[Federal Register: July 12, 2001 (Volume 66, Number 134)]
[Notices]
[Page 36619-36653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jy01-96]
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Part II
Federal Financial Institutions Examination Council
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Community Reinvestment Act; Interagency Questions and Answers Regarding
Community Reinvestments; Notice
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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
Community Reinvestment Act; Interagency Questions and Answers
Regarding Community Reinvestment
AGENCY: Federal Financial Institutions Examination Council.
ACTION: Notice.
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SUMMARY: The Consumer Compliance Task Force (we) of the Federal
Financial Institutions Examination Council (FFIEC) is supplementing,
amending, and republishing its Interagency Questions and Answers
Regarding Community Reinvestment. The Interagency Questions and Answers
have been prepared by staff of the Office of the Comptroller of the
Currency (OCC), the Board of Governors of the Federal Reserve System
(Board), the Federal Deposit Insurance Corporation (FDIC), and the
Office of Thrift Supervision (OTS) (collectively, the agencies) to
answer frequently asked questions about community reinvestment. These
Interagency Questions and Answers contain informal staff guidance for
agency personnel, financial institutions, and the public.
DATES: Effective Date of Amended Interagency Questions and Answers on
Community Reinvestment: July 11, 2001.
FOR FURTHER INFORMATION CONTACT: OCC: Karen Tucker, National Bank
Examiner, Community and Consumer Policy Division, (202) 874-4446; or
Margaret Hesse, Special Counsel, Community and Consumer Law Division,
(202) 874-5750, Office of the Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
Board: Catherine M.J. Gates, Senior Review Examiner, (202) 452-
3946; or Kathleen C. Ryan, Senior Attorney, (202) 452-3667, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
FDIC: Robert W. Mooney, Assistant Director, Division of Compliance
and Consumer Affairs, (202) 942-3378; Stephanie Caputo, Senior Fair
Lending Specialist, Division of Compliance and Consumer Affairs, (202)
942-3413; or A. Ann Johnson, Counsel, Legal Division, (202) 898-3573,
Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OTS: Theresa A. Stark, Project Manager, Compliance Policy, (202)
906-7054; or Richard R. Riese, Director, Compliance Policy, (202) 906-
6134, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC
20552.
SUPPLEMENTARY INFORMATION:
Background
In 1995, the agencies revised the Community Reinvestment Act (CRA)
regulations by issuing a joint final rule, which was published on May
4, 1995 (60 FR 22156). See 12 CFR parts 25, 228, 345 and 563e,
implementing 12 U.S.C. 2901 et seq. The agencies published related
clarifying documents on December 20, 1995 (60 FR 66048) and May 10,
1996 (61 FR 21362).
The revised regulations are interpreted primarily through
``Interagency Questions and Answers Regarding Community Reinvestment,''
which provide informal staff guidance for use by agency personnel,
financial institutions, and the public, and which are supplemented
periodically. We published our most recent guidance on April 28, 2000
(2000 Interagency Questions and Answers). 65 FR 25088. In addition to
issuing the 2000 Interagency Questions and Answers, we re-proposed
revisions to one question and answer, as well as a conforming amendment
to another question and answer, in the accompanying supplementary
information. The proposed revised question and answer addressed whether
there must be a direct benefit from community development loans and
services and qualified investments to an institution's assessment area.
We specifically requested comment addressing the proposed revised
question and answer, as well as general comments and questions
regarding the CRA regulations. 65 FR at 25090-92.
We received 17 letters in response to our request for comments in
the 2000 Interagency Questions and Answers. Comments came from
financial institutions or financial institution holding companies (7),
community organizations (2), financial institution trade associations
(4), one state agency, and others (3). This document supplements,
revises, and republishes the 2000 Interagency Questions and Answers
based, in part, on questions and comments received from examiners,
financial institutions, and other interested parties, and on comments
received in response to our request for comments.
As discussed below, this document adopts the revisions to the
question and answer about whether there must be a direct benefit to an
institution's assessment area for an activity to benefit the assessment
area that we proposed in April 2000, along with conforming changes to
another existing question and answer, which addresses what is meant by
a ``regional area.'' We are also making slight clarifying revisions to
eight existing questions and answers and adopting six new questions and
answers.
The Interagency Questions and Answers has an index to aid readers
in locating specific information in the document. The index contains
keywords, listed alphabetically, along with numerical indicators of
questions and answers that relate to that keyword. The list of
questions and answers addressing each keyword in the index is not
intended to be exhaustive. We welcome suggestions for additional
entries to the index. Further, when this new version of the Interagency
Questions and Answers is made available on the agencies' and the
FFIEC's World Wide Web sites, the index question and answer numbers
will be linked by hypertext to the questions and answers in the
document to facilitate quick reference to relevant information.
Questions and answers are grouped by the provision of the CRA
regulations that they discuss and are presented in the same order as
the regulatory provisions. The Interagency Questions and Answers employ
an abbreviated method to cite to the regulations. Because the
regulations of the four agencies are substantially identical,
corresponding sections of the different regulations usually bear the
same suffix. Therefore, the Interagency Questions and Answers typically
cite only to the suffix. For example, the small bank performance
standards for national banks appear at 12 CFR 25.26; for Federal
Reserve System member banks supervised by the Board, they appear at 12
CFR 228.26; for nonmember state banks, at 12 CFR 345.26; and for
thrifts, at 12 CFR 563e.26. Accordingly, the citation in this document
would be to Sec. ____.26. In the few instances in which the suffix in
one of the regulations is different, the specific citation for that
regulation is provided. The question numbering system consists of the
regulatory citation (as described above) and a number, connected by a
dash. For example, the first question addressing Sec. ____.21(a) would
be identified as Sec. ____.21(a)-1.
Adopting Question and Answer Re-Proposed in April 2000 and
Conforming Revisions to One Question and Answer
We are adopting the revisions that we re-proposed in April 2000 to
the question and answer about whether there must be a direct benefit to
an institution's assessment area for an activity to benefit the
assessment area. We are also adopting conforming revisions to another
existing question
[[Page 36621]]
and answer to provide consistency with the amended question and answer.
Must There Be Some Immediate or Direct Benefit to the Institution's
Assessment Area(s) To Satisfy the Regulations' Requirement That
Qualified Investments and Community Development Loans or Services
Benefit an Institution's Assessment Area(s) or a Broader Statewide or
Regional Area That Includes the Assessment Area(s)?
The fifth question and answer addressing Secs. ____.12(i) and
563e.12(h) (Secs. ____.12(i) & 563e.12(h)-5) addresses whether there
must be an immediate or direct benefit to an institution's assessment
area(s) to satisfy the regulations' requirement that qualified
investments and community development loans or services benefit an
institution's assessment area(s) or a broader statewide or regional
area that includes the assessment area(s). This question and answer
currently states that an institution's assessment area(s) need not
receive an immediate or direct benefit from the institution's specific
participation in the broader statewide or regional organization or
activity, provided the purpose, mandate, or function of the
organization or activity includes serving geographies or individuals
located in the assessment area(s).
In May 1999, we first proposed revising this question and answer to
permit consideration of support for community development organizations
or activities serving individuals or geographies located somewhere in
the broader statewide or regional area that includes the institution's
assessment area. This consideration would be given even if the
organization or activity did not have the purpose, mandate or function
of serving geographies or individuals within the institution's
assessment area(s). Most commenters responding to the 1999 proposal
appeared to favor the original proposed revision, as it would provide
increased flexibility in engaging in community development activities.
However, it appeared that a number of those commenters did not
recognize the revised answer as an expansion of existing options for
institutions to engage in community development activities outside
their assessment area(s). Therefore, we re-proposed for public comment
a slightly revised question and answer to ensure that the public
understood that the revised question and answer expands the current
guidance.
The question and answer, as it was re-proposed in April 2000,
contained two approaches to determine whether qualified investments and
community development loans or services benefit an institution's
assessment area(s) or a broader statewide or regional area that
includes the institution's assessment area(s). First, as the agencies
have always maintained, if an activity supports an organization or
program that benefits the institution's assessment area or a broader
statewide or regional area that is larger than, but includes, the
assessment area(s), the activity will be considered if the purpose,
mandate, or function of the organization or activity includes serving
the assessment area(s). Second, if, in light of its performance
context, an institution has adequately addressed the community
development needs of its assessment area(s), examiners will consider
community development activities that benefit low-and moderate-income
individuals or geographies somewhere in the broader statewide or
regional area that includes the assessment area(s), even if those
activities do not have a purpose, mandate, or function of benefiting
the institution's assessment area(s).
The following example explained the two approaches. An institution
is located in Chicago. Its assessment area is the Chicago metropolitan
area. Its community development activities include loans, investments,
and services in organizations and projects located in and benefiting
Chicago, its assessment area. These activities would be considered
under the first approach. The institution's community development
activities also include loans and investments in several projects that
benefit the entire state of Illinois, including Chicago. These
activities also are considered under the first approach. In addition,
the institution participated in a community development activity that
benefits the entire Great Lakes region, including the Chicago
metropolitan area. This activity would also be considered under the
first approach. Assume that, after considering its performance context,
examiners have determined that the institution has adequately addressed
the community development needs of its assessment area through loans,
investments or services considered under the first approach. Examiners
then would also consider the institution's investment in a community
development organization located in Decatur, IL, that will serve only
the Decatur area--with no potential that it will ever benefit Chicago,
the institution's assessment area. Decatur, of course, is in the
statewide area (Illinois) that includes the institution's assessment
area. The institution would receive consideration for this activity
under the second approach.
The agencies received 14 letters commenting on the proposed
question and answer. All of the commenters were generally in favor of
the proposed question and answer. As one financial institution
commenter stated, ``We believe that community development organizations
and programs that operate on a local, statewide, or even multi-state
basis ultimately provide benefit to all surrounding areas. Such
initiatives help stabilize these markets and provide a ripple effect on
neighboring geographies. As the capacity of one area grows, it is
possible to leverage that effort to build community development
momentum.''
