# Presentation: 114753

## FDIC San Francisco Region Bankers’ Forum 

**Community Reinvestment Act – **
**Recent Amendments**
**August 31, 2005**

## Overview

- Provide an overview of the Amendments
- Provide tips on how to achieve your bank’s optimal CRA performance
- Questions & Answers

## Amendments

**1)** Increased small bank threshold
**2)** New category: Intermediate Small   Banks
**3)** Expanded definition of “Community     Development”
**4)** Clarified the effects of discriminatory or certain credit practices on CRA rating

## Existing CRA Tests

- Small Banks – TA less than $250M
- Streamlined lending test
- Large Banks – TA > $250M
- Includes small banks affiliated w/holding co. exceeding $1B in TA
- 3 part Test – Lending, Investments, & Services
- Collected and reported data on small business and small farm loans

## New CRA Tests

- Small Banks – No change
- Intermediate Small Banks – New Test
- TA $250M to $1 billion
- Subject to small bank streamlined lending test and new flexible community development test
- No collection of data for small business/farm loans
- Large Banks – over $1 billion
- No change

## Intermediate Small Banks

- Two Separately Rated Tests
- Must receive Satisfactory in both tests
- New Flexible Community Development Test
- Innovative and Complexity
- Asset Size based on Changes to CPI

## Intermediate Small Banks	

- Not required to collect and report small business and small farm loans
- Not required to collect and report location of HMDA loans outside MSA

## HMDA Data	

- An important note for HMDA reporters:
**The collection of borrower’s race, ethnicity, gender, and income are still required for loans made outside an MSA. **

## Community Development 

- Important to identify and participate
- Activities must have primary purpose

## Community Development – Existing Rules

- Primary Purpose:
- Affordable housing
- Community services targeted to LMI individuals
- Activities that promoted economic development
- Activities that revitalize or stabilize LMI geographies

## Community Development (expanded)

- Revitalize and Stabilize Revisions to Include:
- Distressed or Underserved non-MSA middle income rural areas
- Disaster areas to be eligible
- FFIEC to publish eligible areas
- Expanded definition is responsive

## Discriminatory or Illegal Credit Practices

- Could Adversely Impact CRA Rating
- Evidence of Discrimination
- Illegal Referral Violating Section 8 RESPA
- TIL Concerning Right of Rescission
- Unfair or Deceptive Practices violating Section 5 of FTC

## Discriminatory or Illegal Credit Practices (continued)

- Compliance Management System may be impacted
- Bank’s policies/practices
- Consumers being harmed
- Management’s corrective actions
- Historical performance

## Performance Context

- Opportunities in assessment area for lending, investments & services
- Bank’s product offerings and business strategy
- Bank’s capacity & constraints
- Size
- Financial condition
- Economic climate
- Safety & Soundness limitations

## Performance Context (cont.)

- Past performance
- Performance of similarly situated lenders
- Written comments in bank’s Public File
- Demographic Data

## Achieving Optimal CRA Performance 

- Only 15% are rated Outstanding
- Review your assessment area boundaries
- New branches or office
- Changes in product mix
- Review in light of 2000 census tract designations

## Achieving Optimal CRA Performance (continued)

- Review your lending distribution
- Make sure majority of lending is within assessment area
- Review those areas outside the assessment area

## Achieving Optimal CRA Performance (continued)

- Establish and communicate goals for CRA performance
- Are we striving for an Outstanding?
- Help examiners understand your area and “performance context”
- You know your market better than examiners
- Explain anomalies and unique characteristics of your assessment area

## Achieving Optimal CRA Performance (continued)

- Ensure your organization understands the definition of community development
- Remember – activities must meet definition and primary purpose
- Develop a mechanism to identify & track community development activities
- Don’t get credit if you don’t provide for examiners to review
- Missed or forgotten

## Achieving Optimal CRA Performance (continued)

- Promote strong HMDA & CRA (if applicable) loan data integrity
- Potential civil money penalties
- Affect compliance management system
- Strong controls and audit
- Determine how much community development activity is enough?
- Every institution is different
- Compare to performance context
- Compare to similarly situated banks in your market

## Achieving Optimal CRA Performance (continued)

- Measure your bank against similarly situated banks and the market
- Review banks w/Outstanding CRA rating
- Ensure that your fair lending program and credit practices are in order
- Consider CRA implications for opening and closing offices

## Achieving Optimal CRA Performance (continued)

- Partnership with Community Groups
- Be proactive

## Achieving Optimal CRA Performance (continued) 		

- Serving your community
- Expansion Plans
- Reputation
- Opportunities
- Increase profits

## Resources	

- Joint Final Rule: _[http://www.fdic.gov/news/news/financial/2005/fil7905.html](http://www.fdic.gov/news/news/financial/2005/fil7905.html)_
- CRA Exam Procedures _[http://www.ffiec.gov/cra/exam_overview.htm](http://www.ffiec.gov/cra/exam_overview.htm)_
- Need Help?
- Jimmy Nguyen (_[hinguyen@fdic.gov](mailto:hinguyen@fdic.gov)__) or (415) 808-8071_

## Questions?