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Menlo Park
Washington DC
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John L. Douglas
Davis Polk & Wardwell LLP
901 15th Street, NW
Washington, DC 20005

202 962 7126 tel


202 962 7084 fax
john.douglas@davispolk.com

November 10, 2016


Re:

TCT Holdings, Inc., Teachers Insurance and Annuity Association of America, and TIAA
Board of Overseers Proposed Acquisition of EverBank Financial Corp Response to
Concerns of a Commenter

Katty Ng
Senior Analyst
Federal Reserve Bank of Boston
600 Atlantic Avenue
Boston, MA 02210
Dear Ms. Ng:
We are grateful for this opportunity to respond to the comment letter filed by Inner City Press/Fair
Finance Watch on 29 October 2016 (the Comment Letter), regarding the application submitted
by TCT Holdings, Inc., Teachers Insurance and Annuity Association of America (TIAA), and
TIAA Board of Overseers (collectively, the Applicants) seeking prior approval of the Board of
Governors of the Federal Reserve System (the Federal Reserve Board) to acquire EverBank
Financial Corp (EFC) pursuant to Section 10(e)(1)(A)(ii) of the Home Owners Loan Act (the
Application). As a result of the acquisition of EFC, the Applicants will acquire control of
EverBank, a wholly owned subsidiary of EFC and a federal savings bank.
The Comment Letter makes a series of assertions regarding the lending practices of TIAA-CREF
Trust Company, FSB (TIAA FSB) and EverBank by referencing certain Home Mortgage
Disclosure Act (HMDA) data for 2015. It also suggests that TIAA does not satisfy the requisite
managerial standards consistent with approval. Finally, the Comment Letter requests an
extension of the public comment period and a public hearing on the Application.
The Applicants respectfully submit that the commenter selects isolated data in an attempt to
support a charge of discriminatory lending. The full record for both institutions belies the
commenters implications, which are simply not supported by the facts. Further, the commenters
allegations with respect to TIAAs investments in Brazil are unsubstantiated and outside the
scope of the statutory factors for Federal Reserve Board consideration under the Home Owners
Loan Act. In addition, the current management of TIAA FSB and EverBank and the proposed
management of the combined bank have management expertise that is consistent with the
relevant statutory factor. Finally, the Comment Letter does not establish adequate grounds for
an extension of the comment period or a public hearing. Below, the Applicants have provided a
response addressing each of the commenters allegations and requests.

Ms. Katty Ng

I.

November 10, 2016

Allegations of Improper Lending Practices

As discussed in detail below, the Comment Letter cites 2015 HMDA data for the proposition that
TIAA FSB lent only to white borrowers in the St. Louis metropolitan statistical area (MSA).
Further, the Comment Letter alleges that EverBank denied loans to African Americans at a
substantially higher rate than it denied loans to white applicants in the Miami MSA, and that it
denied loans to all African American applicants in the Tampa MSA. The Applicants respectfully
submit that the data does not, in fact, evidence discriminatory or otherwise improper lending
practices.
As a preliminary matter, the Applicants note that the Federal Reserve Board has recognized that
HMDA data alone provide an incomplete measure of an institutions lending in its community
because these data cover only a few categories of housing-related lending and provide only
limited information about the covered loans. 1 For example, the data do not account for the
possibility that an institutions outreach efforts may attract a larger proportion of marginally
qualified applicants than other institutions attract, and do not provide a basis for an independent
assessment of whether an applicant who was denied credit was, in fact, creditworthy. Credit
history problems and excessive debt levels relative to income (reasons most frequently cited for
a credit denial) are not available from HMDA data. HMDA data may also be incomplete and may
not identify all applicants with regard to income level, ethnicity, or other demographic factors.
In addition, and as further explained below, the Applicants note that the denial rates cited in the
Comment Letter are based on extremely small sample sizes and do not take into account any of
the credit and transaction characteristics that TIAA FSB and EverBank use to underwrite loans.
It is widely accepted that one cannot use HMDA data alone to conclude whether a statistical
difference in loan approval rates is the result of discrimination as opposed to differences in credit
and transaction characteristics. 2 Many lenders use statistical testing to determine whether
average differences in mortgage loan application approval rates across borrower groups are
explainable by credit and transaction characteristics. The HMDA data cited in the Comment
Letter, however, cannot be tested through a statistical analysis because neither bank received a
sufficient number of loan applications relevant to the commenters cited data to support a such
an analysis of underwriting outcomes.
Both TIAA FSB and EverBank take their fair lending responsibilities seriously and are confident
that the data cited in the Comment Letter are misleading. Below, the Applicants have addressed
the allegations related to each bank.

