Interagency Q&As Flashcards
What is a special purpose institution?
These institutions engage in specialized activities that do not involve granting credit to the public in the ordinary course of business. These types of banks are exempt from CRA coverage.
Special purpose institutions
typically serve as correspondent banks, trust companies, or clearing agents or engage only in specialized services, such as cash management controlled disbursement services.
A financial institution, however, does not become a special purpose institution merely by ceasing to make loans and, instead, making investments and providing other retail banking services.
To be a special purpose institution, must an institution limit its activities in its charter?
No. A special purpose institution may, but is
not required to, limit the scope of its activities in its charter, articles of association, or other corporate organizational
documents.
An institution that does not have legal limitations on its activities, but has voluntarily limited its activities, however, would no longer be exempt from Community Reinvestment Act (CRA) requirements if it subsequently engaged in activities that involve granting credit to the public
in the ordinary course of business.
An institution that believes it is exempt from CRA as a special purpose institution should seek confirmation of this status from its supervisory Agency.
Does the definition of “affiliate” include subsidiaries of an institution?
Yes, “affiliate” includes any company that controls, is controlled by, or is under common control with
another company. An institution’s subsidiary is controlled by the institution and is, therefore, an affiliate.
Do the definitions of “branch,” “automated teller machine (ATM),” and “remote service facility (RSF)” include mobile branches, ATMs, and RSFs?
Yes. Staffed mobile offices that are authorized as branches are considered “branches,” and mobile ATMs and RSFs are considered “ATMs” and “RSFs.”
Are loan production offices (LPO) branches for purposes of the CRA?
LPOs and other offices are not “branches” unless they are authorized as branches of the institution through the regulatory approval process of the institution’s supervisory Agency.
Are community development
activities limited to those that promote economic
development?
No. Although the definition of “community development” includes activities that promote economic development by financing small businesses or farms, the rule does not limit community development loans and services and qualified investments to those activities.
Community development also includes community- or tribal-based child care, educational, health, social services, or workforce
development or job training programs targeted to low- or
moderate-income persons, affordable housing for low- or moderate-income individuals, and activities that revitalize or stabilize low- or moderate-income areas, designated disaster
areas, or underserved or distressed nonmetropolitan middle income geographies.
Must a community development activity occur inside a low- or moderate-income area, designated disaster area, or underserved or distressed nonmetropolitan middle-income area in order for an institution to receive CRA consideration for the activity?
No. Community development includes
activities, regardless of their location, that provide affordable housing for, or community services targeted to, low- or moderate-income individuals and activities that promote economic development by financing small businesses and farms. Activities that stabilize or revitalize particular low- or
moderate-income areas, designated disaster areas, or underserved or distressed nonmetropolitan middle-income areas (including by creating, retaining, or improving jobs for low- or moderate-income persons) also qualify as community development, even if the activities are not located in these areas.
One example is financing a supermarket that serves as
an anchor store in a small strip mall located at the edge of a middle-income area, if the mall stabilizes the adjacent low-income community by providing needed shopping services that are not otherwise available in the low-income
community.
Does the regulation provide
flexibility in considering performance in high-cost areas?
Yes, the flexibility of the performance standards
allows examiners to account in their evaluations for conditions in high-cost areas. Examiners consider lending and services to individuals and geographies of all income levels and
businesses of all sizes and revenues. In addition, the
flexibility in the requirement that community development
loans, community development services, and qualified investments have as their “primary” purpose community development allows examiners to account for conditions in high-cost areas.
For example, examiners could take into account the fact that activities address a credit shortage among middle-income people or areas caused by the disproportionately high cost of building, maintaining or
acquiring a house when determining whether an institution’s loan to or investment in an organization that funds affordable housing for middle-income people or areas, as well as low and
moderate-income people or areas, has as its primary
purpose community development.
Can examples of community
development activities discussed in a particular Q&A also apply to other types of community development activities not
specifically discussed in that Q&A if they have a similar
community development purpose?
Yes. The Interagency Questions and Answers
Regarding Community Reinvestment (Questions and Answers) provide examples of particular activities that may receive consideration as community development activities.
Because a particular Q&A often describes a single type of community development activity, such as a community
development loan, the corresponding examples are of community development loans.
However, because community development loans, qualified investments, and community development services all must have a primary purpose of community development, a qualified investment or community
development service that supports a community development purpose similar to the activity described in the context of the community development loan would likely receive
consideration under the applicable test. The same would be true if the community development activity described in a
particular Q&A were a qualified investment or community development service.
When determining whether a
project is “affordable housing for low- or moderate-income individuals,” thereby meeting the definition of “community
development,” will it be sufficient to use a formula that relates the cost of ownership, rental, or borrowing to the income
levels in the area as the only factor, regardless of whether the users, likely users, or beneficiaries of that affordable housing are low- or moderate-income individuals?
The concept of “affordable housing” for low- or moderate-income individuals does hinge on whether low- or moderate-income individuals benefit, or are likely to benefit, from the housing. It would be inappropriate to give consideration to a project that exclusively or predominately houses families that are not low- or moderate-income simply
because the rents or housing prices are set according to a particular formula.
For projects that do not yet have occupants, and for
which the income of the potential occupants cannot be determined in advance, or in other projects where the income of occupants cannot be verified, examiners will review factors such as demographic, economic, and market data to determine the likelihood that the housing will “primarily” accommodate
low- or moderate-income individuals.
For example, examiners
may look at median rents of the assessment area and the project; the median home value of either the assessment area, low- or moderate-income geographies or the project; the low or moderate-income population in the area of the project; or the past performance record of the organization(s) undertaking
the project.
Further, such a project could receive consideration if its express, bona fide intent, as stated, for example, in a prospectus, loan proposal, or community action plan, is
community development.
Community development includes community services targeted to low- or moderate-income individuals. What are examples of ways that an institution could determine that community services are offered to low or moderate-income individuals? (8)
• The community service is targeted to the clients of a nonprofit organization that has a defined mission of serving low and moderate-income persons, or, because of government grants, for example, is limited to offering services only to low or
moderate-income persons.
• The community service is offered by a nonprofit organization that is located in and serves a low- or moderate-income geography.
• The community service is conducted in a low- or moderate-
income area and targeted to the residents of the area.
• The community service is a clearly defined program that benefits primarily low- or moderate-income persons, even if it is provided by an entity that offers other programs that serve
individuals of all income levels.
• The community service is offered at a workplace to workers who are low- and moderate-income, based on readily available data for the average wage for workers in that particular occupation or industry
• The community service is provided to students or their
families from a school at which the majority of students qualify for free or reduced-price meals under the U.S. Department of Agriculture’s National School Lunch Program.
