, we pledged $120 billion over a ten-year period to serve a wide range of community needs and issues. We are gratified that with the help of our community partners Washington Mutual has already reached almost 30 percent of our ten-year CRA goal in only two years. We view this accomplishment as an opportunity to do even more, which is why we are increasing our commitment to our communities.
In recent years Washington Mutual has experienced strong growth and the expansion of our operations throughout the nation. Our success provides us with the opportunity to build on our more than 100-year legacy of making the communities we serve better places to live, work and do business.
The following commitment is based on our assessment of where our business is today, the continued growth of our company and the successful completion of WaMu's proposed merger with Dime Bancorp, Inc. It is important to note that our pledged amount is contingent on being a member of, and having access to advances, mortgage purchase programs and affordable housing programs through the Federal Home Loan Banks in each of the regions that we serve. Support from the Federal Home Loan Banks is critical because these institutions play an important role in providing funds for our loans and other financial support to communities.
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Our Commitment Washington Mutual will commit $375 billion to our low- to moderate-income communities over a ten-year period beginning in 2002. In light of our strong track record of community support and our intent to combine with like-minded institutions, we are proud to be able to make such a significant pledge. We will use our best efforts to realize the goals we've set for ourselves, consistent with safe and sound business practices and our obligation to act in a financially sound manner.
These funds will provide loans and other financial support to communities consisting predominantly of people of color, to residents of low- to moderate-income (LMI) census tracts, and to people whose income is below 80 percent of median income. We will strive to create products and programs that increase our market share in low income and diverse communities, with a long-term goal of making our market share in these communities more closely mirror our market share overall. Using our Year 2000 production as a baseline, we have set our goal to double the number of loans made to borrowers of color by the end of the first year of this commitment. Thereafter, we will increase the number of loans made in these communities as quickly as possible.
Lending Commitments
Single-Family Lending To help more people and families achieve their dream of owning their own home, we are committing $300 billion in housing loans to minority borrowers, borrowers in LMI census tracts, and borrowers earning less than 80 percent of median income. Of this amount, we will target $100 billion specifically for low- to moderate-income borrowers.
Consumer and Small Business Lending A total of $48 billion will be available to consumers and small business owners, including businesses owned by people of color, women or disabled persons. We will make a good faith effort to make 50 percent of these loans and lines of credit in the amount of $50,000 or less.
Because we know that home equity is one of the best sources of capital for many small business owners, we're committing funds for home equity loans and lines of credit to borrowers with low to moderate income and to borrowers in LMI census tracts. Our consumer product line includes personal and home equity loans and lines of credit.
Our small business lending will include not only term loans and unsecured lines of credit to small businesses, but may also include participation in government-sponsored loan programs such as the Small Business Administration's (SBA) loan programs, as well as multi-bank programs targeted at local economic development.
Multi-Family Lending We've earmarked $25 billion for apartments and manufactured home park developments in LMI census tracts or serving families earning less than 80 percent of median income. There is no minimum loan size for our multi-family loan programs.
Preserving and expanding the level of affordable housing units is important to us. We continue to place a high priority on housing created by developers targeting families whose incomes are below 80 percent of median income. Additionally, we support nonprofit developers and tenants in acquiring Housing and Urban Development (HUD) preservation properties.
Community Investment and Development Washington Mutual is committing $2 billion in investments and loans to community development and low-income housing initiatives, tax-exempt housing revenue bonds, and community banks and financial institutions targeting multi-cultural communities or other community needs. This commitment includes support for pre-development work, which we fund through nonprofit organizations and investments in community development corporations.
Specific types of funding designed to improve local community economic development include construction and permanent loans, bridge loans, bond purchases and letters of credit.
Washington Mutual has a long history of participation in community development lending and will continue to work with and support financial intermediaries as a means of increasing lending to small businesses in LMI communities and communities of color.
We realize that reaching our ambitious ten-year goal requires focus and dedication. It is not enough to simply state what we plan to accomplish; we want our community partners to know how we are going to achieve our goals. With this in mind, we're pleased to outline Washington Mutual's approach to serving the needs of our communities.
Providing Affordable Housing Washington Mutual is committed to increasing access to safe, clean and quality affordable housing. Our goal is to be a leading residential lender to under-served racial and ethnic communities as well as to low- and moderate-income borrowers in all the markets we serve. Our strong financial performance and well-capitalized balance sheet enable us to retain more of our loan originations than most of our competitors. This ability to hold a portion of the loans we originate in our portfolio allows us more underwriting flexibility than other lenders. That flexibility is valuable in meeting the needs of first-time homebuyers and others who might not meet the requirements of the secondary market.