See e.g., FRB Order No. 2015-05 (Feb. 13, 2015); FRB Order No. 2014-8 (May 7, 2014); FRB Order No.
2012-8 (July 31, 2012); FRB Order No. 2012-2 (Feb. 14, 2012). The Office of the Comptroller of the Currency
(OCC) has taken a similar position and has consistently noted in its corporate decisions that HMDA data does
not provide an adequate basis for concluding that a bank is engaged in lending discrimination, nor does it
indicate whether its level of lending is sufficient. See e.g., OCC CRA Decision 2013-155 (Mar. 5, 2013); OCC
CRA Decision 2012-153 (Oct. 17, 2012); OCC Conditional Approval 2007-816 (Aug. 16, 2007); OCC CRA
Decision 2007-139 (Apr. 20, 2007).
2

See, e.g., 101 FED. RES. BULL., No. 04 (Nov. 2015); Interagency Policy Statement on Discrimination in
Lending, 59 Fed. Reg. 18,266, 18,270 (Apr. 15, 1994); CFPB, Final Amendments to Regulation C, 80 Fed. Reg.
66,127, 66,259 (Oct. 28, 2015).

Ms. Katty Ng

November 10, 2016

A. Allegations Specific to TIAA FSB


The Comment Letter cites HMDA data as evidence that that TIAA FSB lent only to whites in
2015. The Applicants note that TIAA FSB made only four loans in 2015 in the St. Louis MSA for
which HMDA data on the borrowers race was available. All such loans are documented in TIAA
FSBs statistics regarding conventional mortgage lending in the St. Louis MSA and are included
in HMDA Disclosure Table 4-2.
In addition to the four approved loans, TIAA FSB received one application for a governmentsponsored mortgage loan (e.g., a loan insured by the Federal Housing Administration or
guaranteed by the Department of Veterans Affairs) and three applications for refinancing. These
applications, however, were withdrawn prior to an approval or denial decision. The applicants for
these four loans did not identify their race.
In short, TIAA FSB did not deny the loan application of any applicant; every application that was
not withdrawn was approved. Thus there is no evidence of disparate or discriminatory treatment
of applicants of different races from the data. In addition, the extremely small sample size (four
loans) makes it impossible to draw any statistically significant conclusion regarding the lending
practices of TIAA FSB. Further, as discussed in detail in Section III.C.2 of application submitted
to the OCC for approval to merge TIAA FSB with and into EverBank (the OCC Application),
TIAA FSB takes seriously its obligations to serve the convenience and needs of its community,
including through its lending activities. TIAA FSBs commitment to serving its community is
evidenced by numerous letters of support submitted to the Federal Reserve Bank of Boston by
TIAA FSBs community partners.
B. Allegations Specific to EverBank
The Comment Letter also states that EverBank had a 77% denial rate for African American loan
applicants and a 36% denial rate for white loan applicants according to publicly available HMDA
data in the Miami MSA in 2015 in HMDA Disclosure Table 4-1. It further asserts that EverBank
had a 100% denial rate for African American loan applicants in the Tampa MSA in 2015 per
HMDA Disclosure Table 4-1.
The Applicants respectfully submit that the commenter has made selective use of the HMDA
data to paint a misleading picture. Again, the denial rates above are based on extremely small
sample sizes. More importantly, however, they refer only to applications for government-backed
home purchase loans. During 2015, EverBank received a total of only nine government-backed
home purchase loan applications from African American applicants in Miami (seven of which
were declined), and only one government-backed home purchase loan application from an
African American applicant in Tampa (which was declined). In other words, the denial rates cited
in the Comment Letter are based on a total of eight declined applications.
EverBank has advised the Applicants that it has carefully evaluated and investigated the
allegations and it has provided the Applicants with information following its manual review of
each of the eight declined applications underlying the data cited in the Comment Letter. This
review confirmed to EverBank that one of the applications in the Miami MSA was withdrawn, and
the remaining seven in the Miami and Tampa MSAs were properly declined because they did not
satisfy EverBanks underwriting requirements.