• The community service is targeted to individuals who
receive or are eligible to receive Medicaid.
• The community service is provided to recipients of government assistance programs that have income qualifications equivalent to, or stricter than, the definitions of low- and moderate- income as defined by the CRA Regulations. Examples
include U.S. Department of Housing and Urban Development’s section 8, 202, 515, and 811 programs or U.S. Department of Agriculture’s section 514, 516, and Supplemental
Nutrition Assistance programs.
Community development
includes activities that promote economic development by financing businesses or farms that meet certain size eligibility
standards. Are all activities that finance businesses and farms that meet the size eligibility standards considered to be community development?
No. The concept of ‘‘community development’’ under involves both a
‘‘size’’ test and a ‘‘purpose’’ test that clarify what economic development activities are considered under CRA. An institution’s loan, investment, or service meets the ‘‘size’’ test if it finances, either directly, or through an intermediary,
businesses or farms that either meet the size eligibility standards of the Small Business Administration’s Development Company (SBDC) or Small Business Investment Company (SBIC) programs, or have gross annual revenues of $1 million or less.
As part of the purpose test under economic development, CD activities must promote economic development. What types of activities are considered to promote economic development? (2)
If they support:
• permanent job creation, retention, and/or improvement:
o for low- or moderate-income persons;
o in low- or moderate-income geographies;
o in areas targeted for redevelopment by Federal, state, local, or tribal governments;
o by financing intermediaries that lend to, invest in, or provide technical assistance to start-ups or recently formed small businesses or small farms; or
o through technical assistance or supportive services for small businesses or farms, such as shared space, technology,
or administrative assistance; or
• Federal, state, local, or tribal economic development initiatives
that include provisions for creating or improving access
by low- or moderate-income persons to jobs or to job training or workforce development programs.
The agencies will presume that any loan or service to
or investment in a SBDC, SBIC, Rural Business Investment Company, New Markets Venture Capital Company, New Markets Tax Credit-eligible Community Development Entity, or Community Development Financial Institution that finances small businesses or small farms, promotes ______ ________.
economic development
Under the purpose test for economic development, does the CD activity need to support only LMI individuals?
No
Examiners will also consider the qualitative aspects of performance. For example, activities will be considered more responsive to
community needs if a majority of jobs created, retained, and/or improved benefit low- or moderate-income individuals.
Is the definition of “community development” applicable to all institutions?
The definition of “community development” is applicable to all institutions, regardless of a particular institution’s size or the performance criteria under which it is evaluated.
Will activities that provide housing for middle-income and upper-income persons qualify for favorable consideration as community development activities when they help to revitalize or stabilize a distressed nonmetropolitan middle-income geography or
designated disaster areas?
An activity that provides housing for middle- or
upper-income individuals qualifies as an activity that
revitalizes or stabilizes a distressed nonmetropolitan middle income geography or a designated disaster area if the housing directly helps to revitalize or stabilize the community by
attracting new, or retaining existing, businesses or residents and, in the case of a designated disaster area, is related to disaster recovery.
The Agencies generally will consider all activities that revitalize or stabilize a distressed nonmetropolitan middle-income geography or designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including needs of low- or moderate-income individuals or neighborhoods.
Will activities that provide housing for middle-income and upper-income persons qualify for favorable consideration as community development activities when they help to revitalize or stabilize a underserved nonmetropolitan middle-income geography?
In underserved nonmetropolitan middle-income geographies,
activities that provide housing for middle- and upper- income individuals may qualify as activities that revitalize or stabilize such underserved areas if the activities also provide housing for low- or moderate-income individuals.
For example, a loan to build a mixed income housing development that provides housing for middle- and upper-income individuals in an underserved nonmetropolitan middle-income geography
would receive positive consideration if it also provides housing for low- or moderate-income individuals.
Can a bank’s housing related loan be evaluated as a community development loan if it has been reported or collected as a HMDA loan?
Not unless the bank is an ISB and the loan is a multifamily housing loan. They can be double counted.
What activities are considered to “revitalize or stabilize” a low- or moderate-income geography, and how are those activities considered?
Activities that revitalize or stabilize a low- or moderate-income geography are activities that help to attract
new, or retain existing, businesses or residents.
Examiners will presume that an activity revitalizes or stabilizes a low- or moderate-income geography if the activity has been approved by the governing board of an Enterprise Community or
Empowerment Zone and is consistent with the board’s strategic plan. They will make the same presumption if the activity has received
similar official designation as consistent with a Federal, state, local, or tribal government plan for the revitalization or stabilization of the low- or moderate-income geography.
To determine whether other activities revitalize or stabilize a low- or moderate-income geography, examiners will evaluate the activity’s actual impact on the geography, if information about this is available. If not, examiners will determine whether the activity is consistent with the community’s formal or informal plans for the revitalization and stabilization of the low- or moderate-income geography
What CD purpose would this fall under?
Foreclosure prevention programs with the objective
of providing affordable, sustainable, long-term loan
restructurings or modifications to homeowners in low- or
moderate-income geographies, consistent with safe and sound banking practices
Revitalization and Stabilization
What is a “designated disaster area” and how long does it last?
A “designated disaster area” is a major disaster area designated by the Federal government.
Such disaster designations include, in particular, Major Disaster Declarations administered by the Federal Emergency Management Agency (FEMA), but
excludes counties designated to receive only FEMA Public Assistance Emergency Work Category A (Debris Removal) and/or Category B (Emergency Protective Measures).
Examiners will consider institution activities related
to disaster recovery that revitalize or stabilize a designated disaster area for 36 months following the date of designation.
Where there is a demonstrable community need to extend the period for recognizing revitalization or stabilization activities
in a particular disaster area to assist in long-term recovery efforts, this time period may be extended.
What activities are considered to “revitalize or stabilize” a designated disaster area, and how are those activities considered?
ex:? (3)
- Activities that help to attract new, or retain existing businesses or residents and is related to disaster recovery. AND
- Activity must be consistent with a bona fide govt revitalization and stabilization plan or disaster recovery plan.
The Agencies generally will consider all activities relating to disaster recovery that revitalize or stabilize a designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including the needs of low- or moderate income
individuals or neighborhoods.
Ex:
-Financing to retain businesses that employ local residents and LMI individuals.
-Financing to attract a major new employer to create long term job opportunities for LMI individuals.