The agencies are adopting the amended question and answer,
Secs. ____.12(i) & 563e.12(h)-5, as it was proposed in April 2000.
What Is Meant by the Term ``Regional Area''?
In addition, the agencies are also adopting the conforming
amendment to question and answer, Secs. ____.12(i) & 563e.12(h)-6,
which was also proposed in April 2000. This revised question and answer
is necessary so that, in cases where an institution has already
adequately addressed the community development needs of its assessment
area(s), examiner discretion does not unduly impede the broader choice
and judgment permitted to institutions for performing community
development activities in the relevant statewide or regional area. This
conforming amendment clarifies that, if an institution has adequately
addressed the community development needs of its assessment area(s),
examiners will consider its community development activities that
benefit geographies or individuals located somewhere within the broader
statewide or regional area that includes the institution's assessment
area(s), even if those activities do not benefit its assessment
area(s).
New Questions and Answers
The agencies are adopting six new questions and answers, which are
discussed below.
Revitalize and Stabilize Low- and Moderate-Income Areas
Financial institutions and examiners have asked us about the types
of activities that are considered to revitalize and/or stabilize low-
and moderate-income areas. In response, the agencies are adopting a new
question and answer, Secs. ____.12(h)(4) & 563e.12(g)(4)-1, which
provides
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guidance about such activities. It states that activities that
revitalize or stabilize a low- or moderate-income geography are
activities that help to attract and retain businesses and residents.
Examiners will presume that an activity revitalizes or stabilizes a
low- or moderate-income geography if the activity has been approved by
the governing board of an Enterprise Community or Empowerment Zone
(designated pursuant to 26 U.S.C. 1391) and is consistent with the
board's strategic plan. They will make the same presumption if the
activity has received similar official designation as consistent with a
federal, state, local, or tribal government plan for the revitalization
or stabilization of the low- or moderate-income geography. To determine
whether other activities revitalize or stabilize a low- or moderate-
income geography, examiners will evaluate the activity's actual impact
on the geography, if information about this is available. If not,
examiners will determine whether the activity is consistent with the
community's formal or informal plans for the revitalization and
stabilization of the low- or moderate-income geography.
Types of Lending Activities That May Warrant Favorable Consideration as
Activities Responsive to the Credit Needs of an Institution's Community
Credit needs vary from community to community. However, there are
some lending activities that are likely to be responsive in helping to
meet the credit needs of many communities. The agencies are adopting a
new question and answer, Sec. ____.22(a)-1, which identifies the
following activities as being responsive to the needs of an
institution's assessment area:
Providing loan programs that include a financial education
component about how to avoid lending activities that may be abusive or
otherwise unsuitable;
Establishing loan programs that provide small, unsecured
consumer loans in a safe and sound manner (i.e., based on the
borrower's ability to repay) and with reasonable terms;
Offering lending programs, which feature reporting to
consumer reporting agencies, that transition borrowers from loans with
higher interest rates and fees (based on credit risk) to lower-cost
loans, consistent with safe and sound lending practices. Reporting to
consumer reporting agencies allows borrowers accessing these programs
the opportunity to improve their credit histories and thereby improve
their access to competitive credit products. Examiners may consider
favorably such lending activities, which have features augmenting the
success and effectiveness of the institution's lending programs.
Indirect Community Development Services
The agencies are adopting a new question and answer,
Sec. ____.24(e)-1, that addresses the conditions under which an
institution may receive consideration for community development
services offered by affiliates or third parties. The guidance states
that, at an institution's option, the agencies will consider services
performed by an affiliate or by a third party on the institution's
behalf under the service test if the services provided enable the
institution to help meet the credit needs of its community. Indirect
services that enhance an institution's ability to deliver credit
products or deposit services within its community and that can be
quantified may be considered under the service test if those services
have not been considered already under the lending or investment test.
For example, an institution that contracts with a community
organization to provide home ownership counseling to low- and moderate-
income home buyers as part of the institution's mortgage program may
receive consideration for that indirect service under the service test.
In contrast, donations to a community organization that offers
financial services to low- or moderate-income individuals may be
considered under the investment test, but would not also be eligible
for consideration under the service test. Services performed by an
affiliate will be treated the same as affiliate loans and investments
made in the institution's assessment area and may be considered if the
service is not claimed by any other institution.
Credit Card Banks' Activities
The agencies are adopting a new question and answer,
Sec. ____.25(a)-1, that applies only to credit card banks that are
exempt from the definition of ``bank'' in the Bank Holding Company Act
(BHCA), as amended by the Competitive Equality Banking Act of 1987
(CEBA credit card banks). This new guidance explains how a CEBA credit
card bank (if designated as a limited-purpose institution) can meet its
community's credit needs without losing its exemption from the
definition of ``bank.'' This guidance memorializes a letter issued in
1996 by staff at the Board of Governors of the Federal Reserve System
to the president of the Association of Financial Services Holding
Companies. The guidance clarifies that, although the BHCA restricts
CEBA credit card banks to credit card operations, a CEBA credit card
bank can engage in community development activities without losing its
exemption under the BHCA. A CEBA credit card bank could provide
community development services and investments without engaging in
operations other than credit card operations. For example, the bank
could provide credit card counseling, or the financial expertise of its
executives, free of charge, to community development organizations. In
addition, a CEBA credit card bank could make qualified investments, as
long as the investments meet the guidelines for passive and
noncontrolling investments provided in the BHCA and the Board's
Regulation Y. Finally, although a CEBA credit card bank cannot make any
loans other than credit card loans, under Sec. ____.25(d)(2) (community
development test-- indirect activities), the bank could elect to have
part of its qualified passive and noncontrolling investments in a
third-party lending consortium considered as community development
lending, provided that the consortium's loans otherwise meet the
requirements for community development lending. When assessing a CEBA
credit card bank's CRA performance under the community development
test, examiners will take into account the bank's performance context.
In particular, examiners will consider the legal constraints imposed by
the BHCA on the bank's activities as part of the bank's performance
context in Sec. ____.21(b)(4).
Effect of Evidence of Other Illegal Credit Practices
Section ____.28(c) of our regulations states that evidence of
discriminatory or other illegal credit practices adversely affects the
evaluation of an institution's performance. The agencies are adopting a
new question and answer addressing this provision. The new question and
answer, Sec. ____.28(c)-1, discusses what is meant by ``discriminatory
or other illegal credit practices.'' It explains that an institution
engages in discriminatory credit practices if it discourages or
discriminates against credit applicants or borrowers on a prohibited
basis, in violation, for example, of the Fair Housing Act or the Equal
Credit Opportunity Act (as implemented by Regulation B). Examples of
other illegal credit practices inconsistent with helping to meet
community credit needs include violations of:
The Truth in Lending Act regarding rescission of certain
mortgage transactions and regarding disclosures and certain loan term
restrictions in
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connection with credit transactions that are subject to the Home
Ownership and Equity Protection Act;
The Real Estate Settlement Procedures Act regarding the
giving and accepting of referral fees, unearned fees or kickbacks in
connection with certain mortgage transactions; and
The Federal Trade Commission Act regarding unfair or
deceptive acts or practices.
Examiners will determine the effect of evidence of illegal credit
practices as set forth in examination procedures and Sec. ____.28(c) of
the regulations.
Violations of other provisions of the consumer protection laws
generally will not adversely affect an institution's CRA rating, but
may warrant the inclusion of comments in an institution's performance
evaluation. These comments may address the institution's policies,
procedures, training programs, and internal assessment efforts.
Electronic Public Files
Some financial institutions have inquired whether it is acceptable
to maintain the required public file information electronically on an
intranet or the Internet. The agencies believe that an institution may
keep all or part of its public file on an intranet or the Internet,
provided that the institution maintains all of the information, either
in paper or electronic form, that is required in Sec. ____.43 of the
regulations. An institution that opts to keep part or all of its public
file on an intranet or the Internet must follow the rules in
Sec. ____.43(c)(1) and (2) as to what information is required to be
kept at a main office and at a branch. The institution must also ensure
that the information required to be maintained at a main office and
branch, if kept electronically, can be readily downloaded and printed
for any member of the public who requests a hard copy of the
information.
The agencies are adopting a new question and answer,
Sec. ____.43(c)-2, which addresses maintaining public files on an
intranet or the Internet.
Revised Questions and Answers
The agencies are revising eight existing questions and answers,
which are discussed below.
New Markets Venture Capital Companies
The Consolidated Appropriations Act of 2001 (Pub. L. 106-554),
enacted December 21, 2000, included the New Markets Venture Capital
Program Act of 2000. The New Markets Venture Capital Program, which is
administered by the Small Business Administration (SBA), allows the SBA
to designate New Market Venture Capital companies (NMVCCs). NMVCCs are
investment funds that will promote economic development and create
wealth and job opportunities in low-income geographies and among
individuals living in such areas through equity-type investments in
smaller enterprises located in those low-income geographical areas.
Based on the statutory mandate for NMVCCs, the agencies will
presume that any loan to or lawful investment in NMVCCs will promote
economic development. Therefore, we are revising Sec. ____.12(h)(3)-1
to reflect this presumption.
Reporting Loans With a Business Purpose That Are Secured by Residential
Real Estate
The agencies are adopting revisions to two existing questions and
answers to accommodate the difference in treatment between the Call
Report and Thrift Financial Report (TFR) instructions concerning loans
secured by residential real estate that have a business purpose. Under
the Call Report instructions, loans secured by nonfarm residential real
estate that are used to finance small businesses must be reported as
``loans secured by real estate'' unless the security interest in the
nonfarm residential real estate is taken only as an abundance of
caution. The TFR instructions, however, allow an institution to
classify a loan that meets the definition of a mortgage loan, but that
is used to finance small businesses, as a mortgage loan or as a
nonmortgage loan according to the purpose of the loan, at the option of
the reporting institution. As a result, institutions that file Call
Reports and those that file TFRs may treat loans secured by nonfarm
residential real estate, but that are for the purpose of financing a
small business, in different ways.