Ms. Katty Ng

November 10, 2016

Further, the Comment Letter cites data specific to government-backed home purchase loans in
the Tampa and Miami MSAs, rather than data that is reflective of EverBanks broader home
lending and refinancing activities in those areas. In both the Miami and Tampa MSAs in 2015,
EverBanks denial rates on conventional home mortgages were lower for African American
applicants than white applicants. In Miami in 2015, EverBank received 42 conventional home
purchase loan applications from African American applicants and denied 12 of them, yielding a
denial rate of 29%. For white conventional home purchase applicants, EverBank received 329
applications and declined 106 of them, yielding a denial rate of 32%. Thus, EverBanks
conventional home purchase loan denial rate for African American applicants was three
percentage points lower than its conventional home purchase denial rate for white applicants.
The statistics for EverBanks conventional home purchase lending in the Tampa MSA tell a
similar story. In 2015, EverBank received two conventional home purchase loan applications
from African American applicants in Tampa, and did not deny either application. That same year,
the bank received 134 conventional purchase applications from white applicants in Tampa and
denied 23 (17%) of them. Thus, EverBanks conventional home purchase denial rate for African
American applicants in Tampa was 17 percentage points lower than its conventional home
purchase loan denial rate for white applicants.
Finally, EverBanks 2015 denial rates for African American refinance applicants in both the Miami
and Tampa MSAs were also lower than its denial rates for white refinance applicants.
Specifically, in Miami, EverBanks denial rate for white refinance applicants was 33% (71 out of
218 applications denied), whereas its denial rate for African American refinance applicants was
18% (4 out of 22 applications denied). In Tampa, EverBanks denial rate for African American
refinance applicants was 14% (1 out of 7 applications denied), which is five percentage points
lower than its 19% denial rate for white refinance applicants (26 out of 137 applications denied).
In summary, the Applicants respectfully submit that the data cited in the Comment Letter is
selective and narrow, and does not reflect EverBanks broader home lending and refinancing
activities and its commitment to fair treatment of all borrowers. Further, as discussed in detail in
Section III.C.1 of the OCC Application, EverBank takes seriously its obligations to serve the
convenience and needs of its community, including through its lending activities. EverBanks
commitment to serving its community is evidenced by numerous letters of support submitted to
the Federal Reserve Bank of Boston by EverBanks community partners.
II.

Allegations Related to Managerial Resources and Integrity Factors

The Comment Letter alleges that TIAAs managerial resources are inconsistent with the statutory
criteria for Federal Reserve Board consideration with respect to the Application, in part because
TIAA has limited experience in banking. As discussed in Section III.A of the OCC Application
and Confidential Exhibit 4 thereto, the bank resulting from the merger will be guided by a
seasoned team of banking professionals with extensive experience leading and operating
significant financial institutions and relevant expertise in the management of federal savings
associations. The Applicants respectfully submit that the management of the combined
institution, which will be composed of banking executives from both EverBank and TIAA FSB,
have expertise that is consistent with the relevant statutory factor.
The commenter also suggests that allegations in a dated news article that TIAA has engaged in
improper business practices in Brazil should be considered by the Federal Reserve Board as a
factor when considering the managerial resources of the Applicants. The news article cited in

Ms. Katty Ng

November 10, 2016

the Comment Letter does not provide a complete or accurate portrayal of how TIAA conducts
business in Brazil and other markets.
As a life insurance company, TIAA invests in farmland as a component of its overall investment
strategy, which is designed to provide financial wellbeing for its customers through diversification,
inflation protection, and return potential. TIAA believes that sustainable and ethical foreign
investments in farmland are beneficial not only to its customers, but also to the local economy
and farmers. TIAA works directly with local agricultural operators and farmers to help them grow
their operations, make improvements to land, conserve resources, and acquire new
technologies. Its investments in Brazil, just as its investments elsewhere, are consistent with
these principles and critical to its role as a long-term investor.
TIAA is a signatory to the U.N. Principles for Responsible Investment and one of the original
signatories who helped develop the Principles for Responsible Investment in Farmland, which
comprise five tenets that serve as the foundation for how TIAA invests and manages its farmland
portfolio: (1) Promote environmental sustainability; (2) Respect labor and human rights; (3)
Respect existing land and resource rights; (4) Uphold high business and ethical standards; and
(5) Report on activities and progress toward implementing the principles. Over the last three
years, TIAA has issued detailed annual reports to disclose its practices and provide transparency
on its progress in meeting each of these five principles. 3 The reports describe how TIAA has
incorporated these principles into its acquisition and portfolio management processes. The
investments in Brazil follow the Principles for Responsible Investing in Farmland.
The allegations made in the news article cited in the Comment Letter are unsubstantiated and
without merit. Further, the Applicants respectfully submit that the allegations are outside the
scope of the statutory factors for Federal Reserve Board consideration under the Home Owners
Loan Act.
III.

