Regulators Expand CRA Eligible Lending Activities

For the second timernin less than six months federal regulatory agencies have added new avenuesrnunder which banks can meet their obligations under the Community ReinvestmentrnAct (CRA.)  The Federal Deposit InsurancernCorporation (FDIC) the Board of Governors of the Federal Reserve System, Officernof Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS)<bissued a joint Final Rule on Tuesday which will require regulators to consider twornadditional services when assessing a banks record of meeting community creditrnneeds.   </p

Beginning November 3rnregulators must consider a bank’s record of making low-cost education loans tornlow-income borrowers, i.e. borrowers and co-borrowers with income below 50rnpercent of the area median income.  A lowrncost loan is one that meets that definition for rates and fees under Departmentrnof Education (DOE) lending programs and includes loans for higher education at DOErnlisted accredited institutions.  CRArnassessments can take into account loans that are made outside of the bank’srnassessment area as long as needs within the area are being met.  The new regulation does not require the bankrnto make education loans nor does it change how consumer loans are otherwisernconsidered during CRA evaluations.  </p

Also going intorneffect on November 3 will be a provision that allows the agencies to considerrnvarious activities undertaken by majority-owned institutions in conjunction withrnminority and women-owned financial institutions (MWLIs) and low-income creditrnunions.  These changes which were originallyrnannounced in March, will allow CRA regulators to ventures taken in cooperationrnwith the MWLIs and credit unions even if those institutions are located outsidernof the subject bank’s assessment area. rnThe key determinant it whether the assistance will enable the MWLIs andrncredit unions to better meet the credit needs in those institutions ownrncommunities.  </p

Examples ofrnactivities undertaken by a majority-owned financial institution in cooperationrnwith MWLIs that would receive CRA consideration may include making a deposit orrncapital investment; purchasing a participation in a loan, loaning an officer orrnproviding technical assistance to the MWLI or providing free or discounted datarnprocessing systems or office facilities to aid an MWLI in serving itsrncustomers. </p

In June regulatorsrnproposed a program to encourage banks covered by CRA to support thernNeighborhood Stabilization Program (NSP) even where those programs are outsidernof the bank’s assessment area, thus increasing bank incentives to invest in orrnfacilitate NSP-eligible activities in approved target areas.

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