THE COMMUNITY REINVESTMENT ACT

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THE COMMUNITY REINVESTMENT ACT

• Tools for Improving Community Development
  Lending, Services and Investments

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PURPOSE OF CRA AND CRA ADVOCACY
Redlining the refusal to loan money secured by
a property because of its location in a specific
area. Under CRA, banks have a continuing and
affirmative responsibility to provides loans and
services in areas from which they accept
deposits.
Source www.syracusethenandnow.org
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Banks as Community Partners CRA Provides a
Valuable Mandate
CRA
Government
CDFIs
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Fair Lending and CRA HOW THEY WORK TOGETHER

• Community Reinvestment Act
• Banks have a continuing and affirmative
  obligation to serve all communities in their
  chartered service area including low income
  areas
• Income
• Geography

• Fair Lending
• It is unlawful to refuse credit or impose
  restrictive conditions to credit on the basis of
• Race
• Gender
• Disability, or other protected status

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Home Mortgage Disclosure Act (HMDA)
1975
1977
Community Reinvestment Act (CRA)
Limited adherence to CRA requirements
1977-87
1989
The Color of Money story printed
1989
CRA Exams made public
New data added to HMDA
1990
1992-96
Boston Fed analyses of CRA reports
COMMUNITY REINVESTMENT ACT HISTORY
1995
Lending, Investments, Services test added
2005
ISB regulations
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The Impact of the CRA BILLIONS OF DOLLARS IN
REINVESTMENT
Areas with high levels of CRA activism see
increased levels of lending CRA related home
mortgage and small business lending is
profitable Banks across US make CRA pledges to
communities to increase lending, investments and
services
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ENFORCEMENT OF CRA WHO IS RESPONSIBLE FOR BANK
REGULATION?
Federal Financial Institutions Examination
Council Interagency regulatory body
Office of the Comptroller of the
Currency regulates national banks
Office of Thrift Supervision regulates thrifts
and SLs
Federal Deposit Insurance Corp. regulates
non-federal reserve member
state banks
Federal Reserve Board regulates member banks and
holding companies
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Bank Performance and Evaluation HOW TO READ A CRA
EXAM
Description of Institution Institution Assessment
Area(s) Type of Exam Large Bank Small
Bank Bank Performance Rating Outstanding
Satisfactory Needs to Improve Substantial
Non-Compliance
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Searching for CRA Exams Online HOW DOES YOUR BANK
STACK UP?
FFIEC Interagency CRA Rating Search
www.ffiec.gov/cracf/crarating/main.cfm
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The Large Bank Exam HOW THE LENDING TEST WORKS
Borrower characteristics Geographic distribution
of loans Number and dollar amount of
loans Community development lending Innovative or
flexible lending practices

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The Large Bank Exam HOW THE INVESTMENT TEST WORKS
Equity Investments, and EQ2s Operating and
program grants CRA targeted mortgage-backed
securities Affordable housing, economic
development, technical assistance

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The Large Bank Exam HOW THE SERVICE TEST WORKS
Branch distribution, opening and
closing Affordable bank accounts Relationships
with fringe finance companies? Financial literacy
curriculum

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The Small Bank Exam STREAMLINED EXAMS FOR SMALLER
BANKS
Lending test only, not examined for services,
investments Percent of loans in assessment area,
loan to deposit ratios Action taken on written
complaints No small business data Wink and Nod
test, neither rigorous nor comprehensive

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The Intermediate Small Bank Exam NEW CRA
REGULATIONS FOR MIDSIZED BANKS
Lending test examines the distribution of loans
in banks assessment area Community development
test examines bank branch distribution, community
development investments and loans Examination
focuses on the banks opportunity and capacity
and the need for community development funding No
longer required to disclose small business
lending

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Data Analysis Publicly available data and data
from banks
HMDA and small business data is available online
at FFIEC website Collect newspaper
articles Look up financial and branch
information on FDIC website Review community
development loans Investigate features and
requirements for checking and savings accounts

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Technical Assistance WHAT IS AVAILABLE?
Works with banks to develop policies and programs
to promote community development Woodstock
Institute provides quarterly listings of upcoming
CRA exams when is your bank examined? Organizes
to influence local, regional and national
banking policy

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Community Needs Analysis REINVESTMENT GOALS FOR
YOUR AREA
Bank Branches Residential Lending Small Business
Lending Grants and Investments Affordable Bank
Products Financial Literacy Training
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Making Your Ask Confrontation and follow-through
Identify appropriate bank staff such as CRA
Officer or community development
specialist Review investment goals or grant
making guidelines Submit and discuss your
analysis Discuss your organizations program
areas and how they can fill gaps in CRA lending,
grants and investments, or services

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Critical Issues PRESERVING AND STRENGTHENING CRA

Key issues for community based organizations Gr
ade Inflation CRA Sunshine requirements Regula
tory erosion of CRA
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Attacks on CRA CAN BANKS REALLY FAIL THE CRA EXAM?

Since 1990, few banks have failed a CRA exam
Satisfactory
Outstanding
Needs to Improve
Substantial Non-Compliance
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ATTACKS ON CRA GRAMM-LEACH-BLILEY ADDS SUNSHINE
PROVISION
Nonprofits must disclose CRA related loans and
grants Regulation is burdensome and
vague Woodstock Institute published Reinvestment
Alert 17 CRA Sunshine Rules and You to clarify
regulation
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Attacks on CRA FDIC AND OTS WATER DOWN CRA

Large Bank Exam
Small Bank Exam
Intermediate Small Bank Exam
Greater than
1 billion
Greater than
250 million
OCC
OTS
FDIC
Federal Reserve
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Chicago CRA Coalition and Woodstock Institute
Provides technical assistance for community needs
analysis Works to strengthen CRA and improve
reinvestment activities in member service areas
through Steering committee and task forces meet
regularly to discuss best practices, funding
opportunities and relevant policy decisions
effecting reinvestment in the Chicago region