The agencies are revising Secs. ____.12(u) & 563e.12(t)-3 and
Sec. ____.42(c)(2)-1 to be consistent with guidance provided in the
Call Report and TFR instructions. The agencies are bifurcating the
answer to Secs. ____.12(u) & 563e.12(t)-3 to account for the different
treatment in the Call Report and TFR instructions. The guidance states
that, for banks filing Call Reports, loans secured by nonfarm
residential real estate to finance small businesses will typically not
be included as ``loans to small businesses'' for Call Report purposes,
unless the security interest in the property is taken only as an
abundance of caution. The agencies recognize that many small businesses
are financed by loans that would not have been made or would have been
made on less favorable terms had they not been secured by residential
real estate. If these loans have a primary purpose of community
development, as defined in the regulations, they may be reported as
community development loans. Otherwise, at an institution's option, the
institution may collect and maintain data separately concerning these
loans and request that the data be considered in its CRA evaluation as
``Other Secured Lines/Loans for Purposes of Small Business.''
For institutions that file TFRs, depending on how a loan is
classified, it is possible that a loan secured by nonfarm residential
real estate that finances a small business will be reported as a
``small business loan.'' Loans secured by nonfarm residential real
estate to finance small businesses may be reported as small business
loans if they are reported on the TFR as nonmortgage, commercial loans.
Otherwise, loans that meet the definition of mortgage loans, for TFR
reporting purposes, may be classified as mortgage loans. These loans
may be reported as community development loans, if appropriate, or
collected as ``Other Secured Lines/Loans for Purposes of Small
Business.''
The guidance provided in Sec. ____.42(c)(2)-1 is being revised to
be applicable only to banks that file Call Reports. This question and
answer is inapplicable to thrifts that file TFRs. The question and
answer reiterates that banks that make loans to finance small
businesses, which are secured by nonfarm, residential real estate, and
for which the security interest was not taken only as an abundance of
caution, may either report the loans as community development loans, if
appropriate, or may collect and maintain loan information as ``Other
Secured Lines/Loans for Purposes of Small Business.''
Clarification of Sec. ____.21(b)(5)-1 Addressing Assigned Ratings Being
Adversely Affected by Poor Past Performance
The agencies are clarifying the wording of the answer to this
question. We intend no substantive change.
Home Mortgage Loan Modification, Extension, and Consolidation
Agreements (MECAs)
In several states, financial institutions use MECAs as an
alternative to refinancings for their customers. Existing guidance
Sec. ____.22(a)(2)-3 states that an institution may receive
[[Page 36624]]
consideration under CRA as ``other loan data'' for MECAs, in which it
obtains loans from other institutions without actually purchasing or
refinancing the loans. The agencies are clarifying this guidance to
indicate that it applies only to home mortgage loans.
Reporting Lines of Credit
The agencies have received inquiries from examiners and our
institutions about how institutions should report increases to small
business or small farm lines of credit once the total line exceeds the
$1 million or $500,000 limit for reporting a loan to a small business
or a loan to a small farm, respectively, as described in the Call
Report or TFR instructions. Because the Call Report and TFR no longer
consider lines of credit that have exceeded the $1 million or $500,000
thresholds as loans to small businesses or loans to small farms,
respectively, such lines would also no longer be considered small
business or small farm loans for CRA purposes.
The agencies are revising existing question and answer
Sec. ____.42-3 to clarify this view.
Clarification of Sec. ____.42(a)-5 Addressing Reporting Data on
Refinancings and Renewals of Small Business and Small Farm Loans
In the 2000 Interagency Questions and Answers, the agencies adopted
a revised version of Sec. ____.42(a)-5, which discusses collection and
reporting of data on small business and farm loans that are refinanced
or renewed. The 2000 guidance suggests that if a renewal of $15,000 and
new money of $5,000 are provided in connection with the same loan to
the same borrower, the two amounts should be reported separately as two
separate originations. In response to several communications from
institutions indicating that their data systems may not allow such a
transaction to be reported as two originations, the agencies are
clarifying that institutions may report the two originations (the
renewal and the increase in the line) together as a single origination.
In the example above, an institution may report one origination of
$20,000.
We have also deleted from the answer to this question information
that was relevant to data collected in the year 2000 and reported in
2001. Because this data should have been reported by March 1, 2001,
this portion of the answer is no longer pertinent. The remaining answer
is applicable beginning with data on small business and small farm
collected in 2000 and reported in 2001.
Updating Sec. ____.42-4
Consistent with the deletion of the out-dated portion of the answer
to Sec. ____.42(a)-5, we are also deleting the part of the answer to
Sec. ____.42 `` - that was relevant only to data that was collected in
2000 and reported in 2001. The remaining answer is applicable beginning
with data about renewals of lines of credit collected in 2000 that will
be reported in 2001.
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)
The SBREFA requires an agency, for each rule for which it prepares
a final regulatory flexibility analysis, to publish one or more
compliance guides to help small entities understand how to comply with
the rule.
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
agencies certified that their proposed CRA rule would not have a
significant economic impact on a substantial number of small entities
and invited public comments on that determination. See 58 FR 67478
(Dec. 21, 1993); 59 FR 51250 (Oct. 7, 1994). In response to public
comment, the agencies voluntarily prepared a final regulatory
flexibility analysis for the joint final rule, although the analysis
was not required because it supported the agencies' earlier
certification regarding the proposed rule. Because a regulatory
flexibility analysis was not required, section 212 of the SBREFA does
not apply to the final CRA rule. However, in their continuing efforts
to provide clear, understandable regulations and to comply with the
spirit of the SBREFA, the agencies have compiled the Interagency
Questions and Answers. The Interagency Questions and Answers serve the
same purpose as the compliance guide described in the SBREFA by
providing guidance on a variety of issues of particular concern to
small banks and thrifts.
The text of the Interagency Questions and Answers follows:
Interagency Questions and Answers Regarding Community Reinvestment
Sec. ____.11--Authority, Purposes, and Scope
Sec. ____.11(c) Scope
Secs. ____.11(c)(3) & 563e.11(c)(2) Certain Special Purpose
Institutions
Secs. ____.11(c)(3) & 563e.11(c)(2)-1: Is the list of special
purpose institutions exclusive?
A1. No, there may be other examples of special purpose
institutions. These institutions engage in specialized activities that
do not involve granting credit to the public in the ordinary course of
business. Special purpose institutions typically serve as correspondent
banks, trust companies, or clearing agents or engage only in
specialized services, such as cash management controlled disbursement
services. A financial institution, however, does not become a special
purpose institution merely by ceasing to make loans and, instead,
making investments and providing other retail banking services.
Sec. ____.11(c)(3) & 563e.11(c)(2)-2: To be a special purpose
institution, must an institution limit its activities in its charter?
A2. No. A special purpose institution may, but is not required to,
limit the scope of its activities in its charter, articles of
association or other corporate organizational documents. An institution
that does not have legal limitations on its activities, but has
voluntarily limited its activities, however, would no longer be exempt
from Community Reinvestment Act (CRA) requirements if it subsequently
engaged in activities that involve granting credit to the public in the
ordinary course of business. An institution that believes it is exempt
from CRA as a special purpose institution should seek confirmation of
this status from its supervisory agency.
Sec. ____.12--Definitions
Sec. ____.12(a) Affiliate
Sec. ____.12(a)-1: Does the definition of ``affiliate'' include
subsidiaries of an institution?
A1. Yes, ``affiliate'' includes any company that controls, is
controlled by, or is under common control with another company. An
institution's subsidiary is controlled by the institution and is,
therefore, an affiliate.
Secs. ____.12(f) & 563e.12(e) Branch
Secs. ____.12(f)-563e.12(e) & 1: Do the definitions of ``branch,''
``automated teller machine (ATM),'' and ``remote service facility
(RSF)'' include mobile branches, ATMs, and RSFs?
A1. Yes. Staffed mobile offices that are authorized as branches are
considered ``branches'' and mobile ATMs and RSFs are considered
``ATMs'' and ``RSFs.''
Secs. ____.12(f) & 563e.12(e)-2: Are loan production offices (LPOs)
branches for purposes of the CRA?
A2. LPOs and other offices are not ``branches'' unless they are
authorized as branches of the institution through the regulatory
approval process of the institution's supervisory agency.
[[Page 36625]]
Secs. ____.12(h)-563e.12(g) Community Development
Secs. ____.12(h) & 563e.12(g)-1: Are community development
activities limited to those that promote economic development?
A1. No. Although the definition of ``community development''
includes activities that promote economic development by financing
small businesses or farms, the rule does not limit community
development loans and services and qualified investments to those
activities. Community development also includes community- or tribal-
based child care, educational, health, or social services targeted to
low- or moderate-income persons, affordable housing for low- or
moderate-income individuals, and activities that revitalize or
stabilize low- or moderate-income areas.
Secs. ____.12(h) & 563e.12(g)-2: Must a community development
activity occur inside a low- or moderate-income area in order for an
institution to receive CRA consideration for the activity?
A2. No. Community development includes activities outside of low-
and moderate-income areas that provide affordable housing for, or
community services targeted to, low- or moderate-income individuals and
activities that promote economic development by financing small
businesses and farms. Activities that stabilize or revitalize
particular low- or moderate-income areas (including by creating,
retaining, or improving jobs for low- or moderate-income persons) also
qualify as community development, even if the activities are not
located in these low- or moderate-income areas. One example is
financing a supermarket that serves as an anchor store in a small strip
mall located at the edge of a middle-income area, if the mall
stabilizes the adjacent low-income community by providing needed
shopping services that are not otherwise available in the low-income
community.
Secs. ____.12(h) & 563e.12(g)-3: Does the regulation provide
flexibility in considering performance in high-cost areas?
