For the second time
in less than six months federal regulatory agencies have added new avenues
under which banks can meet their obligations under the Community Reinvestment
Act (CRA.) The Federal Deposit Insurance
Corporation (FDIC) the Board of Governors of the Federal Reserve System, Office
of Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS)
issued a joint Final Rule on Tuesday which will require regulators to consider two
additional services when assessing a banks record of meeting community credit
needs.
Beginning November 3
regulators must consider a bank's record of making low-cost education loans to
low-income borrowers, i.e. borrowers and co-borrowers with income below 50
percent of the area median income. A low
cost loan is one that meets that definition for rates and fees under Department
of Education (DOE) lending programs and includes loans for higher education at DOE
listed accredited institutions. CRA
assessments can take into account loans that are made outside of the bank's
assessment area as long as needs within the area are being met. The new regulation does not require the bank
to make education loans nor does it change how consumer loans are otherwise
considered during CRA evaluations.
Also going into
effect on November 3 will be a provision that allows the agencies to consider
various activities undertaken by majority-owned institutions in conjunction with
minority and women-owned financial institutions (MWLIs) and low-income credit
unions. These changes which were originally
announced in March, will allow CRA regulators to ventures taken in cooperation
with the MWLIs and credit unions even if those institutions are located outside
of the subject bank's assessment area.
The key determinant it whether the assistance will enable the MWLIs and
credit unions to better meet the credit needs in those institutions own
communities.
Examples of
activities undertaken by a majority-owned financial institution in cooperation
with MWLIs that would receive CRA consideration may include making a deposit or
capital investment; purchasing a participation in a loan, loaning an officer or
providing technical assistance to the MWLI or providing free or discounted data
processing systems or office facilities to aid an MWLI in serving its
customers.
In June regulators
proposed a program to encourage banks covered by CRA to support the
Neighborhood Stabilization Program (NSP) even where those programs are outside
of the bank's assessment area, thus increasing bank incentives to invest in or
facilitate NSP-eligible activities in approved target areas.