Two Areas Big Banks Beat Us: CRA and Private Banking

big banks beat on cra and private bankingI mentioned yesterday that we have been beating the “big banks” across the board on the interest rate front.

But, there are two areas where we rarely beat the big banks in rate: CRA Loans and Private Banking.


CRA stands for Community Reinvestment Act.

It is a law that “encourages” (aka requires) banks to lend in “under-served” areas with “low to moderate” incomes.

In order to meet their CRA quotas, some large banks offer steeply discounted interest rates that are as much as 1% lower than market rates.

Some banks will use their very low CRA interest rates as a marketing ploy but the problem is that the CRA loans are limited to only a very few “census tracts” or areas that meet the law’s low-income requirements.

The other issue with CRA loans is that the data for the “low income” areas is often woefully out of date, so the special low-rate loans end up going to millionaires who are buying in areas that are no longer “low-income.”


Most major banks have a “private banking” division that is devoted entirely to serving high net worth individuals with $250,000 or more of assets.

In order to preserve relationships with high net worth individuals, private bankers will offer below-market mortgage rates.

Hence, when we have borrowers with substantial liquid assets in a particular bank, we often encourage them to get a quote from their bank’s private banking division at the start of the pre-approval process.

We do this of course to ensure that our clients get the best possible deal.

I might add, however, that many potential private banking clients stick with us in any case for our faster closes, better service, and better appraiser panel (their agents often illuminate the latter factor).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646