A3. Yes, the flexibility of the performance standards allows
examiners to account in their evaluations for conditions in high-cost
areas. Examiners consider lending and services to individuals and
geographies of all income levels and businesses of all sizes and
revenues. In addition, the flexibility in the requirement that
community development loans, community development services, and
qualified investments have as their ``primary'' purpose community
development allows examiners to account for conditions in high-cost
areas. For example, examiners could take into account the fact that
activities address a credit shortage among middle-income people or
areas caused by the disproportionately high cost of building,
maintaining or acquiring a house when determining whether an
institution's loan to or investment in an organization that funds
affordable housing for middle-income people or areas, as well as low-
and moderate-income people or areas, has as its primary purpose
community development.
Secs. ____.12(h)(1) & 563e.12(g)(1) Affordable Housing (Including
Multifamily Rental Housing) for Low- or Moderate-Income Individuals
Secs. ____.12(h)(1) & 563e.12(g)(1)-1: When determining whether a
project is ``affordable housing for low- or moderate-income
individuals,'' thereby meeting the definition of ``community
development,'' will it be sufficient to use a formula that relates the
cost of ownership, rental or borrowing to the income levels in the area
as the only factor, regardless of whether the users, likely users, or
beneficiaries of that affordable housing are low- or moderate-income
individuals?
A1. The concept of ``affordable housing'' for low- or moderate-
income individuals does hinge on whether low- or moderate-income
individuals benefit, or are likely to benefit, from the housing. It
would be inappropriate to give consideration to a project that
exclusively or predominately houses families that are not low- or
moderate-income simply because the rents or housing prices are set
according to a particular formula.
For projects that do not yet have occupants, and for which the
income of the potential occupants cannot be determined in advance, or
in other projects where the income of occupants cannot be verified,
examiners will review factors such as demographic, economic and market
data to determine the likelihood that the housing will ``primarily''
accommodate low- or moderate-income individuals. For example, examiners
may look at median rents of the assessment area and the project; the
median home value of either the assessment area, low- or moderate-
income geographies or the project; the low- or moderate-income
population in the area of the project; or the past performance record
of the organization(s) undertaking the project. Further, such a project
could receive consideration if its express, bona fide intent, as
stated, for example, in a prospectus, loan proposal or community action
plan, is community development.
Secs. ____.12(h)(3) & 563e.12(g)(3) Activities That Promote Economic
Development by Financing Businesses or Farms That Meet Certain Size
Eligibility Standards
Sec. ____.12(h)(3) & 563e.12(g)(3)-1: ``Community development''
includes activities that promote economic development by financing
businesses or farms that meet certain size eligibility standards. Are
all activities that finance businesses and farms that meet these size
eligibility standards considered to be community development?
A1. No. To be considered as ``community development'' under
Secs. ____.12(h)(3) and 563e.12(g)(3), a loan, investment or service,
whether made directly or through an intermediary, must meet both a size
test and a purpose test. An activity meets the size requirement if it
finances entities that either meet the size eligibility standards of
the Small Business Administration's Development Company (SBDC) or Small
Business Investment Company (SBIC) programs, or have gross annual
revenues of $1 million or less. To meet the purpose test, the activity
must promote economic development. An activity is considered to promote
economic development if it supports permanent job creation, retention,
and/or improvement for persons who are currently low- or moderate-
income, or supports permanent job creation, retention, and/or
improvement either in low- or moderate-income geographies or in areas
targeted for redevelopment by Federal, state, local or tribal
governments. The agencies will presume that any loan to or investment
in a SBDC, SBIC, or New Markets Venture Capital Company promotes
economic development.
In addition to their quantitative assessment of the amount of a
financial institution's community development activities, examiners
must make qualitative assessments of an institution's leadership in
community development matters and the complexity, responsiveness, and
impact of the community development activities of the institution. In
reaching a conclusion about the impact of an institution's community
development activities, examiners may, for example, determine that a
loan to a small business in a low- or moderate-income geography that
provides needed jobs and services in that area may have a greater
impact and be more responsive to the community credit needs than does a
loan to a small business in the
[[Page 36626]]
same geography that does not directly provide additional jobs or
services to the community.
Secs. ____.12(h)(4) & 563e.12(g)(4) Activities That Revitalize or
Stabilize Low- or Moderate-Income Geographies
Sec. ____.12(h)(4) & 563e.12(g)(4)-1: What are activities that
revitalize or stabilize a low- or moderate-income geography?
A1. Activities that revitalize or stabilize a low- or moderate-
income geography are activities that help to attract and retain
businesses and residents. Examiners will presume that an activity
revitalizes or stabilizes a low- or moderate-income geography if the
activity has been approved by the governing board of an Enterprise
Community or Empowerment Zone (designated pursuant to 26 U.S.C. 1391)
and is consistent with the board's strategic plan. They will make the
same presumption if the activity has received similar official
designation as consistent with a federal, state, local or tribal
government plan for the revitalization or stabilization of the
geography. To determine whether other activities revitalize or
stabilize a low- or moderate-income geography, examiners will evaluate
the activity's actual impact on the geography, if information about
this is available. If not, examiners will determine whether the
activity is consistent with the community's formal or informal plans
for the revitalization and stabilization of the low- or moderate-income
geography. For more information on what activities revitalize or
stabilize a low- or moderate-income geography, see Secs. ____.12(h) &
563e.12(g)-2 and Secs. ____.12(i) & 563e.12(h)-4.
Secs. ____.12(i) & 563e.12(h) Community Development Loan
Secs. ____.12(i) & 563e.12(h)-1: What are examples of community
development loans?
A1. Examples of community development loans include, but are not
limited to, loans to:
Borrowers for affordable housing rehabilitation and
construction, including construction and permanent financing of
multifamily rental property serving low- and moderate-income persons;
Not-for-profit organizations serving primarily low- and
moderate-income housing or other community development needs;
Borrowers to construct or rehabilitate community
facilities that are located in low- and moderate-income areas or that
serve primarily low- and moderate-income individuals;
Financial intermediaries including Community Development
Financial Institutions (CDFIs), Community Development Corporations
(CDCs), minority- and women-owned financial institutions, community
loan funds or pools, and low-income or community development credit
unions that primarily lend or facilitate lending to promote community
development.
Local, state, and tribal governments for community
development activities; and
Borrowers to finance environmental clean-up or
redevelopment of an industrial site as part of an effort to revitalize
the low- or moderate-income community in which the property is located.
The rehabilitation and construction of affordable housing or
community facilities, referred to above, may include the abatement or
remediation of, or other actions to correct, environmental hazards,
such as lead-based paint, that are present in the housing, facilities,
or site.
Secs. ____.12(i) & 563e.12(h)-2: If a retail institution that is
not required to report under the Home Mortgage Disclosure Act (HMDA)
makes affordable home mortgage loans that would be HMDA-reportable home
mortgage loans if it were a reporting institution, or if a small
institution that is not required to collect and report loan data under
CRA makes small business and small farm loans and consumer loans that
would be collected and/or reported if the institution were a large
institution, may the institution have these loans considered as
community development loans?
A2. No. Although small institutions are not required to report or
collect information on small business and small farm loans and consumer
loans, and some institutions are not required to report information
about their home mortgage loans under HMDA, if these institutions are
retail institutions, the agencies will consider in their CRA
evaluations the institutions' originations and purchases of loans that
would have been collected or reported as small business, small farm,
consumer or home mortgage loans, had the institution been a collecting
and reporting institution under the CRA or the HMDA. Therefore, these
loans will not be considered as community development loans.
Multifamily dwelling loans, however, may be considered as community
development loans as well as home mortgage loans. See also
Sec. ____.42(b)(2)-2.
Secs. ____.12(i) & 563e.12(h)-3: Do secured credit cards or other
credit card programs targeted to low- or moderate-income individuals
qualify as community development loans?
A3. No. Credit cards issued to low- or moderate-income individuals
for household, family, or other personal expenditures, whether as part
of a program targeted to such individuals or otherwise, do not qualify
as community development loans because they do not have as their
primary purpose any of the activities included in the definition of
``community development.''
Secs. ____.12(i) & 563e.12(h)-4: The regulation indicates that
community development includes ``activities that revitalize or
stabilize low- or moderate-income geographies.'' Do all loans in a low-
to moderate-income geography have a stabilizing effect?
A4. No. Some loans may provide only indirect or short-term benefits
to low- or moderate-income individuals in a low- or moderate-income
geography. These loans are not considered to have a community
development purpose. For example, a loan for upper-income housing in a
distressed area is not considered to have a community development
purpose simply because of the indirect benefit to low- or moderate-
income persons from construction jobs or the increase in the local tax
base that supports enhanced services to low- and moderate-income area
residents. On the other hand, a loan for an anchor business in a
distressed area (or a nearby area), that employs or serves residents of
the area, and thus stabilizes the area, may be considered to have a
community development purpose. For example, in an underserved,
distressed area, a loan for a pharmacy that employs, and provides
supplies to, residents of the area promotes community development.
Secs. ____.12(i) & 563e.12(h)-5: Must there be some immediate or
direct benefit to the institution's assessment area(s) to satisfy the
regulations' requirement that qualified investments and community
development loans or services benefit an institution's assessment
area(s) or a broader statewide or regional area that includes the
institution's assessment area(s)?
A5. No. The regulations recognize that community development
organizations and programs are efficient and effective ways for
institutions to promote community development. These organizations and
programs often operate on a statewide or even multi-state basis.
Therefore, an institution's activity is considered a community
development loan or service or a qualified investment if it supports an
organization or activity that covers an area that is larger than, but
includes, the institution's assessment area(s). The
[[Page 36627]]
institution's assessment area(s) need not receive an immediate or
direct benefit from the institution's specific participation in the
broader organization or activity, provided that the purpose, mandate,
or function of the organization or activity includes serving
geographies or individuals located within the institution's assessment
area(s).
In addition, a retail institution that, considering its performance
context, has adequately addressed the community development needs of
its assessment area(s) will receive consideration for certain other
community development activities. These community development
activities must benefit geographies or individuals located somewhere
within a broader statewide or regional area that includes the
institution's assessment area(s). Examiners will consider these
activities even if they will not benefit the institution's assessment
area(s).