Bringing the Comittment Home We recognize that some racially or culturally diverse borrowers may have traditionally had more limited access to credit and that the credit available to these borrowers and markets may more often be subprime. Challenges with access to credit can create conditions that lead to predatory lending. We disapprove of predatory practices and particularly those that target under-served communities. To provide a responsible alternative, we plan to develop and market products that will help make traditional credit products more accessible to credit-impaired borrowers. In this way, we intend to continue our record of leadership in providing subprime loans on a safe, sound and ethical basis, as set forth in Washington Mutual's Responsible Mortgage Lending Principles.
Over the course of this commitment we will strive to create products and programs that increase our market share in low income and diverse communities, with a long-term goal of closely mirroring our market share overall. To help achieve this objective, we will, beginning in 2002, set goals to ensure that the percentage of our conventional home loans to each under-served community increases where necessary as quickly as possible.
In addition to setting goals, we offer the following programs that address under-served communities and will expand their availability throughout our service areas:
Innovative Solutions for Under-served Communities To leverage our single-family lending efforts, Washington Mutual develops innovative ways to reach under-served communities through its single-family community lending program. Washington Mutual's dedicated staff and strong community and industry partnerships have enabled us to work with communities that have unique or special needs and seek solutions to these challenges. The results of these efforts include the creation of a variety of special programs to help local, regional and state markets in collaboration with our community partners. These programs may be coupled with a variety of outside sources of subsidy to increase affordability for lower-income homebuyers and those in very high-cost housing markets.
Our community programs and support include:
In addition to these community programs, Washington Mutual will continue to explore creative ways to assist non-profit housing developers in acquiring properties suitable for low to moderate income families.
Washington Mutual brings its full range of affordable housing solutions to potential borrowers through a variety of methods, including:
Educating Consumers for Life Another strategy for increasing home ownership is our commitment to homebuyer education. Our employees frequently offer free seminars that teach first-time homebuyers and lower-income individuals about how to buy a home. These seminars—currently taught in a variety of languages—include information on how to calculate the loan amount you can afford, ways to save for a down payment, tips for improving a credit history and how to qualify for a mortgage loan. We also co-sponsor and participate in housing fairs with community development agencies and nonprofit economic development corporations. Further, we strongly support nonprofit mortgage counseling programs.
Because we believe it's never too soon to learn the fundamentals of basic money management that will last a lifetime, Washington Mutual sponsors a number of education programs for children of all ages. Most noteworthy of the programs is the company's School Savings® program, which was founded in 1923. For nearly eighty years School Savings has been teaching children the value of thrift by literally bringing the bank to school each week for deposits as little as a dime. Local financial center managers oversee the transactions at each school with the help of parent volunteers. Washington Mutual employees also bring age-appropriate curriculum into local classrooms through specially designed lessons. Developed with the assistance of teachers, these classroom presentations cover topics such as budgeting and how to use credit wisely, and ways to save your allowance.
Through a series of classes known as WaMoola for L.I.F.E. (Adult Banking and Financial Education), Washington Mutual employees also help adults learn and master valuable skills in money management.
Providing Free and Low Cost Financial Services To make financial services affordable for all members of our communities Washington Mutual offers a variety of free and low-cost services. Our WaMu Free Checking™ account features unlimited check writing, no monthly service fee, no minimum balance obligation and no direct deposit requirement.
Washington Mutual also participates in a nationwide electronic network that allows consumers who receive certain government benefits through a debit card to regularly access their funds free of charge via our more than 3,800 ATMs.
Responding to Local Needs To continue to play a leadership role in our communities and our industry, Washington Mutual encourages local managers to make decisions to meet the specific needs of the markets we serve. This local decision-making allows us to be responsive to the needs of local communities.
Preserving access to bank services for low-income individuals is important to us. That's why we actively look for opportunities to open new branches in under-served communities.
In addition, we do not close any branches in low-income or under-served neighborhoods as a result of our acquisitions unless another full-service branch is conveniently located in that community. In determining whether a branch in an under-served neighborhood should be retained, it is our standard practice to perform a detailed business review of the factors that affect the branch's profitability and to discuss any potential closure with appropriate community groups. In the rare situation of a closed branch we look for alternative uses, such as sales or donations to community-based organizations.
