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Inactive Financial Institution Letters

Changes to the Community Reinvestment Act

August 5, 2004

TO: EXECUTIVE OFFICER (also of interest to Compliance Officer)
SUBJECT: Joint Interim Rule Regarding Community Reinvestment Act Regulation (Part 345 of the FDIC's Rules and Regulations.)
Summary: The FDIC and other financial institution regulatory agencies are seeking comment on the joint interim rule that implements technical changes to regulations implementing the Community Reinvestment Act (CRA).

The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (OTS) are seeking comment on the joint interim rule that implements technical changes to regulations implementing the Community Reinvestment Act (CRA). This joint interim rule conforms the agencies' CRA regulations to recent actions of U.S. Office of Management and Budget (OMB), U.S. Bureau of the Census, and the FRB, and became effective on July 8, 2004. Comments are due by September 7, 2004.

The rule makes regulations implementing the CRA conform to changes in: 1) the Standards for Defining Metropolitan and Micropolitan Statistical Areas published by OMB; 2) definitions relating to census tracts as designated by the Census; and 3) the regulation implementing the Home Mortgage Disclosure Act (HMDA) (effective January 1, 2004).

A. Changes Resulting from OMB Revisions

OMB's standards for defining statistical areas provide nationally consistent definitions for government agencies to use when collecting, tabulating, and publishing federal statistics by geographic area. OMB updates these standards approximately every 10 years.

The agencies' CRA regulations rely on OMB standards for defining metropolitan areas for purposes of CRA data collection and reporting, and for delineating institutions' assessment areas. Under OMB's 1990 standards, metropolitan areas consisted of: (1) metropolitan statistical areas (MSAs); and (2) larger consolidated metropolitan statistical areas (CMSAs). CMSAs consisted, in turn, of primary metropolitan statistical areas (PMSAs).

On December 27, 2000, OMB published in the Federal Register a notice adopting new standards for defining metropolitan and micropolitan statistical areas. These new standards replaced and superseded OMB's 1990 standards for defining metropolitan areas. The 2000 standards retain the basic concept of an MSA (an area with a population of at least 50,000) and continue to recognize that in large MSAs, demographic and economic conditions vary widely. According to OMB, those variations necessitate dividing large MSAs into “metropolitan divisions,” smaller statistical areas similar to PMSAs.

OMB updated the list of MSAs and other statistical areas, effective December 2003, in a bulletin issued in February 2004. OMB directed all agencies that conduct statistical activities to collect and publish data for MSAs using the most recent definition of the area. To that end, the agencies have made corresponding changes to the CRA regulations to incorporate OMB's new standards and definitions.

B. Changes Resulting from Census Revisions

Prior to the joint interim rule, the CRA regulation defined the term “geography” as “a census tract or a block-numbering area delineated by the United States Bureau of the Census in the most recent decennial census.” Prior to Census 2000, a “block-numbering area” was a statistical subdivision created for grouping and numbering blocks within a county for which census tracts had not been established. Beginning with Census 2000, the Census assigned tracts in all counties, making block-numbering areas unnecessary. As a result, the definition of “geography” has been revised to omit the term “block-numbering area” (§ 345.12(k)).

The revised definition of “geography” affects CRA assessment area delineation and data collection and reporting. First, when delineating an assessment area, a financial institution must include only whole geographies. Second, data about small business, small farm, community development, and consumer loans include loan location, which is the geography (census tract) in which the loan or borrower is located.

C. Changes Resulting from Revisions to the Board's Regulation C

Prior to January 2004, the CRA regulation defined a “home mortgage loan” to mean a “home improvement loan” or a “home purchase loan” as defined in Regulation C, 12 CFR 203.2. The interagency CRA guidance published by the agencies made clear that this definition of “home mortgage loan” also included refinancings of home improvement and home purchase loans. See 66 FR 36620, 36628 (July 12, 2001) (question 1 addressing §§ __.12 (m)).

Effective January 1, 2004, the revised Regulation C definition of “refinancing” states that a loan is reportable as a refinancing if it satisfies and replaces another obligation, and both the existing obligation and the new obligation are secured by a lien on a dwelling, 12 CFR 203.2(k). Before these revisions, a lender could choose among four standards to determine which refinancings to report; two of the standards considered the purpose of the loan being refinanced. Under the revised definition, the purpose of the loan being refinanced is not considered. The joint interim regulation amends the definition of “home mortgage loan” in the CRA regulations to include refinancings as well as home purchase loans and home improvement loans, as defined in 12 CFR 203.2. In some cases, the revised definition of a home mortgage loan will capture more of an institution's originations or purchases of refinanced loans than the old definition captured because refinancings reported under HMDA may also be reported as refinancings of small business or small farm loans under CRA.

Written comments may be sent to Robert E. Feldman, Executive Secretary, Attention: Comments/Executive Secretary Section, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, DC 20429. Comments may also be mailed electronically to Comments may be hand-delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. For more information, please contact Pamela Freeman, Policy Analyst, DSC, at (202) 898-6568; or Susan van den Toorn, Counsel, Legal Division, at (202) 898-8707.

For your reference, FDIC Financial Institution Letters may be accessed on the FDIC's Web site at To learn how to automatically receive FDIC Financial Institution Letters through e-mail, please visit

Michael J. Zamorski
Division of Supervision and Consumer Protection

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Distribution: FDIC-Supervised Banks (Commercial and Savings)

NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC'S Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).

Last Updated 4/11/2005

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