Secs. ____.12(i) & 563e.12(h)-6: What is meant by the term
``regional area''?
A6. A ``regional area'' may be as small as a city or county or as
large as a multistate area. For example, the ``mid-Atlantic states''
may comprise a regional area.
Community development loans and services and qualified investments
to statewide or regional organizations that have a bona fide purpose,
mandate, or function that includes serving the geographies or
individuals within the institution's assessment area(s) will be
considered as addressing assessment area needs. When examiners evaluate
community development loans and services and qualified investments that
benefit a regional area that includes the institution's assessment
area(s), they will consider the institution's performance context as
well as the size of the regional area and the actual or potential
benefit to the institution's assessment area(s). With larger regional
areas, benefit to the institution's assessment area(s) may be diffused
and, thus less responsive to assessment area needs.
In addition, as long as an institution has adequately addressed the
community development needs of its assessment area(s), it will also
receive consideration for community development activities that benefit
geographies or individuals located somewhere within the broader
statewide or regional area that includes the institution's assessment
area(s), even if those activities do not benefit its assessment
area(s).
Secs. ____.12(i) & 563e.12(h)-7: What is meant by the term
``primary purpose'' as that term is used to define what constitutes a
community development loan, a qualified investment or a community
development service?
A7. A loan, investment or service has as its primary purpose
community development when it is designed for the express purpose of
revitalizing or stabilizing low-or moderate-income areas, providing
affordable housing for, or community services targeted to, low-or
moderate-income persons, or promoting economic development by financing
small businesses and farms that meet the requirements set forth in
Secs. ____.12(h) or 563e.12(g). To determine whether an activity is
designed for an express community development purpose, the agencies
apply one of two approaches. First, if a majority of the dollars or
beneficiaries of the activity are identifiable to one or more of the
enumerated community development purposes, then the activity will be
considered to possess the requisite primary purpose. Alternatively,
where the measurable portion of any benefit bestowed or dollars applied
to the community development purpose is less than a majority of the
entire activity's benefits or dollar value, then the activity may still
be considered to possess the requisite primary purpose if (1) the
express, bona fide intent of the activity, as stated, for example, in a
prospectus, loan proposal, or community action plan, is primarily one
or more of the enumerated community development purposes; (2) the
activity is specifically structured (given any relevant market or legal
constraints or performance context factors) to achieve the expressed
community development purpose; and (3) the activity accomplishes, or is
reasonably certain to accomplish, the community development purpose
involved. The fact that an activity provides indirect or short-term
benefits to low-or moderate-income persons does not make the activity
community development, nor does the mere presence of such indirect or
short-term benefits constitute a primary purpose of community
development. Financial institutions that want examiners to consider
certain activities under either approach should be prepared to
demonstrate the activities' qualifications.
Secs. ____.12(j) & 563e.12(i) Community Development Service
Secs. ____.12(j) & 563e.12(i)-1: In addition to meeting the
definition of ``community development'' in the regulation, community
development services must also be related to the provision of financial
services. What is meant by ``provision of financial services''?
A1. Providing financial services means providing services of the
type generally provided by the financial services industry. Providing
financial services often involves informing community members about how
to get or use credit or otherwise providing credit services or
information to the community. For example, service on the board of
directors of an organization that promotes credit availability or
finances affordable housing is related to the provision of financial
services. Providing technical assistance about financial services to
community-based groups, local or tribal government agencies, or
intermediaries that help to meet the credit needs of low-and moderate-
income individuals or small businesses and farms is also providing
financial services. By contrast, activities that do not take advantage
of the employees' financial expertise, such as neighborhood cleanups,
do not involve the provision of financial services.
Secs. ____.12(j) & 563e.12(i)-2: Are personal charitable activities
provided by an institution's employees or directors outside the
ordinary course of their employment considered community development
services?
A2. No. Services must be provided as a representative of the
institution. For example, if a financial institution's director, on her
own time and not as a representative of the institution, volunteers one
evening a week at a local community development corporation's financial
counseling program, the institution may not consider this activity a
community development service.
Secs. ____.12(j) & 563e.12(i)-3: What are examples of community
development services?
A3. Examples of community development services include, but are not
limited to, the following:
Providing technical assistance on financial matters to
nonprofit, tribal or government organizations serving low-and moderate-
income housing or economic revitalization and development needs;
Providing technical assistance on financial matters to
small businesses or community development organizations, including
organizations and individuals who apply for loans or grants under the
Federal Home Loan Banks' Affordable Housing Program;
Lending employees to provide financial services for
organizations facilitating affordable housing construction and
rehabilitation or development of affordable housing;
Providing credit counseling, home-buyer and home-
maintenance counseling, financial planning or other
[[Page 36628]]
financial services education to promote community development and
affordable housing;
Establishing school savings programs and developing or
teaching financial education curricula for low-or moderate-income
individuals;
Providing electronic benefits transfer and point of sale
terminal systems to improve access to financial services, such as by
decreasing costs, for low- or moderate-income individuals; and
Providing other financial services with the primary
purpose of community development, such as low-cost bank accounts,
including ``Electronic Transfer Accounts'' provided pursuant to the
Debt Collection Improvement Act of 1996, or free government check
cashing that increases access to financial services for low- or
moderate-income individuals.
Examples of technical assistance activities that might be provided
to community development organizations include:
Serving on a loan review committee;
Developing loan application and underwriting standards;
Developing loan processing systems;
Developing secondary market vehicles or programs;
Assisting in marketing financial services, including
development of advertising and promotions, publications, workshops and
conferences;
Furnishing financial services training for staff and
management;
Contributing accounting/bookkeeping services; and
Assisting in fund raising, including soliciting or
arranging investments.
Secs. ____.12(k) & 563e.12(j) Consumer Loan
Secs. ____.12(k) & 563e.12(j)-1: Are home equity loans considered
``consumer loans''?
A1. Home equity loans made for purposes other than home purchase,
home improvement or refinancing home purchase or home improvement loans
are consumer loans if they are extended to one or more individuals for
household, family, or other personal expenditures.
Secs. ____.12(k) & 563e.12(j)-2: May a home equity line of credit
be considered a ``consumer loan'' even if part of the line is for home
improvement purposes?
A2. If the predominant purpose of the line is home improvement, the
line may only be reported under HMDA and may not be considered a
consumer loan. However, the full amount of the line may be considered a
``consumer loan'' if its predominant purpose is for household, family,
or other personal expenditures, and to a lesser extent home
improvement, and the full amount of the line has not been reported
under HMDA. This is the case even though there may be ``double
counting'' because part of the line may also have been reported under
HMDA.
Secs. ____.12(k) & 563e.12(j)-3: How should an institution collect
or report information on loans the proceeds of which will be used for
multiple purposes?
A3. If an institution makes a single loan or provides a line of
credit to a customer to be used for both consumer and small business
purposes, consistent with the Call Report and TFR instructions, the
institution should determine the major (predominant) component of the
loan or the credit line and collect or report the entire loan or credit
line in accordance with the regulation's specifications for that loan
type.
Secs. ____.12(m) & 563e.12(l) Home Mortgage Loan
Secs. ____.12(m) & 563e.12(l)-1: Does the term ``home mortgage
loan'' include loans other than ``home purchase loans''?
A1. Yes. ``Home mortgage loan'' includes a ``home improvement
loan'' as well as a ``home purchase loan,'' as both terms are defined
in the HMDA regulation, Regulation C, 12 CFR part 203. This definition
also includes multifamily (five-or-more families) dwelling loans, loans
for the purchase of manufactured homes, and refinancings of home
improvement and home purchase loans.
Secs. ____.12(m) & 563e.12(l)-2: Some financial institutions broker
home mortgage loans. They typically take the borrower's application and
perform other settlement activities; however, they do not make the
credit decision. The broker institutions may also initially fund these
mortgage loans, then immediately assign them to another lender. Because
the broker institution does not make the credit decision, under
Regulation C (HMDA), they do not record the loans on their HMDA-LARs,
even if they fund the loans. May an institution receive any
consideration under CRA for its home mortgage loan brokerage
activities?
A2. Yes. A financial institution that funds home mortgage loans but
immediately assigns the loans to the lender that made the credit
decisions may present information about these loans to examiners for
consideration under the lending test as ``other loan data.'' Under
Regulation C, the broker institution does not record the loans on its
HMDA-LAR because it does not make the credit decisions, even if it
funds the loans. An institution electing to have these home mortgage
loans considered must maintain information about all of the home
mortgage loans that it has funded in this way. Examiners will consider
this other loan data using the same criteria by which home mortgage
loans originated or purchased by an institution are evaluated.
Institutions that do not provide funding but merely take
applications and provide settlement services for another lender that
makes the credit decisions will receive consideration for this service
as a retail banking service. Examiners will consider an institution's
mortgage brokerage services when evaluating the range of services
provided to low-, moderate-, middle-and upper-income geographies and
the degree to which the services are tailored to meet the needs of
those geographies. Alternatively, an institution's mortgage brokerage
service may be considered a community development service if the
primary purpose of the service is community development. An institution
wishing to have its mortgage brokerage service considered as a
community development service must provide sufficient information to
substantiate that its primary purpose is community development and to
establish the extent of the services provided.
Secs. ____.12(n) & 563e.12(m) Income Level
Secs. ____.12(n) & 563e.12(m)-1: Where do institutions find income
level data for geographies and individuals?
A1. The income levels for geographies, i.e., census tracts and
block numbering areas, are derived from Census Bureau information and
are updated every ten years. Institutions may contact their regional
Census Bureau office or the Census Bureau's Income Statistics Office at
(301) 763-8576 to obtain income levels for geographies. See Appendix A
of these Interagency Questions and Answers for a list of the regional
Census Bureau offices. The income levels for individuals are derived
from information calculated by the Department of Housing and Urban
Development (HUD) and updated annually. Institutions may contact HUD at
(800) 245-2691 to request a copy of ``FY [year number, e.g., 1996]
Median Family Incomes for States and their Metropolitan and
Nonmetropolitan Portions.''
