if the agency is located in an LMI neighborhood and provides
services to the people living in that neighborhood, their services
meet the definition for favorable CRA credit.
■ ■ A specific community service benefiting LMI persons, even
when provided by an organization that serve individuals of all
income levels: For example, the American Heart Association is
a nonprofit that serves individuals of all income levels. However, if you were to conduct fundraising to fund the purchase
or operations of a van used to conduct health screenings for
residents in LMI neighborhoods who don’t have ready access
to a health clinic, the activity would qualify for CRA.
■ ■ Services offered at a workplace for LMI employees based
on readily available data concerning the average wages for
employees in that particular occupation or industry: Similar
to being able to receive favorable CRA credit for activities
conducted in LMI neighborhoods as described in the second
bullet above, you can now rely upon Bureau of Labor Statistics6
information rather than having to prove that the employees
were primarily LMI.
revised Q&as: Primary Purpose of
Community development
Historically, favorable CRA credit was given for activities under
only one of two conditions—when a majority of the dollars or
beneficiaries of the activity meet one of the community development purpose definitions or when the activity is expressly
intended to meet one of the community development activities.
Because many housing developments don’t include a majority
of affordable units, and, in fact, some municipalities require that
a certain percentage of housing units be set aside for affordable
housing, compliance officers have been arguing for years that
credit should be given for mixed-income developments, if only
on a pro-rata share basis. The new Q&As now allow financial
institutions to receive pro-rata consideration for mixed-income
housing developments when less than 51 percent of the development meets the definition for affordable housing.
To receive credit, be prepared to provide evidence that the units
are targeted to LMI individuals, and be consistent in calculating/
reporting pro-rata credit. You must report only the portion of
the loan that provides affordable housing if less than 51 percent
of the units are affordable; however, if a majority of the units are
affordable, report the entire loan amount. You may pro rate using
the unit count or you could possibly document the actual dollars
spent to develop the affordable housing units. Using the straight
unit proration is often the easiest. For example, if 10 out of 100
units are affordable, you would report 10 percent of the loan (or
investment) for community development credit.
agencies expand Cra to encourage support
for hud neighborhood stabilization Program
activities
The Neighborhood Stabilization Program (NSP)—administered
by the U.S. Department of Housing and Urban Development
Hardly a week goes by that allegations
of predatory lending activities are not in
the news, placing all lenders under greater
scrutiny by both the community at large
and examiners.
(HUD)—provides funding to nonprofits and state or municipal
governments to purchase and rehabilitate abandoned and foreclosed properties in areas of high vacancy. While many of these
areas were in LMI neighborhoods, they were not all designated
as such. The December 2010 Final Rule encourages financial
institutions to participate in NSP-eligible programs by providing
CRA credit for programs in such neighborhoods, regardless of
whether they are designated as LMI neighborhoods. This promotes innovative public-private partnerships that benefit entire
communities. The new rule goes on to clarify that NSP-eligible
activities will receive credit for up to two years after the date that
NSP funds must be used. It also says CRA credit is not limited to
programs receiving NSP funds as long as they are eligible activities
within the designated NSP plan area.
Review the list of NSP2 grantees7 to determine whether your
organization could partner with one of them in your community.
Look into leveraging NSP dollars with other down payment
assistance programs—such as the Federal Home Loan Bank
Workforce Initiative Subsidy for Homeownership8 and Individual
Development and Empowerment Account9 or other municipal
programs—to enhance lending activities for LMI borrowers.
Being creative with how your organization can utilize NSP program dollars and/or eligible programs within NSP designated
communities can demonstrate the flexibility and leadership to
earn extra credit in your next CRA exam.
developing a road Map for success—Chart the
Course with your Fair lending Counterparts
For large banks, CRA will be regulated by one of the three prudential regulators (board, FDIC, or OCC) and most of the consumer
protection regulations will be evaluated by the CFPB. Whether
your performance will be regulated by one or more agencies, it will
be important to forge a close relationship with those responsible
for your institution’s consumer lending compliance program.
Perhaps one of the most significant threats to successful exam
results is not directly tied to your CRA performance, but instead
to your fair lending violations. In recent years, discrimination or
other illegal credit practices (such as violating provisions of Regulation B, FHA, and Unfair and Deceptive Acts and Practices, Home
Ownership and Equity Protection Act, the Real Estate Settlement
Procedures Act, or Truth in Lending) have become some of the
most likely issues to adversely impact CRA performance. Recent
exam results make it clear that financial institutions must better
understand their consumer lending practices—and those of their
