FDIC, Federal Reserve Board, OCC, and OTS Announce Revisions to the Community Reinvestment Act Regulations

November 30, 2010 at 4:36 pm Leave a comment

(Original E-Alert Dated October 19, 2010)

On October 4, 2010, the FDIC, the Federal Reserve Board, the OCC and the OTS (the Agencies) issued a joint final rule (the Rule), which revises the rules implementing the Community Reinvestment Act. The Rule implements certain statutory changes, and provides that the Agencies (i) will consider low-cost education loans to low-income borrowers and (ii) may consider capital investment, loan participation, and other ventures undertaken by financial institutions in connection with minority-owned or women-owned financial institutions or low-income credit unions as positive factors when determining a financial institution’s CRA rating. Specifically, the Rule:

  • provides a definition of “low-income borrower” consistent with current CRA definitions (50% of area median income), including borrowers’ and co-borrowers’ income;
  • defines “low-cost” based on the rates and fees charged under U.S. Department of Education lending programs;
  • includes loans for higher education by accredited institutions listed by the U.S. Department of Education and loans covered by Truth in Lending protections;
  • enables consideration of loans outside assessment areas if the needs are adequately addressed inside assessment areas;
  • does not require any institution to make low-cost loans to low-income students or change how consumer loans are otherwise considered during CRA evaluations;
  • incorporates the statutory language in Section 804(b) that the Agencies may consider as a factor capital investment, loan participation, and other ventures undertaken by the institution in cooperation with minority-owned and women-owned financial institutions and low-income credit unions in assessing the CRA rating of non-minority-owned and non-women-owned institutions; and
  • clarifies that activities described in the previous bullet-point are not limited to the institution’s CRA assessment area, but such activities outside the assessment area will not compensate for poor lending performance within the assessment area.

The Rule will become effective November 3, 2010. A copy of the complete text of the Rule can be found here.

Entry filed under: Client Alerts.

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