[[Page 36629]]
Alternatively, institutions may obtain a list of the 1990 Census
Bureau-calculated and the annually updated HUD median family incomes
for metropolitan statistical areas (MSAs) and statewide nonmetropolitan
areas by calling the Federal Financial Institution Examination
Council's (FFIEC's) HMDA Help Line at (202) 452-2016. A free copy will
be faxed to the caller through the ``fax-back'' system. Institutions
may also call this number to have ``faxed-back'' an order form, from
which they may order a list providing the median family income level,
as a percentage of the appropriate MSA or nonmetropolitan median family
income, of every census tract and block numbering area (BNA). This list
costs $50. Institutions may also obtain the list of MSA and statewide
nonmetropolitan area median family incomes or an order form through the
FFIEC's home page on the Internet at http://www.ffiec.gov>.
Secs. ____.12(o) & 563e.12(n) Limited Purpose Institution
Secs. ____.12(o) & 563e.12(n)-1: What Constitutes a ``Narrow
Product Line'' in the Definition of ``Limited Purpose Institution''?
A1. An institution offers a narrow product line by limiting its
lending activities to a product line other than a traditional retail
product line required to be evaluated under the lending test (i.e.,
home mortgage, small business, and small farm loans). Thus, an
institution engaged only in making credit card or motor vehicle loans
offers a narrow product line, while an institution limiting its lending
activities to home mortgages is not offering a narrow product line.
Secs. ____.12(o) & 563e.12(n)-2: What factors will the agencies
consider to determine whether an institution that, if limited purpose,
makes loans outside a narrow product line, or, if wholesale, engages in
retail lending, will lose its limited purpose or wholesale designation
because of too much other lending?
A2. Wholesale institutions may engage in some retail lending
without losing their designation if this activity is incidental and
done on an accommodation basis. Similarly, limited purpose institutions
continue to meet the narrow product line requirement if they provide
other types of loans on an infrequent basis. In reviewing other lending
activities by these institutions, the agencies will consider the
following factors:
Is the other lending provided as an incident to the
institution's wholesale lending?
Are the loans provided as an accommodation to the
institution's wholesale customers?
Are the loans made only infrequently to the limited
purpose institution's customers?
Does only an insignificant portion of the institution's
total assets and income result from the other lending?
How significant a role does the institution play in
providing that type(s) of loan(s) in the institution's assessment
area(s)?
Does the institution hold itself out as offering that
type(s) of loan(s)?
Does the lending test or the community development test
present a more accurate picture of the institution's CRA performance?
Secs. ____.12(o) & 563e.12(n)-3: Do ``niche institutions'' qualify
as limited purpose (or wholesale) institutions?
A3. Generally, no. Institutions that are in the business of lending
to the public, but specialize in certain types of retail loans (for
example, home mortgage or small business loans) to certain types of
borrowers (for example, to high-end income level customers or to
corporations or partnerships of licensed professional practitioners)
(``niche institutions'') generally would not qualify as limited purpose
(or wholesale) institutions.
Secs. ____.12(s) & 563e.12(r) Qualified Investment
Secs. ____.12(s) & 563e.12(r)-1: Does the CRA regulation provide
authority for institutions to make investments?
A1. No. The CRA regulation does not provide authority for
institutions to make investments that are not otherwise allowed by
Federal law.
Secs. ____.12(s) & 563e.12(r)-2: Are mortgage-backed securities or
municipal bonds ``qualified investments''?
A2. As a general rule, mortgage-backed securities and municipal
bonds are not qualified investments because they do not have as their
primary purpose community development, as defined in the CRA
regulations. Nonetheless, mortgage-backed securities or municipal bonds
designed primarily to finance community development generally are
qualified investments. Municipal bonds or other securities with a
primary purpose of community development need not be housing-related.
For example, a bond to fund a community facility or park or to provide
sewage services as part of a plan to redevelop a low-income
neighborhood is a qualified investment. Housing-related bonds or
securities must primarily address affordable housing (including
multifamily rental housing) needs in order to qualify. See also
Sec. ____.23(b)-2.
Secs. ____.12(s) & 563e.12(r)-3: Are Federal Home Loan Bank stocks
and membership reserves with the Federal Reserve Banks ``qualified
investments''?
A3. No. Federal Home Loan Bank (FHLB) stock and membership reserves
with the Federal Reserve Banks do not have a sufficient connection to
community development to be qualified investments. However, FHLB member
institutions may receive CRA consideration for technical assistance
they provide on behalf of applicants and recipients of funding from the
FHLB's Affordable Housing Program. See Secs. ____.12(j) & 563e.12(i)-3.
Secs. ____.12(s) & 563e.12(r)-4: What are examples of qualified
investments?
A4. Examples of qualified investments include, but are not limited
to, investments, grants, deposits or shares in or to:
Financial intermediaries (including, Community Development
Financial Institutions (CDFIs), Community Development Corporations
(CDCs), minority- and women-owned financial institutions, community
loan funds, and low-income or community development credit unions) that
primarily lend or facilitate lending in low- and moderate-income areas
or to low- and moderate-income individuals in order to promote
community development, such as a CDFI that promotes economic
development on an Indian reservation;
Organizations engaged in affordable housing rehabilitation
and construction, including multifamily rental housing;
Organizations, including, for example, Small Business
Investment Companies (SBICs) and specialized SBICs, that promote
economic development by financing small businesses;
Facilities that promote community development in low- and
moderate-income areas for low- and moderate-income individuals, such as
youth programs, homeless centers, soup kitchens, health care
facilities, battered women's centers, and alcohol and drug recovery
centers;
Projects eligible for low-income housing tax credits;
State and municipal obligations, such as revenue bonds,
that specifically support affordable housing or other community
development;
Not-for-profit organizations serving low- and moderate-
income housing or other community development needs, such as counseling
for credit, home-ownership, home maintenance, and other financial
services education; and
Organizations supporting activities essential to the
capacity of low- and
[[Page 36630]]
moderate-income individuals or geographies to utilize credit or to
sustain economic development, such as, for example, day care operations
and job training programs that enable people to work.
Secs. ____.12(s) & 563e.12(r)-5: Will an institution receive
consideration for charitable contributions as ``qualified
investments''?
A5. Yes, provided they have as their primary purpose community
development as defined in the regulations. A charitable contribution,
whether in cash or an in-kind contribution of property, is included in
the term ``grant.'' A qualified investment is not disqualified because
an institution receives favorable treatment for it (for example, as a
tax deduction or credit) under the Internal Revenue Code.
Secs. ____.12(s) & 563e.12(r)-6: An institution makes or
participates in a community development loan. The institution provided
the loan at below-market interest rates or ``bought down'' the interest
rate to the borrower. Is the lost income resulting from the lower
interest rate or buy-down a qualified investment?
A6. No. The agencies will, however, consider the innovativeness and
complexity of the community development loan within the bounds of safe
and sound banking practices.
Secs. ____.12(s) & 563e.12(r)-7: Will the agencies consider as a
qualified investment the wages or other compensation of an employee or
director who provides assistance to a community development
organization on behalf of the institution?
A7. No. However, the agencies will consider donated labor of
employees or directors of a financial institution in the service test
if the activity is a community development service.
Secs. ____.12(t) & 563e.12(s) Small Institution
Secs. ____.12(t) & 563e.12(s)-1: How are the ``total bank and
thrift assets'' of a holding company determined?
A1. ``Total banking and thrift assets'' of a holding company are
determined by combining the total assets of all banks and/or thrifts
that are majority-owned by the holding company. An institution is
majority-owned if the holding company directly or indirectly owns more
than 50 percent of its outstanding voting stock.
Secs. ____.12(t) & 563e.12(s)-2: How are Federal and State branch
assets of a foreign bank calculated for purposes of the CRA?
A2. A Federal or State branch of a foreign bank is considered a
small institution if the Federal or State branch has less than $250
million in assets and the total assets of the foreign bank's or its
holding company's U.S. bank and thrift subsidiaries that are subject to
the CRA are less than $1 billion. This calculation includes not only
FDIC-insured bank and thrift subsidiaries, but also the assets of any
FDIC-insured branch of the foreign bank and the assets of any uninsured
Federal or State branch (other than a limited branch or a Federal
agency) of the foreign bank that results from an acquisition described
in section 5(a)(8) of the International Banking Act of 1978 (12 U.S.C.
Sec. 3103(a)(8)).
Secs. ____.12(u) & 563e.12(t) Small Business Loan
Secs. ____.12(u) & 563e.12(t)-1: Are loans to nonprofit
organizations considered small business loans or are they considered
community development loans?
A1. To be considered a small business loan, a loan must meet the
definition of ``loan to small business'' in the instructions in the
``Consolidated Reports of Conditions and Income'' (Call Report) and
``Thrift Financial Reports'' (TFR). In general, a loan to a nonprofit
organization, for business or farm purposes, where the loan is secured
by nonfarm nonresidential property and the original amount of the loan
is $1 million or less, if a business loan, or $500,000 or less, if a
farm loan, would be reported in the Call Report and TFR as a small
business or small farm loan. If a loan to a nonprofit organization is
reportable as a small business or small farm loan, it cannot also be
considered as a community development loan, except by a wholesale or
limited purpose institution. Loans to nonprofit organizations that are
not small business or small farm loans for Call Report and TFR purposes
may be considered as community development loans if they meet the
regulatory definition.
Secs. ____.12(u) & 563e.12(t)-2: Are loans secured by commercial
real estate considered small business loans?
A2. Yes, depending on their principal amount. Small business loans
include loans secured by ``nonfarm nonresidential properties,'' as
defined in the Call Report and TFR, in amounts less than $1 million.
Secs. ____.12(u) & 563e.12(t)-3: Are loans secured by nonfarm
residential real estate to finance small businesses ``small business
loans''?