-providing financing or other assistance for essential community-wide infrastructure, community services, and rebuilding needs; and activities that provide housing, financial assistance, and services to individuals in designated
disaster areas and to individuals who have been displaced from those areas, including low- and moderate-income individuals
What criteria are used to
identify distressed or underserved nonmetropolitan, middle income geographies?
Eligible nonmetropolitan middle-income geographies are those designated by the Agencies as being in distress or that could have difficulty meeting essential community needs (underserved). A particular geography could be designated as both distressed and underserved.
A nonmetropolitan middle-income geography will be
designated as distressed if it is in a county that meets one or more of the following triggers:
(1) an unemployment rate of at least 1.5 times the national average,
(2) a poverty rate of 20
percent or more, or
(3) a population loss of 10 percent or more between the previous and most recent decennial census or a net migration loss of five percent or more over the five-year period preceding the most recent census.
A nonmetropolitan middle-income geography will be
designated as underserved if it meets criteria for population size, density, and dispersion that indicate the area’s population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs.
How often will the Agencies
update the list of designated distressed and underserved
nonmetropolitan middle-income geographies?
Annually
To the extent that changes to the designated census
tracts occur, the Agencies have determined to adopt a one-year “lag period.” This lag period will be in effect for the 12 months immediately following the date when a census tract
that was designated as distressed or underserved is removed from the designated list.
Revitalization or stabilization activities
undertaken during the lag period will receive consideration as community development activities if they would have been considered to have a primary purpose of community development
if the census tract in which they were located were
still designated as distressed or underserved.
What activities are considered to “revitalize or stabilize” a distressed nonmetropolitan middle-income geography, and how are those activities evaluated?
- Attracts new or retains existing businesses or residents.
- Under a bona fide Govt plan.
The Agencies generally
will consider all activities that revitalize or stabilize a
distressed nonmetropolitan middle-income geography, but will give greater weight to those activities that are most responsive to community needs, including needs of low- or moderate income individuals or neighborhoods.
Qualifying activities may include, for example, providing financing to attract a major new employer that will create long-term job opportunities, including for low- and moderate-income
individuals, and activities that provide financing or other assistance for essential infrastructure or facilities necessary to attract or retain businesses or residents.
What activities are considered to “revitalize or stabilize” an underserved nonmetropolitan middle-income geography, and how are those activities
evaluated?
If they help to meet essential community needs,
including needs of low- or moderate-income individuals.
Activities, such as financing for the construction, expansion, improvement, maintenance, or operation of essential infrastructure or facilities for health services, education, public safety, public services, industrial parks, affordable housing, or communication services, will be evaluated under these criteria to determine if they qualify for revitalization or stabilization consideration.
If an underserved geography is also designated as a distressed or a disaster area, additional
activities may be considered to revitalize or stabilize the geography.
What are examples of types of projects that qualify as meeting essential community needs, including needs of LMI individuals for the purpose of revitalization and stabilization in underserved geographies?
• a new or expanded hospital that serves the entire county,
including low- and moderate-income residents;
- an industrial park for businesses whose employees include low- or moderate-income individuals;
- a new or rehabilitated sewer line that serves community residents, including low- or moderate-income residents;
- a mixed-income housing development that includes affordable housing for low- and moderate-income families;
• a renovated elementary school that serves children from the community, including children from low- and moderate income
families;
• a new or rehabilitated communications infrastructure, such as broadband internet service, that serves the community,
including low- and moderate-income residents; or
• a new or rehabilitated flood control measure, such as a
levee or storm drain, that serves the community, including low- and moderate-income residents.
Would the following qualify as R&S in an underserved geography?
Financing a project to build a sewer line spur that connects services to a
middle- or upper-income housing development while
bypassing a low- or moderate-income development that also needs the sewer services
NO
What are examples of community development loans? (9)
Loans to:
- Borrowers for affordable housing rehab and construction, including construction to perm for multifamily rental serving LMI individuals.
- non profits serving LMI housing or other CD needs
- borrowers to construct or rehab community facilities that are located in LMI areas or that serve primarily LMI
- financial intermediaries (CDFIs, tax credit eligible CD entities, CDCs, minority and women owned banks, community loan funds/pools, LMI credit unions that primarily lend or facilitate lending to promote community development.
- local, state, and tribal govts for CD activities.
- borrowers to finance environmental clean up or redevelopment of an industrial site as part of effort to revitalize the LMI community
- businesses in an amount greater than $1MM, when made as part of SBA 504 program
- borrowers to finance renewable energy, energy efficient, or water conservation equipment for projects that support the development, rehab, improvement, or maintenance of affordable housing or community facilities (ex: health clinic serving LMI)
- -benefit can include reduction in utility cost for tenants or common areas in affordable housing development.
- -renewable energy facility can be located on or off site, so long a benefit is to the affordable housing proj.
-rehabilitation and construction of affordable housing or community facilities including the abatement or remediation of, or other actions to correct environmental hazards (lead paint, asbestos, mold, radon)
If a retail institution that is not required to report under HMDA makes affordable home mortgage loans that would be HMDA-reportable home mortgage loans if it were a reporting institution, or if a small institution that is not required to collect and report loan data under the CRA makes small business
and small farm loans and consumer loans that would be collected and/or reported if the institution were a large institution, may the institution have these loans considered as community
development loans?
No. Although small institutions are not required
to report or collect information on small business and small farm loans and consumer loans, and some institutions are not required to report information about their home mortgage loans under HMDA, if these institutions are retail institutions, the Agencies will consider in their CRA evaluations the
institutions’ originations and purchases of loans that would have been collected or reported as small business, small farm, consumer or home mortgage loans, had the institution been a collecting and reporting institution under the CRA or the HMDA.
Therefore, these loans will not be considered as community development loans, unless the small institution is an intermediate small institution. Multifamily dwelling loans, however, may be considered as
community development loans as well as home mortgage loans.
May an intermediate small institution that is not subject to HMDA reporting have home mortgage loans considered as community development loans?
Similarly, may an intermediate small institution have small business and small farm loans and consumer loans considered
as community development loans?
Yes. In instances where intermediate small institutions are not required to report HMDA or small business or small farm loans, these loans may be considered, at the institution’s option, as community development loans, provided they meet the regulatory definition of “community development”
The only exception would be if the ISB chooses to be evaluated under large bank procedures, then it may not choose to have home mortgage, small business, small farm or consumer loans considered as CD loans.
Loans other than multifamily dwelling loans may not
be considered under both the lending test and the community development test for intermediate small institutions. Thus, if an institution elects to have certain loans considered under the community development test, those loans may not also be
considered under the lending test, and would be excluded from the lending test analysis.
