Now is your chance to submit comments to improve the Community Reinvestment Act and we encourage everyone to weigh in before the deadline.
The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued a notice of proposed rulemaking to update CRA regulations to strengthen the achievement of the core purpose of the statue, and to adapt to changes in the banking industry, including the expanded role of mobile and online banking. This is the first opportunity to make significant changes to CRA regulations in over 25 years and can have significant impacts on investment in affordable housing.
The Community Reinvestment Act (CRA) was enacted in 1977 to prevent discrimination and address systemic inequities in access to credit. The CRA encourages banks to lend and provide services equitably, and support community development in the places where they do business, with a particular focus on low- and moderate- income (LMI) communities. It is one of the most impactful policies in financing housing and community development.
Three federal banking agencies, or regulators, are responsible for the CRA: the Federal Reserve Board (FRB) regulates state-chartered banks that are members of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC) regulates state-charted banks that are NOT members of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) regulates banks with national charters.
Read the New York Fed’s CRA 101 to learn more about CRA regulations.
An Opportunity for Reform:
The agencies identified five key elements in their fact sheet:
- Expand access to credit, investment, and basic banking services in low- and moderate-income communities: Under the proposal, the agencies would evaluate bank performance across the varied activities they conduct and communities in which they operate so that CRA is a strong and effective tool to address inequities in access to credit. The proposal would promote community engagement and financial inclusion. It would also emphasize smaller value loans and investments that can have high impact and be more responsive to the needs of LMI communities.
- Adapt to changes in the banking industry, including internet and mobile banking: The proposal would update CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models.
- Provide greater clarity, consistency, and transparency: The proposal would adopt a metrics-based approach to CRA evaluations of retail lending and community development financing, which includes public benchmarks, for greater clarity and consistency. It also would clarify eligible CRA activities, such as affordable housing, that are focused on LMI, undeserved, and rural communities.
- Tailor CRA evaluations and data collection to bank size and type: The proposal provides that smaller banks would continue to be evaluated under the existing CRA regulatory framework with the option to be evaluated under aspects of the new proposed framework.
- Maintain a unified approach: The proposal reflects a unified approach from the bank regulatory agencies and incorporates extensive feedback from stakeholders.
Who’s Weighing In?
NYHC wants to see reforms that strongly incentivize investment in affordable housing not just lending. Affordable housing is complicated with multiple financing streams, complex underwriting and long timelines. CRA reforms should better encourage this investment, especially as we struggle to address a supply crisis, inflation and rising interest rates. We are concerned that the joint proposal is biased in favor of retail lending and may not sufficiently encourage affordable housing investment by large banks due to the proposed rating system.
In the current large bank test a bank’s CRA examination score is determined by a lending test (50%), an investment test (25%) and a services test (25%). The joint proposal seeks to change the bank assessment to weigh retail test performance heavier (60%) than community development performance (40%). Further, within community development financing, it combines investment and lending. This change would allow banks to achieve satisfactory ratings, even if they need improvement in community development, effectively diluting the value of community development within CRA compliance.There are several local and national organizations with a wide range of perspectives that have been closely monitoring CRA reform and will submit comment. We encourage you to take advantage of this historic opportunity to impact affordable housing investment.
Comments are due on August 5 and can be submitted by E-mail at email@example.com. Attach your comment letter as a PDF file. Include docket (R-1769) and RIN (7100-AG29) numbers in the subject line of the message. Review the below resources for ideas on how to draft your own comments:
The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve their common interest. Read their most recent blog post on CRA reform. If you have further questions, you can contact Luke Villalobos, Director of Policy and Research at firstname.lastname@example.org
The National Association of Affordable Housing Lenders expands economic opportunity through responsible private financing for affordable housing and inclusive neighborhood revitalization. It is the national alliance of major banks, CDFIs and other capital providers for affordable housing and inclusive neighborhood revitalization. Visit their media page to read analysis on the CRA proposal.
The Association for Neighborhood and Housing Development is a member organization of community groups across New York City. They use research, advocacy, and grassroots organizing to support their members in their work to build equity and justice in their neighborhoods and city-wide. Learn about their CRA advocacy here and read their sample comments. If you have further questions, you can contact Jaime Weisberg, Senior Campaign Analyst at email@example.com
Novogradac is a national professional services that works extensively in the affordable housing, community development, historic preservation, opportunity zones and renewable energy fields. Read their most recent blog post on how the CRA proposal may impact community development tax incentives. If you have further questions, you can contact Peter Lawrence, Director of Public Policy and Government Relations at firstname.lastname@example.org.