A3. Applicable to banks filing Call Reports: Typically not. Loans
secured by nonfarm residential real estate that are used to finance
small businesses are not included as ``small business'' loans for Call
Report purposes unless the security interest in the nonfarm residential
real estate is taken only as an abundance of caution. (See Call Report
Glossary definition of ``Loan Secured by Real Estate.'') The agencies
recognize that many small businesses are financed by loans that would
not have been made or would have been made on less favorable terms had
they not been secured by residential real estate. If these loans
promote community development, as defined in the regulation, they may
be considered as community development loans. Otherwise, at an
institution's option, the institution may collect and maintain data
separately concerning these loans and request that the data be
considered in its CRA evaluation as ``Other Secured Lines/Loans for
Purposes of Small Business.''
Applicable to institutions that file TFRs: Possibly, depending how
the loan is classified for TFR purposes. Loans secured by nonfarm
residential real estate to finance small businesses may be included as
small business loans only if they are reported on the TFR as
nonmortgage, commercial loans. (See TFR Q&A No. 62.) Otherwise, loans
that meet the definition of mortgage loans, for TFR reporting purposes,
may be classified as mortgage loans.
Secs. ____.12(u) & 563e.12(t)-4: Are credit cards issued to small
businesses considered ``small business loans''?
A4. Credit cards issued to a small business or to individuals to be
used, with the institution's knowledge, as business accounts are small
business loans if they meet the definitional requirements in the Call
Report or TFR instructions.
Secs. ____.12(w) & 563e.12(v) Wholesale Institution
Secs. ____.12(w) & 563e.12(v)-1: What factors will the agencies
consider in determining whether an institution is in the business of
extending home mortgage, small business, small farm, or consumer loans
to retail customers?
A1. The agencies will consider whether:
The institution holds itself out to the retail public as
providing such loans; and
The institution's revenues from extending such loans are
significant when compared to its overall operations.
A wholesale institution may make some retail loans without losing
its wholesale designation as described above in Secs. ____.12(o) &
563e.12(n)-2.
[[Page 36631]]
Sec. ____.21--Performance Tests, Standards, and Ratings, in General
Sec. ____.21(a) Performance Tests and Standards
Sec. ____.21(a)-1: Are all community development activities
weighted equally by examiners?
A1. No. Examiners will consider the responsiveness to credit and
community development needs, as well as the innovativeness and
complexity of an institution's community development lending, qualified
investments, and community development services. These criteria include
consideration of the degree to which they serve as a catalyst for other
community development activities. The criteria are designed to add a
qualitative element to the evaluation of an institution's performance.
Sec. ____.21(b) Performance context
Sec. ____.21(b)-1: Is the performance context essentially the same
as the former regulation's needs assessment?
A1. No. The performance context is a broad range of economic,
demographic, and institution-and community-specific information that an
examiner reviews to understand the context in which an institution's
record of performance should be evaluated. The agencies will provide
examiners with much of this information prior to the examination. The
performance context is not a formal or written assessment of community
credit needs.
Sec. ____.21(b)(2) Information Maintained by the Institution or
Obtained From Community Contacts
Sec. ____.21(b)(2)-1: Will examiners consider performance context
information provided by institutions?
A1. Yes. An institution may provide examiners with any information
it deems relevant, including information on the lending, investment,
and service opportunities in its assessment area(s). This information
may include data on the business opportunities addressed by lenders not
subject to the CRA. Institutions are not required, however, to prepare
a needs assessment. If an institution provides information to
examiners, the agencies will not expect information other than what the
institution normally would develop to prepare a business plan or to
identify potential markets and customers, including low-and moderate-
income persons and geographies in its assessment area(s). The agencies
will not evaluate an institution's efforts to ascertain community
credit needs or rate an institution on the quality of any information
it provides.
Sec. ____.21(b)(2)-2: Will examiners conduct community contact
interviews as part of the examination process?
A2. Yes. Examiners will consider information obtained from
interviews with local community, civic, and government leaders. These
interviews provide examiners with knowledge regarding the local
community, its economic base, and community development initiatives. To
ensure that information from local leaders is considered--particularly
in areas where the number of potential contacts may be limited--
examiners may use information obtained through an interview with a
single community contact for examinations of more than one institution
in a given market. In addition, the agencies will consider information
obtained from interviews conducted by other agency staff and by the
other agencies. In order to augment contacts previously used by the
agencies and foster a wider array of contacts, the agencies will share
community contact information.
Sec. ____.21(b)(4) Institutional Capacity and Constraints
Sec. ____.21(b)(4)-1: Will examiners consider factors outside of an
institution's control that prevent it from engaging in certain
activities?
A1. Yes. Examiners will take into account statutory and supervisory
limitations on an institution's ability to engage in any lending,
investment, and service activities. For example, a savings association
that has made few or no qualified investments due to its limited
investment authority may still receive a low satisfactory rating under
the investment test if it has a strong lending record.
Sec. ____.21(b)(5) Institution's Past Performance and the Performance
of Similarly Situated Lenders
Sec. ____.21(b)(5)-1: Can an institution's assigned rating be
adversely affected by poor past performance?
A1. Yes. The agencies will consider an institution's past
performance in its overall evaluation. For example, an institution that
received a rating of ``needs to improve'' in the past may receive a
rating of ``substantial noncompliance'' if its performance has not
improved.
Sec. ____.21(b)(5)-2: How will examiners consider the performance
of similarly situated lenders?
A2. The performance context section of the regulation permits the
performance of similarly situated lenders to be considered, for
example, as one of a number of considerations in evaluating the
geographic distribution of an institution's loans to low-, moderate-,
middle-, and upper-income geographies. This analysis, as well as other
analyses, may be used, for example, where groups of contiguous
geographies within an institution's assessment area(s) exhibit
abnormally low penetration. In this regard, the performance of
similarly situated lenders may be analyzed if such an analysis would
provide accurate insight into the institution's lack of performance in
those areas. The regulation does not require the use of a specific type
of analysis under these circumstances. Moreover, no ratio developed
from any type of analysis is linked to any lending test rating.
Sec. ____.22--Lending Test
Sec. ____.22(a) Scope of Test
Sec. ____.22(a)-1: Are there any types of lending activities that
help meet the credit needs of an institution's assessment area(s) and
that may warrant favorable consideration as activities that are
responsive to the needs of the institution's assessment area(s)?
A1. Credit needs vary from community to community. However, there
are some lending activities that are likely to be responsive in helping
to meet the credit needs of many communities. These activities include:
Providing loan programs that include a financial education
component about how to avoid lending activities that may be abusive or
otherwise unsuitable;
Establishing loan programs that provide small, unsecured
consumer loans in a safe and sound manner (i.e., based on the
borrower's ability to repay) and with reasonable terms;
Offering lending programs, which feature reporting to
consumer reporting agencies, that transition borrowers from loans with
higher interest rates and fees (based on credit risk) to lower-cost
loans, consistent with safe and sound lending practices. Reporting to
consumer reporting agencies allows borrowers accessing these programs
the opportunity to improve their credit histories and thereby improve
their access to competitive credit products.
Examiners may consider favorably such lending activities, which
have features augmenting the success and effectiveness of the
institution's lending programs.
Sec. ____.22(a)(1) Types of Loans Considered
Sec. ____.22(a)(1)-1: If a large retail institution is not required
to collect and report home mortgage data under the
[[Page 36632]]
HMDA, will the agencies still evaluate the institution's home mortgage
lending performance?
A1. Yes. The agencies will sample the institution's home mortgage
loan files in order to assess its performance under the lending test
criteria.
Sec. ____.22(a)(1)-2: When will examiners consider consumer loans
as part of an institution's CRA evaluation?
A2. Consumer loans will be evaluated if the institution so elects;
and an institution that elects not to have its consumer loans evaluated
will not be viewed less favorably by examiners than one that does.
However, if consumer loans constitute a substantial majority of the
institution's business, the agencies will evaluate them even if the
institution does not so elect. The agencies interpret ``substantial
majority'' to be so significant a portion of the institution's lending
activity by number or dollar volume of loans that the lending test
evaluation would not meaningfully reflect its lending performance if
consumer loans were excluded.
Sec. ____.22(a)(2) Loan Originations and Purchases/Other Loan Data
Sec. ____.22(a)(2)-1: How are lending commitments (such as letters
of credit) evaluated under the regulation?
A1. The agencies consider lending commitments (such as letters of
credit) only at the option of the institution. Commitments must be
legally binding between an institution and a borrower in order to be
considered. Information about lending commitments will be used by
examiners to enhance their understanding of an institution's
performance.
Sec. ____.22(a)(2)-2: Will examiners review application data as
part of the lending test?
A2. Application activity is not a performance criterion of the
lending test. However, examiners may consider this information in the
performance context analysis because this information may give
examiners insight on, for example, the demand for loans.
Sec. ____.22(a)(2)-3: May a financial institution receive
consideration under CRA for home mortgage loan modification, extension,
and consolidation agreements (MECAs), in which it obtains home mortgage
loans from other institutions without actually purchasing or
refinancing the home mortgage loans, as those terms have been
interpreted under CRA and HMDA, as implemented by 12 CFR pt. 203?
A3. Yes. In some states, MECAs, which are not considered loan
refinancings because the existing loan obligations are not satisfied
and replaced, are common. Although these transactions are not
considered to be purchases or refinancings, as those terms have been
interpreted under CRA, they do achieve the same results. An institution
may present information about its MECA activities with respect to home
mortgages to examiners for consideration under the lending test as
``other loan data.''
Sec. ____.22(a)(2)-4: Do institutions receive consideration for
originating or purchasing loans that are fully guaranteed?
A4. Yes. The lending test evaluates an institution's record of
helping to meet the credit needs of its assessment area(s) through the
origination or purchase of specified types of loans. The test does not
take into account whether or not such loans are guaranteed.
Sec. ____.22(b) Performance Criteria
Sec. ____.22(b)-1: How will examiners apply the performance
criteria in the lending test?