Intermediate small institutions may choose individual loans within their portfolio for community development consideration. Examiners will evaluate an intermediate small institution’s community development activities within the context of the responsiveness of the activity to the community
development needs of the institution’s assessment area(s).
Do secured credit cards or other credit card programs targeted to low- or moderate-income individuals qualify as community development loans?
No. Credit cards issued to low- or moderate income
individuals for household, family, or other personal
expenditures, whether as part of a program targeted to such individuals or otherwise, do not qualify as community development loans because they do not have as their primary purpose any of the activities included in the definition of
“community development.”
The regulation indicates that
community development includes “activities that revitalize or stabilize low- or moderate-income geographies.” Do all loans
in a low- to moderate-income geography have a stabilizing effect?
No. Some loans may provide only indirect or short-term benefits to low- or moderate-income individuals in a low- or moderate-income geography. These loans are not considered to have a community development purpose. For example, a loan for upper-income housing in a low- or moderate-income area is not considered to have a community development purpose simply because of the indirect benefit to low- or moderate-income persons from construction jobs or the increase in the local tax base that supports enhanced services to low- and moderate-income area residents. On the
other hand, a loan for an anchor business in a low- or
moderate-income area (or a nearby area) that employs or
serves residents of the area and, thus, stabilizes the area, may
be considered to have a community development purpose.
Is the following considered a qualified CD activity? If so, under what CD purpose?
Loan for an anchor business in a low- or moderate-income area (or a nearby area) that employs or serves residents of the area
Yes by employing and serving residents it helps stabilize the area, and maybe considered to have a community development purpose under revitalization and stabilization.
Must there be some immediate or direct benefit to the institution’s assessment area(s) to satisfy the regulations’ requirement that qualified investments and community development loans or services benefit an institution’s assessment area(s) or a broader statewide or regional area that includes the institution’s assessment area(s)?
What about activities that don’t benefit the bank’s AA but benefit a broader statewide or regional area?
No. The regulations recognize that community
development organizations and programs are efficient and effective ways for institutions to promote community development. These organizations and programs often operate
on a statewide or even multistate basis. Therefore, an institution’s activity is considered a community development loan or service or a qualified investment if it supports an organization or activity that covers an area that is larger than, but includes, the institution’s assessment area(s). The
institution’s assessment area(s) need not receive an immediate or direct benefit from the institution’s participation in the organization or activity, provided that the purpose, mandate, or function of the organization or activity includes serving geographies or individuals located within the institution’s assessment area(s).
In addition, a retail institution will receive consideration for certain other community development activities. These activities must benefit geographies or individuals located somewhere within a broader statewide or regional area that includes the institution’s assessment area(s). Examiners will consider these activities even if they will not
benefit the institution’s assessment area(s), as long as the institution has been responsive to community development needs and opportunities in its assessment area(s).
What is meant by the term “regional area”?
A “regional area” may be an intrastate area or a multistate area that includes the financial institution’s assessment area(s). Regional areas typically have some
geographic, demographic, and/or economic interdependencies and may conform to commonly accepted delineations, such as “the tri-county area” or the “mid-Atlantic states.” Regions are often defined by the geographic scope and specific purpose of a community development organization or initiative.
What is meant by the term “primary purpose” as that term is used to define what constitutes a community development loan, a qualified investment, or a
community development service?
A loan, investment, or service has as its primary
purpose community development when it is designed for the express purpose of revitalizing or stabilizing low- or moderate-income areas, designated disaster areas, or underserved or distressed nonmetropolitan middle-income areas, providing affordable housing for, or community services targeted to, low- or moderate-income persons, or promoting economic development by financing small businesses or farms that meet the requirements.
How do you determine if a CD activity is designed for an express community development purpose? (2)
First, if a majority of the dollars or beneficiaries of the activity are identifiable to one or more of the enumerated community development purposes, then the activity will be considered to possess the requisite primary purpose.
Alternatively, where the measurable portion of any benefit bestowed or dollars applied to the community
development purpose is less than a majority of the entire
activity’s benefits or dollar value, then the activity may still be considered to possess the requisite primary purpose, and the
institution may receive CRA consideration for the entire activity, if:
(1) the express, bona fide intent of the activity, as
stated, for example, in a prospectus, loan proposal, or community action plan, is primarily one or more of the
enumerated community development purposes;
(2) the activity is specifically structured (given any relevant market or legal
constraints or performance context factors) to achieve the expressed community development purpose; and
(3) the activity accomplishes, or is reasonably certain to accomplish, the community development purpose involved.
In what scenarios can an activity involving affordable housing be deemed to have a “primary purpose” of community development even if the activity does not meet the normal standards for “primary purpose”?
i.e. majority of funding is not going to support primary purpose of CD
Activities related to the provision of mixed income
housing, such as in connection with a development that has a mixed-income housing component or an affordable
housing set-aside required by Federal, state, or local
government, also would be eligible for consideration as an activity that has a “primary purpose” of community development at the election of the institution.
In such cases, an institution may receive pro rata consideration for the portion of such activities that helps to provide affordable housing to low- or moderate-income individuals.
How much would qualify under Affordable Housing CD activity in the following scenario?
An institution makes a $10 million loan to finance a mixed-income housing development in which 10 percent of the units will be set aside as affordable housing for low- and moderate-income individuals
The institution may elect to treat $1 million of such loan as a community development loan. In other words, the pro rata dollar amount of the total activity will be based on the percentage of units set-aside for affordable housing for low- or moderate-income individuals.
In addition to meeting the definition of “community development” in the regulation, community
development services must also be related to the provision of financial services. What is meant by “provision of financial services”?
Providing financial services means providing services of the type generally provided by the financial services industry. Providing financial services often involves
informing community members about how to get or use credit or otherwise providing credit services or information to the community.
For example, service on the board of directors of
an organization that promotes credit availability or finances affordable housing is related to the provision of financial
services. Providing technical assistance about financial
services to community-based groups, local or tribal
government agencies, or intermediaries that help to meet the credit needs of low- and moderate-income individuals or small businesses and farms is also providing financial services. By contrast, activities that do not take advantage of the
employees’ financial expertise, such as neighborhood cleanups, do not involve the provision of financial services.
Are personal charitable activities provided by an institution’s employees or directors outside the
ordinary course of their employment considered community development services?
No. Services must be provided as a representative of the institution.
For example, if a financial
institution’s director, on her own time and not as a
representative of the institution, volunteers one evening a week at a local community development corporation’s financial counseling program, the institution may not consider
this activity a community development service.