Reinvesting in Our Communities Our communities are the source of our success, and we are grateful. Washington Mutual's charitable giving program is a broad, community-based program focused on multiple needs and issues, with specific emphasis on affordable housing and community development and education. Although not limited to CRA-related programs, a significant portion of our work is designed to benefit low- and moderate-income people and communities.
We return 2 percent of our pre-tax earnings to our neighborhoods. We believe this commitment makes us a leader among major financial institutions. To ensure our continued leadership, we will review, with our CEO each year, the philanthropic commitments of other major financial institutions to ensure that we continue to be a leader in giving back to the communities we serve.
Washington Mutual's charitable giving funds are returned through grants, sponsorships, loans at below market rates, paid employee volunteer time, and other financial support of our efforts to develop our communities. Our contributions are proportional to the size of our operations in a particular market—including assets, deposit base, number of employees and locations—and to the special needs of the communities we serve. Using this approach we are assured that our continued business success in each community translates into increased local contributions.
Our corporate values include a commitment to community service. To help make it easier for our employees to make a difference in their own communities, Washington Mutual provides twelve hours of paid time off each quarter for service to nonprofit groups and causes. In addition, the company staffs an employee volunteerism department that organizes, manages and tracks volunteer opportunities.
Making Diversity Work for Everyone Washington Mutual's policies and practices assure fair and equal access for everyone—employees, customers and vendors. We see this reflected in the diversity of our workforce, management team and board of directors. In addition, we believe that we are most successful in an environment that offers fair and equal opportunities for employment, and access to credit and business ventures. Although we've received national recognition for our efforts to date, we know there is more we can—and will—do. We will continue to make a good faith effort to achieve a workforce and board of directors that reflects the diversity of all the communities we serve.
Providing equal employment opportunities is consistent with our corporate values. We strive to achieve a workforce at all levels of management that fully reflects the diversity of the communities we serve. The people we want to attract to our company include those making the transition from welfare to work. We've already had tremendous success in this area through programs we developed in conjunction with our community partners in Washington and California. Our program provides the training necessary for former welfare recipients to find gainful employment in customer service call centers. Through this program we've hired and retained a majority of the training program's graduates. We are always looking for opportunities to expand worthwhile programs such as these.
To further support a diverse workplace, we maintain an employee-based Diversity Advisory Group, an intern program and a management training program that emphasizes recruiting and training people of color.
In addition, through our supplier diversity program, we monitor and encourage contracting with businesses owned by minorities, women or individuals with disabilities. Our long-term goal is to award these companies contracts that represent 15 percent of supplier-related corporate expense, to be realized directly or through the use of qualified subcontractors.
To communicate the availability of Washington Mutual's flexible products and services and job opportunities to under-served communities, Washington Mutual uses multi-cultural media to provide a broad reach in advertising and marketing. Because we recognize and respect the diversity inherent in our markets, we actively support marketing, advertising, outreach and consumer and business education programs in diverse and other under-served communities, using local media where appropriate.
Maintaining an Ongoing Dialogue Working with our community partners is essential to our success in making our neighborhoods better places to live, work and do business. Washington Mutual executive and senior management will continue to meet with our Community Advisory Councils throughout the United States. These meetings help determine needs, measure progress, strengthen communication and foster accountability. We expect to also continue our periodic meetings with community-based organizations in our efforts to meet the credit needs of the many communities they support.
As past performance proves, Washington Mutual makes serving the community an integral part of how we do business. We look forward to working with our community partners to further our legacy of service well into our second century of doing business.
Responsible Lending Principles Since 1889, we have made it our business to responsibly provide for the credit and housing needs of our communities. In an increasingly complex financial world, Washington Mutual is committed to continuing its leadership role in addressing the credit needs of its communities, and setting the highest standards for responsible lending.
It is our fundamental belief that every creditworthy borrower should be able to get a loan. To that end, we are committed to providing services to consumers across a wide credit spectrum and with diverse borrowing needs. That is why in 2001, Washington Mutual established its Responsible Mortgage Lending Principles, becoming one of the first lenders to create specific principles to guide its mortgage lending activity. With our expansion into credit card lending, Washington Mutual is restating its Responsible Lending Principles to include credit card practices.
The Executive Committee of the Company will manage the Responsible Lending Principles in a manner consistent with these fundamental beliefs and ensure that the Principles are implemented, interpreted, and adjusted to meet changing business and community needs.
View the Responsible Lending Principles PDF document.
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