Request for Extension of the Comment Period and Public Hearing

The Comment Letter requests an extension of the public comment period, but does not provide
justification for such an extension. The proposed transaction was publicly announced on
August 7, 2016, and the announcement was widely covered in national newspapers of general
circulation. On September 21, 2016, the Applicants caused notice of the Application and
directions on how to submit public comments to be published in newspapers of general
circulation in the St. Louis and Jacksonville MSAs, in compliance with Federal Reserve Board
requirements.4 On October 7, 2016, notice of the Application and directions on how to submit
public comments were published in the Federal Register. 5 The public comment period closed on
October 31, 2016, 40 days after the initial notice of the Application ran and 85 days after the
proposed transaction was publicly announced. The Applicants, therefore, respectfully submit
that ample time has been provided for public comment on the Application, and request that the
commenters request to extend the comment period beyond October 31, 2016 be denied.

TIAAs 2015 report on Responsible Investment in Farmland is accessible at:


https://www.tiaa.org/public/pdf/C26304_2015_Farmland_Report.pdf.
4

12 C.F.R. 238.14(c)(1).

81 Fed. Reg. 69,52969,560. This publication was made in compliance with 12 C.F.R. 238.14(c)(2).

Ms. Katty Ng

November 10, 2016

The Comment Letter also requests a public hearing based on the allegations discussed above.
The Applicants respectfully submit that the allegations made in the Comment Letter do not merit
a public hearing under the Federal Reserve Boards regulations, which require that any comment
requesting a hearing include a statement of why a written presentation would not suffice in lieu
of a hearing, identifying specifically any questions of fact that are in dispute and summarizing the
evidence that would be presented at a hearing. 6 The Comment Letter does not identify any
genuine dispute of fact that would be material to the Federal Reserve Boards decision on
whether or not to approve the Application. Further, the commenter has not demonstrated why
the submission of the written Comment Letter is inadequate for purposes of presenting its
objections to the Application. Thus, the Applicants respectfully submit that the request in the
Comment Letter fails to meet the standard for holding a public hearing set forth by the Federal
Reserve Board in past decisions. 7
Finally, the commenter asserts that the justification for a public hearing is bolstered by the fact
that TIAA is run by a former [Federal Reserve Board] vice chairman. The argument that a
public hearing is warranted because a former Federal Reserve Board official, who resigned from
the Federal Reserve Board more than ten years ago, serves in a senior executive position at one
of the Applicants implies bias or partiality on the part of the Federal Reserve Board and is
baseless. There is no precedent or basis for a hearing on such grounds.
IV.

Conclusion

In summary, the Applicants respectfully submit that the Comment Letter does not raise any
substantive issues within the scope of the factors set forth by statute for Federal Reserve Board
approval. Further, the Applicants submit that the Comment Letter does not establish cause for
extending the comment period for the Application, nor does it establish grounds for a public
hearing. Thus, the Applicants respectfully request that the Federal Reserve Board deny the
commenters request for an extension of the comment period and a public hearing.
Sincerely,

John L. Douglas

6
7

12 C.F.R. 238.14(e), 262.3(e).

See e.g., FRB Order No. 2016-14 (Aug. 8, 2016); FRB Order No. 2016-03 (Mar. 21, 2016), 83 FED. RES.
BULL. No. 8, 672 (Aug. 1997); 83 FED. RES. BULL. No. 7; 607 (July 1997).

Ms. Katty Ng

cc by email:
Scott Chu
Federal Reserve Bank of Boston
Marva Cummings
Sandya Reddy
Office of the Comptroller of the Currency
Matthew R. Lee
Inner City Press/Fair Finance Watch
Keith Morgan
TIAA
James Hubbard
EFC
Andrew Svarre
TCT Holdings, Inc.
Mark Menting
Andrea Tokheim
Sullivan & Cromwell LLP
William Taylor
Kelley L. OMara
Davis Polk & Wardwell LLP
cc by mail:
Antitrust Division - Litigation II Section/Banking Unit
U.S. Department of Justice
Kathryn Haney
Federal Reserve Bank of Atlanta
David Hubbard
Federal Reserve Bank of St. Louis

November 10, 2016