What are examples of community development services? (6)
- Providing technical assistance on financial matters to a nonprofit, tribal, or govt org serving LMI housing or economic revitalization and development needs
- providing technical assistance on financial matters to small business or community development orgs including those who apply for loans or grants under FHLB affordable housing programs
- lending employees to provide financial services for orgs facilitating affordable housing construction and rehab or development of affordable housing.
- providing credit counseling, home buyer and home maintenance counseling, financial planning or other financial services education to promote CD and affordable housing, including credit counseling to LMI persons to avoid foreclosure.
- establishing school savings programs or teaching financial education or literacy curricula for LMI persons.
- providing foreclosure prevention programs to LMI homeowners with the objective of providing affordable, sustainable, long term modifications and restructurings.
What are some examples of technical assistance activities that are related to provision of financial services and that might be provided to community development orgs? (10)
- serving on a Board of Directors
- serving on a loan review committee
- developing loan application and underwriting standards
- developing loan-processing systems
- developing secondary market vehicles or programs
- assisting in marketing financial services
- furnishing financial services training for staff and management
- accounting/bookkeeping services
- fundraising, soliciting or arranging investments
- providing services reflecting the bank employee’s areas of expertise at the bank, such as HR IT and legal services.
Are home equity loans considered “consumer loans”?
Home equity loans made for purposes other than home purchase, home improvement, or refinancing home purchase or home improvement loans are consumer loans if they are extended to one or more individuals for household,
family, or other personal expenditures.
May a home equity line of credit be considered a “consumer loan” even if part of the line is for home improvement purposes?
If the predominant purpose of the line is home improvement, the line may only be reported under HMDA and may not be considered a consumer loan. However, the full
amount of the line may be considered a “consumer loan” if its predominant purpose is for household, family, or other personal expenditures, and to a lesser extent home improvement, and the full amount of the line has not been reported under HMDA. This is the case even though there may be “double counting” because part of the line may also have been reported under HMDA.
How should an institution collect or report information on loans the proceeds of which will be used for multiple purposes?
If an institution makes a single loan or provides
a line of credit to a customer to be used for both consumer and small business purposes, consistent with the instructions for the Consolidated Reports of Condition and Income (Call
Report), the institution should determine the major
(predominant) component of the loan or the credit line and collect or report the entire loan or credit line in accordance with the regulation’s specifications for that loan type.
Does the term “home mortgage loan” include loans other than “home purchase loans”?
Yes. “Home mortgage loan” includes “home improvement loan,” “home purchase loan,” and “refinancing,” as defined in the HMDA regulation. This definition also includes multifamily (five-or more
families) dwelling loans, and loans for the purchase of
manufactured homes.
Some financial institutions broker home mortgage loans. They typically take the borrower’s application and perform other settlement activities; however, they do not make the credit decision. The broker institutions may also initially fund these mortgage loans, then immediately assign them to another lender. Because the broker institution does not make the credit decision, under Regulation C (HMDA), they do not record the loans on their HMDA loan application registers (HMDA-LAR), even if they fund the loans. May an institution receive any consideration under CRA for its home mortgage loan brokerage activities?
Yes. A financial institution that funds home mortgage loans but immediately assigns the loans to the lender that made the credit decisions may present information about these loans to examiners for consideration under the lending test as “other loan data.” Under Regulation C, the broker institution does not record the loans on its HMDA-LAR because it does not make the credit decisions, even if it funds
the loans. An institution electing to have these home mortgage loans considered must maintain information about all of the home mortgage loans that it has funded in this way. Examiners will consider these other loan data using the same criteria by which home mortgage loans originated or purchased by an institution are evaluated.
Institutions that do not provide funding but merely
take applications and provide settlement services for another lender that makes the credit decisions will receive consideration for this service as a retail banking service. Examiners will consider an institution’s mortgage brokerage services when evaluating the range of services provided to low-, moderate-, middle- and upper-income geographies and the degree to which the services are tailored to meet the needs
of those geographies.
Alternatively, an institution’s mortgage brokerage service may be considered a community development service if the primary purpose of the service is
community development. An institution wishing to have its mortgage brokerage service considered as a community development service must provide sufficient information to substantiate that its primary purpose is community
development and to establish the extent of the services provided.
Where do institutions find income level data for geographies and individuals?
The median family income (MFI) levels for geographies, i.e., census tracts, are calculated using income data from the U.S. Census Bureau’s American Community Survey (ACS) and geographic definitions from the Office of Management and Budget (OMB), and are updated approximately every five years. Geographic income data, along with detailed information about the FFIEC’s calculation of geographic MFI data, are available on the FFIEC Web site.
The income levels for individuals are calculated
annually by the FFIEC using geographic definitions from the OMB, income data from the ACS, and the Consumer Price Index from the Congressional Budget Office. Individual MFI data for metropolitan statistical areas (MSA) and statewide nonmetropolitan areas, along with detailed information about the FFIEC’s calculation of individual MFI data, are available on the FFIEC Web site.
What constitutes a “narrow product line” in the definition of “limited purpose institution”?
An institution offers a narrow product line by limiting its lending activities to a product line other than a traditional retail product line required to be evaluated under the lending test (i.e., home mortgage, small business, and small farm loans). Thus, an institution engaged only in
making credit card or motor vehicle loans offers a narrow product line, while an institution limiting its lending activities to home mortgages is not offering a narrow product line.
What factors will the Agencies consider to determine whether an institution that, if limited
purpose, makes loans outside a narrow product line, or, if wholesale, engages in retail lending, will lose its limited purpose or wholesale designation because of too much other lending? (7)
Wholesale institutions may engage in some retail lending without losing their designation if this activity is
incidental and done on an accommodation basis. Similarly, limited purpose institutions continue to meet the narrow product line requirement if they provide other types of loans on an infrequent basis. In reviewing other lending activities by these institutions, the Agencies will consider the following factors:
- Is the retail lending provided as an incident to the institution’s wholesale lending?
- Are the retail loans provided as an accommodation to the institution’s wholesale customers?
• Are the other types of loans made only infrequently to the
limited purpose institution’s customers?
- Does only an insignificant portion of the institution’s total assets and income result from the other lending?
- How significant a role does the institution play in providing that type(s) of loan(s) in the institution’s assessment area(s)?
- Does the institution hold itself out as offering that type(s) of loan(s)?
• Does the lending test or the community development test
present a more accurate picture of the institution’s CRA performance?
Do “niche institutions” qualify as limited purpose (or wholesale) institutions?
Generally, no. Institutions that are in the business of lending to the public, but specialize in certain types of retail loans (for example, home mortgage or small
business loans) to certain types of borrowers (for example, to high-end income level customers or to corporations or partnerships of licensed professional practitioners) (“niche institutions”) generally would not qualify as limited purpose (or wholesale) institutions.
Does the CRA regulation provide authority for institutions to make investments?
No. The CRA regulation does not provide authority for institutions to make investments that are not otherwise allowed by Federal law.
Are mortgage-backed securities or municipal bonds “qualified investments”?
As a general rule, mortgage-backed securities and municipal bonds are not qualified investments because they do not have as their primary purpose community development, as defined in the CRA regulations.
Nonetheless, mortgage-backed securities or municipal bonds designed
primarily to finance community development generally are qualified investments. Municipal bonds or other securities
with a primary purpose of community development need not be housing-related.
For example, a bond to fund a community facility or park or to provide sewage services as part of a plan
to redevelop a low-income neighborhood is a qualified
investment. Certain municipal bonds in underserved nonmetropolitan middle-income geographies may also be qualified investments. Housing-related bonds or securities must primarily address affordable housing (including multifamily rental housing) needs of low- or moderate-income individuals in order to qualify.
Are FHLB stocks or unpaid dividends and membership reserves with the Federal Reserve Banks “qualified investments”?
No. FHLB stocks or unpaid dividends, and membership reserves with the Federal Reserve Banks do not have a sufficient connection to community development to be qualified investments. However, FHLB member institutions may receive CRA consideration as a community development
service for technical assistance they provide on behalf of applicants and recipients of funding from the FHLB’s Affordable Housing Program.
What are examples of qualified investments? (9)
Examples of qualified investments include, but
are not limited to, investments, grants, deposits, or shares in or
to:
- Financial intermediaries that primarily lend or facilitate lending in LMI areas or to LMI people to promote CD, such as a CDFI that promotes ED on an Indian reservation
- organizations engaged in affordable housing rehab and construction, including multifamily rental housing
- orgs including SBIC, specialized SBICs and rural business investment companies that promote ED by financing small businesses
- CD venture capital companies that promote EC by financing small businesses
- facilities that promotes CD by providing community services for LMI persons, youth program, homeless centers, soup kitchens, health care facilities, battered women’s shelters\, and alcohol and drug recovery centers
- projects eligible for Low income housing tax credits
- state and municipal obligations, revenue bonds, that specifically support affordable housing or CD.
- non profit orgs serving LMI housing or other CD needs, counseling for credit, home ownership, home maintenance, and other financial literacy programs.
- orgs supporting activities essential to the capacity of LMI individuals or geographies to utilize credit or to sustain ED. (ex: daycare operations and job training programs, workforce development programs enabling LMI individuals to work).
What are examples of financial intermediaries?
Financial intermediaries (including CDFIs, New Markets Tax Credit-eligible Community Development Entities, CDCs, minority- and women-owned financial institutions, community loan funds, and low-income or community development credit unions)
Will an institution receive
consideration for charitable contributions as “qualified
investments”?
Yes, provided they have as their primary purpose community development as defined in the regulations.
A charitable contribution, whether in cash or an in-kind contribution of property, is included in the term “grant.” A qualified investment is not disqualified because an institution receives favorable treatment for it (for example, as a tax deduction or credit) under the Internal Revenue Code.
An institution makes or participates in a community development loan. The institution provided the
loan at below-market interest rates or “bought down” the interest rate to the borrower. Is the lost income resulting from
the lower interest rate or buy-down a qualified investment?
No. The Agencies will, however, consider the
responsiveness, innovativeness, and complexity of the community development loan within the bounds of safe and sound banking practices.
Will the Agencies consider as a qualified investment the wages or other compensation of an employee or director who provides assistance to a community development organization on behalf of the institution?
No. However, the Agencies will consider donated labor of employees or directors of a financial institution as a community development service if the activity meets the regulatory definition of “community development
service.”
When evaluating a qualified investment, what consideration will be given for prior-period investments?
When evaluating an institution’s qualified investment record, examiners will consider investments that were made prior to the current examination, but that are still
outstanding. Qualitative factors will affect the weight given to both current period and outstanding prior-period qualified investments.
For example, a prior-period outstanding investment with a multi-year impact that addresses assessment area
community development needs may receive more consideration than a current period investment of a comparable amount that is less responsive to area community development needs.
How do examiners evaluate loans or investments to organizations that, in turn, invest in instruments that do not have a community development purpose, and use only the income, or a portion of the income, from those investments to support their community development purpose?
Examiners will give quantitative consideration
for the dollar amount of funds that benefit an organization or activity that has a primary purpose of community development. If an institution invests in (or lends to) an organization that, in turn, invests those funds in instruments that do not have as their primary purpose community
development, such as Treasury securities, and uses only the income, or a portion of the income, from those investments to support the organization’s community development purposes, the Agencies will consider only the amount of the investment income used to benefit the organization or activity that has a community development purpose for CRA purposes.
Examiners will, however, provide consideration for such instruments when the organization invests solely as a means of securing capital for leveraging purposes, securing additional financing, or in order to generate a return with minimal risk until funds can be deployed toward the originally intended community development activity. The organization must express a bona fide intent to deploy the funds from investments and loans in a manner that primarily serves a community development purpose in order for the institution to
receive consideration under the applicable test.
How are Federal and state branch assets of a foreign bank calculated for purposes of the CRA?
A Federal or state branch of a foreign bank is considered a small institution if the Federal or state branch has
assets less than the asset threshold delineated in 12 CFR __.12(u)(1) for small institutions.
How often will the asset size
thresholds for small institutions and intermediate small institutions be changed, and how will these adjustments be communicated?
The asset size thresholds for “small institutions”
and “intermediate small institutions” will be adjusted annually based on changes to the Consumer Price Index.
More specifically, the dollar thresholds will be adjusted annually based on the year-to-year change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted for each 12-month period ending in November, with rounding to the nearest million. Any changes in the asset size thresholds will be published in the Federal Register. Historical and current asset-size threshold information may be found on the FFIEC’s Web site.
Are loans to nonprofit organizations considered small business loans or are they considered community development loans?
To be considered a small business loan, a loan
must meet the definition of “loans to small businesses” in the instructions in the Call Report. In general, a loan to a nonprofit organization, for business or farm purposes, where the loan is secured by nonfarm nonresidential property and the original amount of the loan is $1 million or less, if a business
loan, or $500,000 or less, if a farm loan, would be reported in the Call Report as a small business or small farm loan.
If a loan to a nonprofit organization is reportable as a small business or small farm loan, it cannot also be considered as a community development loan, except by a wholesale or limited purpose institution. Loans to nonprofit organizations
that are not small business or small farm loans for Call Report purposes may be considered as community development loans if they meet the regulatory definition of “community
development.”
Are loans secured by commercial real estate considered small business loans?
Yes, depending on their principal amount. Small business loans include loans secured by “nonfarm nonresidential properties,” as defined in the Call Report, in amounts of $1 million or less.
Are loans secured by nonfarm residential real estate to finance small businesses “small business loans”?
Typically not. Loans secured by nonfarm residential real estate that are used to finance small businesses
are not included as “small business” loans for Call Report purposes unless the security interest in the nonfarm residential real estate is taken only as an abundance of caution. (See Call Report Glossary definition of “Loan Secured by Real Estate.”) The Agencies recognize that many small businesses are
financed by loans that would not have been made or would have been made on less favorable terms had they not been secured by residential real estate. If these loans promote community development, as defined in the regulation, they may be considered as community development loans. Otherwise, at an institution’s option, the institution may collect and maintain data separately concerning these loans
and request that the data be considered in its CRA evaluation as “Other Secured Lines/Loans for Purposes of Small Business.”
Are credit cards issued to small businesses considered “small business loans”?
Credit cards issued to a small business or to individuals to be used, with the institution’s knowledge, as business accounts are small business loans if they meet the definitional requirements in the Call Report instructions.
With regard to Wholesale institutions, what factors will the Agencies consider in determining whether an institution is in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers? (2)
The Agencies will consider whether:
• the institution holds itself out to the retail public as
providing such loans.
• the institution’s revenues from extending such loans are significant when compared to its overall operations, including
off-balance sheet activities.
A wholesale institution may make some retail loans
without losing its wholesale designation.
How will examiners apply the performance criteria?
Examiners will apply the performance criteria
reasonably and fairly, in accord with the regulations, the examination procedures, and this guidance. In doing so, examiners will disregard efforts by an institution to manipulate business operations or present information in an artificial light that does not accurately reflect an institution’s overall record
of lending performance.
Are all community development activities weighted equally by examiners?
No. Examiners will consider the responsiveness to credit and community development needs, as well as the innovativeness and complexity, if applicable, of an institution’s community development lending, qualified investments, and community development services. These criteria include consideration of the degree to which they serve
as a catalyst for other community development activities. The criteria are designed to add a qualitative element to the evaluation of an institution’s performance. (“Innovativeness” and “complexity” are not factors in the community development test applicable to intermediate small institutions.)
“Responsiveness” to credit and community development needs is either a criterion or
otherwise a consideration in all of the performance tests. How do examiners evaluate whether a financial institution has been “responsive” to credit and community development needs? (3)
There are three important factors that examiners
consider when evaluating responsiveness: quantity, quality, and performance context.
Examiners evaluate the volume and type of an institution’s activities, i.e., retail and community development loans and services and qualified investments, as a first step in evaluating the institution’s responsiveness to credit
and community development needs.
In addition, an assessment of “responsiveness” encompasses the qualitative
aspects of performance, including the effectiveness of the activities. For example, some community development activities require specialized expertise or effort on the part of the institution or provide a benefit to the community that would not otherwise be made available. In some cases, a
smaller loan may have more benefit to a community than a larger loan. In other words, when evaluated qualitatively, some activities are more responsive than others. Activities are more responsive if they are successful in meeting identified credit and community development needs. For example, investing in a community development organization that specializes in originating home mortgage loans to low- or moderate-income individuals would be considered more responsive than an investment of the same amount in a single family
mortgage-backed security in which the majority of the loans are to low- or moderate-income borrowers. Although both of these activities may receive consideration as a qualified investment, the former example would be considered more responsive than the latter.
Examiners evaluate the responsiveness of an
institution’s activities to credit and community development needs in light of the institution’s performance context. That is, examiners consider the institution’s capacity, its business strategy, the needs of the community, and the opportunities for lending, investments, and services in the community.
How should examiners determine whether a bank has been responsive to the community development needs and opportunities in its AA in order to consider qualifying activities that benefit a broader statewide or regional area? (2)
When considering whether an institution has been responsive to community
development needs and opportunities in its assessment area(s), examiners will consider all of the institution’s community development activities in its assessment area(s).
Examiners will also consider as responsive to assessment area needs
community development activities that support an
organization or activity that covers an area that is larger than, but includes, the institution’s assessment area(s). This is true if the purpose, mandate, or function of the organization or activity includes serving geographies or individuals located within the institution’s assessment area(s), even though the
institution’s assessment area(s) did not receive an immediate or direct benefit from the institution’s participation in the organization or activity.
Ex: bank invests in a statewide community development fund that was organized with the purpose of providing community
development loans throughout the state in which the institution is located. Examiners would consider this investment when evaluating the institution’s responsiveness to community development needs and opportunities in its assessment area(s)
even if the fund had not provided a loan within the
institution’s assessment area(s).
What is meant by “innovativeness”?
“Innovativeness” is one of several qualitative considerations under the lending, investment, and service tests. The community development test for wholesale and limited purpose institutions similarly considers “innovative” loans, investments, and services in the evaluation of performance.
Under the CRA regulations, all innovative practices or
activities will be considered when an institution implements meaningful improvements to products, services, or delivery systems that respond more effectively to customer and
community needs, particularly those segments enumerated in the definition of community development.
Institutions should not innovate simply to meet this
criterion of the applicable test, particularly if, for example, existing products, services, or delivery systems effectively address the needs of all segments of the community.
Innovative activities are especially meaningful when they emphasize serving, for example, low or moderate-income consumers or distressed or underserved
nonmetropolitan middle-income geographies in new or more effective ways.
Innovativeness may also include products, services, or delivery systems already present in the assessment
area by institutions that are not leaders in innovation—due, for example, to the lack of available financial resources or technological expertise—when they subsequently introduce
those products, services, or delivery systems to their low- or moderate-income customers or segments of consumers or markets not previously served.
Practices that cease to be innovative may still receive qualitative consideration for being ______, _______, or ________.
Flexible, complex, or responsive
What is the performance context?
The performance context is a broad range of economic, demographic, and institution- and community specific information that an examiner reviews to understand the context in which an institution’s record of performance should be evaluated. The Agencies will provide examiners with some of this information. The performance context is not a formal assessment of community credit needs.
Will examiners consider
performance context information provided by institutions?
Yes. An institution may provide examiners with
any information it deems relevant, including information on the lending, investment, and service opportunities in its assessment area(s). This information may include data on the business opportunities addressed by lenders not subject to the
CRA.
Institutions are not required, however, to prepare a formal needs assessment. If an institution provides information to examiners, the Agencies will not expect information other than what the institution normally would develop to prepare a business plan or to identify potential markets and customers, including low- and moderate-income
persons and geographies in its assessment area(s). The
Agencies will not evaluate an institution’s efforts to ascertain community credit needs or rate an institution on the quality of any information it provides.
Will examiners conduct
community contact interviews as part of the examination process?
Yes. Examiners will consider information obtained from interviews with local community, civic, and
government leaders. These interviews provide examiners with knowledge regarding the local community, its economic base, and community development initiatives. To ensure that information from local leaders is considered – particularly in areas where the number of potential contacts may be limited –
examiners may use information obtained through an interview with a single community contact for examinations of more than one institution in a given market. In addition, the Agencies may consider information obtained from interviews conducted by other Agency staff and by the other Agencies. In order to augment contacts previously used by the Agencies and foster a wider array of contacts, the Agencies may share community contact information.
Will examiners consider factors outside of an institution’s control that prevent it from engaging
in certain activities?
Yes. Examiners will take into account statutory and supervisory limitations on an institution’s ability to engage in any lending, investment, and service activities.
For example, a savings association that has made few or no qualified investments due to its limited investment authority
may still receive a low satisfactory rating under the investment test if it has a strong lending record.
Can an institution’s assigned rating be adversely affected by poor past performance?
Yes. The Agencies will consider an institution’s
past performance in its overall evaluation. For example, an institution that received a rating of “needs to improve” in the past may receive a rating of “substantial noncompliance” if its performance has not improved.
How will examiners consider the performance of similarly situated lenders?
The performance context section of the regulation permits the performance of similarly situated lenders to be considered, for example, as one of a number of considerations in evaluating the geographic distribution of an institution’s loans to low-, moderate-, middle-, and upper income geographies. This analysis, as well as other analyses,
may be used, for example, where groups of contiguous
geographies within an institution’s assessment area(s) exhibit abnormally low penetration. In this regard, the performance of
similarly situated lenders may be analyzed if such an analysis would provide accurate insight into the institution’s lack of performance in those areas. The regulation does not require the use of a specific type of analysis under these
circumstances. Moreover, no ratio developed from any type of analysis is linked to any lending test rating.
The CRA provides that, in assessing the CRA performance of nonminority- and non-women-owned
(majority-owned) financial institutions, examiners may
consider as a factor capital investments, loan participations, and other ventures undertaken by the institutions in cooperation with minority- or women-owned financial institutions and low-income credit unions (MWLI), provided
that these activities help meet the credit needs of local communities in which the MWLIs are chartered. Must such activities also benefit the majority-owned financial institution’s assessment area(s)?
No. Although the regulations generally provide that an institution’s CRA activities will be evaluated for the
extent to which they benefit the institution’s assessment
area(s) or a broader statewide or regional area that includes the institution’s assessment area(s), the Agencies apply a broader
geographic criterion when evaluating capital investments, loan participations, and other ventures undertaken by that
institution in cooperation with MWLIs, as provided by the CRA. Thus, such activities will be favorably considered in the CRA performance evaluation of the institution (as loans,
investments, or services, as appropriate), even if the MWLIs are not located in, or such activities do not benefit, the assessment area(s) of the majority-owned institution or the
broader statewide or regional area that includes its assessment area(s). The activities must, however, help meet the credit
needs of the local communities in which the MWLIs are chartered. The impact of a majority-owned institution’s activities in cooperation with MWLIs on the majority-owned institution’s CRA rating will be determined in conjunction with its overall performance in its assessment area(s).
What are some examples of activities undertaken by a majority owned financial institution in cooperation with MWLIs that would receive CRA consideration? (5)
- making a deposit or capital investment;
- purchasing a participation in a loan;
- loaning an officer or providing other technical expertise to assist an MWLI in improving its lending policies and practices;
- providing financial support to enable an MWLI to partner with schools or universities to offer financial literacy education to members of its local community; or
- providing free or discounted data processing systems, or office facilities to aid an MWLI in serving its customers.
Are there any types of lending activities that help meet the credit needs of an institution’s assessment area(s) and that may warrant favorable consideration as activities that are responsive to the needs of the institution’s assessment area(s)? (4)
Credit needs vary from community to community.
However, there are some lending activities that are likely to be responsive in helping to meet the credit needs of many communities. These activities include:
- providing loan programs that include a financial education component about how to avoid lending activities that may be abusive or otherwise unsuitable;
- establishing loan programs that provide small, unsecured consumer loans in a safe and sound manner (i.e., based on the borrower’s ability to repay) and with reasonable terms;
• offering lending programs, which feature reporting to
consumer reporting agencies, that transition borrowers from loans with higher interest rates and fees (based on credit risk)
to lower-cost loans, consistent with safe and sound lending practices. Reporting to consumer reporting agencies allows
borrowers accessing these programs the opportunity to improve their credit histories and thereby improve their access to competitive credit products; and
• establishing loan programs with the objective of providing affordable, sustainable, long-term relief, for example, through loan refinancings, restructures, or modifications, to homeowners who are facing foreclosure on their primary residences.
Examiners may consider favorably such lending
activities, which have features augmenting the success and effectiveness of the small, intermediate small, or large institution’s lending programs.
If a large retail institution is not required to collect and report home mortgage data under the HMDA, will the Agencies still evaluate the institution’s home mortgage lending performance?
Yes. The Agencies will sample the institution’s
home mortgage loan files in order to assess its performance under the lending test criteria.
When will examiners
consider consumer loans as part of an institution’s CRA evaluation?
Consumer loans will be evaluated if the institution so elects and has collected and maintained the data; an institution that elects not to have its consumer loans evaluated will not be viewed less favorably by examiners than one that does.
However, if consumer loans constitute a substantial majority of the institution’s business, the Agencies
will evaluate them even if the institution does not so elect.
The Agencies interpret “substantial majority” to be so significant a portion of the institution’s lending activity by number and dollar volume of loans that the lending test evaluation would not meaningfully reflect its lending performance if consumer loans were excluded.
How are lending commitments (such as letters of credit) evaluated under the regulation?
The Agencies consider lending commitments
(such as letters of credit) only at the option of the institution, regardless of examination type. Commitments must be legally binding between an institution and a borrower in order to be considered. Information about lending commitments will be used by examiners to enhance their understanding of an
institution’s performance, but will be evaluated separately from the loans.
Will examiners review application data as part of the lending test?
Application activity is not a performance criterion of the lending test. However, examiners may consider this information in the performance context analysis because this information may give examiners insight on, for
example, the demand for loans.