A1. Examiners will apply the performance criteria reasonably and
fairly, in accord with the regulations, the examination procedures, and
this Guidance. In doing so, examiners will disregard efforts by an
institution to manipulate business operations or present information in
an artificial light that does not accurately reflect an institution's
overall record of lending performance.
Sec. ____.22(b)(1) Lending Activity
Sec. ____.22(b)(1)-1: How will the agencies apply the lending
activity criterion to discourage an institution from originating loans
that are viewed favorably under CRA in the institution itself and
referring other loans, which are not viewed as favorably, for
origination by an affiliate?
A1. Examiners will review closely institutions with (1) a small
number and amount of home mortgage loans with an unusually good
distribution among low-and moderate-income areas and low- and moderate-
income borrowers and (2) a policy of referring most, but not all, of
their home mortgage loans to affiliated institutions. If an institution
is making loans mostly to low- and moderate-income individuals and
areas and referring the rest of the loan applicants to an affiliate for
the purpose of receiving a favorable CRA rating, examiners may conclude
that the institution's lending activity is not satisfactory because it
has inappropriately attempted to influence the rating. In evaluating an
institution's lending, examiners will consider legitimate business
reasons for the allocation of the lending activity.
Sec. ____.22(b)(2) & (3) Geographic Distribution and Borrower
Characteristics
Sec. ____.22(b)(2) & (3)-1: How do the geographic distribution of
loans and the distribution of lending by borrower characteristics
interact in the lending test?
A1. Examiners generally will consider both the distribution of an
institution's loans among geographies of different income levels and
among borrowers of different income levels and businesses of different
sizes. The importance of the borrower distribution criterion,
particularly in relation to the geographic distribution criterion, will
depend on the performance context. For example, distribution among
borrowers with different income levels may be more important in areas
without identifiable geographies of different income categories. On the
other hand, geographic distribution may be more important in areas with
the full range of geographies of different income categories.
Sec. ____.22(b)(2) & (3)-2: Must an institution lend to all
portions of its assessment area?
A2. The term ``assessment area'' describes the geographic area
within which the agencies assess how well an institution has met the
specific performance tests and standards in the rule. The agencies do
not expect that simply because a census tract or block numbering area
is within an institution's assessment area(s) the institution must lend
to that census tract or block numbering area. Rather the agencies will
be concerned with conspicuous gaps in loan distribution that are not
explained by the performance context. Similarly, if an institution
delineated the entire county in which it is located as its assessment
area, but could have delineated its assessment area as only a portion
of the county, it will not be penalized for lending only in that
portion of the county, so long as that portion does not reflect illegal
discrimination or arbitrarily exclude low- or moderate-income
geographies. The capacity and constraints of an institution, its
business decisions about how it can best help to meet the needs of its
assessment area(s), including those of low- and moderate-income
neighborhoods, and other aspects of the performance context, are all
relevant to explain why the institution is serving or not serving
portions of its assessment area(s).
Sec. ____.22(b)(2) & (3)-3: Will examiners take into account loans
made by affiliates when evaluating the
[[Page 36633]]
proportion of an institution's lending in its assessment area(s)?
A3. Examiners will not take into account loans made by affiliates
when determining the proportion of an institution's lending in its
assessment area(s), even if the institution elects to have its
affiliate lending considered in the remainder of the lending test
evaluation. However, examiners may consider an institution's business
strategy of conducting lending through an affiliate in order to
determine whether a low proportion of lending in the assessment area(s)
should adversely affect the institution's lending test rating.
Sec. ____.22(b)(2) & (3)-4: When will examiners consider loans
(other than community development loans) made outside an institution's
assessment area(s)?
A4. Consideration will be given for loans to low- and moderate-
income persons and small business and farm loans outside of an
institution's assessment area(s), provided the institution has
adequately addressed the needs of borrowers within its assessment
area(s). The agencies will apply this consideration not only to loans
made by large retail institutions being evaluated under the lending
test, but also to loans made by small institutions being evaluated
under the small institution performance standards. Loans to low- and
moderate-income persons and small businesses and farms outside of an
institution's assessment area(s), however, will not compensate for poor
lending performance within the institution's assessment area(s).
Sec. ____.22(b)(2) & (3)-5: Under the lending test, how will
examiners evaluate home mortgage loans to middle- or upper-income
individuals in a low- or moderate-income geography?
A5. Examiners will consider these home mortgage loans under the
performance criteria of the lending test, i.e., by number and amount of
home mortgage loans, whether they are inside or outside the financial
institution's assessment area(s), their geographic distribution, and
the income levels of the borrowers. Examiners will use information
regarding the financial institution's performance context to determine
how to evaluate the loans under these performance criteria. Depending
on the performance context, examiners could view home mortgage loans to
middle-income individuals in a low-income geography very differently.
For example, if the loans are for homes or multifamily housing located
in an area for which the local, state, tribal, or Federal government or
a community-based development organization has developed a
revitalization or stabilization plan (such as a Federal enterprise
community or empowerment zone) that includes attracting mixed-income
residents to establish a stabilized, economically diverse neighborhood,
examiners may give more consideration to such loans, which may be
viewed as serving the low- or moderate-income community's needs as well
as serving those of the middle- or upper-income borrowers. If, on the
other hand, no such plan exists and there is no other evidence of
governmental support for a revitalization or stabilization project in
the area and the loans to middle- or upper-income borrowers
significantly disadvantage or primarily have the effect of displacing
low- or moderate-income residents, examiners may view these loans
simply as home mortgage loans to middle- or upper-income borrowers who
happen to reside in a low- or moderate-income geography and weigh them
accordingly in their evaluation of the institution.
Sec. ____.22(b)(4); Community Development Lending
Sec. ____.22(b)(4)-1: When evaluating an institution's record of
community development lending, may an examiner distinguish among
community development loans on the basis of the actual amount of the
loan that advances the community development purpose?
A1. Yes. When evaluating the institution's record of community
development lending under Sec. ____.22(b)(4), it is appropriate to give
greater weight to the amount of the loan that is targeted to the
intended community development purpose. For example, consider two $10
million projects (with a total of 100 units each) that have as their
express primary purpose affordable housing and are located in the same
community. One of these projects sets aside 40 percent of its units for
low-income residents and the other project allocates 65 percent of its
units for low-income residents. An institution would report both loans
as $10 million community development loans under the Sec. ____.42(b)(2)
aggregate reporting obligation. However, transaction complexity,
innovation and all other relevant considerations being equal, an
examiner should also take into account that the 65 percent project
provides more affordable housing for more people per dollar expended.
Under Sec. ____.22(b)(4), the extent of CRA consideration an
institution receives for its community development loans should bear a
direct relation to the benefits received by the community and the
innovation or complexity of the loans required to accomplish the
activity, not simply to the dollar amount expended on a particular
transaction. By applying all lending test performance criteria, a
community development loan of a lower dollar amount could meet the
credit needs of the institution's community to a greater extent than a
community development loan with a higher dollar amount, but with less
innovation, complexity, or impact on the community.
Sec. ____.22(b)(5) Innovative or Flexible Lending Practices
Sec. ____.22(b)(5)-1: What is the range of practices that examiners
may consider in evaluating the innovativeness or flexibility of an
institution's lending?
A1. In evaluating the innovativeness or flexibility of an
institution's lending practices (and the complexity and innovativeness
of its community development lending), examiners will not be limited to
reviewing the overall variety and specific terms and conditions of the
credit products themselves. In connection with the evaluation of an
institution's lending, examiners also may give consideration to related
innovations when they augment the success and effectiveness of the
institution's lending under its community development loan programs or,
more generally, its lending under its loan programs that address the
credit needs of low- and moderate-income geographies or individuals.
For example:
In connection with a community development loan program, a
bank may establish a technical assistance program under which the bank,
directly or through third parties, provides affordable housing
developers and other loan recipients with financial consulting
services. Such a technical assistance program may, by itself,
constitute a community development service eligible for consideration
under the service test of the CRA regulations. In addition, the
technical assistance may be favorably considered as an innovation that
augments the success and effectiveness of the related community
development loan program.
In connection with a small business lending program in a
low- or moderate-income area and consistent with safe and sound lending
practices, a bank may implement a program under which, in addition to
providing financing, the bank also contracts with the small business
borrowers. Such a contracting arrangement would not, standing alone,
qualify for CRA consideration. However, it may be favorably considered
as an innovation that augments the loan program's success and
effectiveness, and improves the program's ability to
[[Page 36634]]
serve community development purposes by helping to promote economic
development through support of small business activities and
revitalization or stabilization of low- or moderate-income geographies.
Sec. ____.22(c) Affiliate Lending
Sec. ____.22(c)(1) In General
Sec. ____.22(c)(1)-1: If an institution elects to have loans by its
affiliate(s) considered, may it elect to have only certain categories
of loans considered?
A1. Yes. An institution may elect to have only a particular
category of its affiliate's lending considered. The basic categories of
loans are home mortgage loans, small business loans, small farm loans,
community development loans, and the five categories of consumer loans
(motor vehicle loans, credit card loans, home equity loans, other
secured loans, and other unsecured loans).
Sec. ____.22(c)(2) Constraints on Affiliate Lending
Sec. ____.22(c)(2)(i) No Affiliate May Claim a Loan Origination or Loan
Purchase if Another Institution Claims the Same Loan Origination or
Purchase
Sec. ____.22(c)(2)(i)-1: How is this constraint on affiliate
lending applied?
A1. This constraint prohibits one affiliate from claiming a loan
origination or purchase claimed by another affiliate. However, an
institution can count as a purchase a loan originated by an affiliate
that the institution subsequently purchases, or count as an origination
a loan later sold to an affiliate, provided the same loans are not sold
several times to inflate their value for CRA purposes.
Sec. ____.22(c)(2)(ii) If an Institution Elects To Have Its
Supervisory Agency Consider Loans Within a Particular Lending Category
Made by One or More of the Institution's Affiliates in a Particular
Assessment Area, the Institution Shall Elect To Have the Agency
Consider All Loans Within That Lending Category in That Particular
Assessment Area Made by All of the Institution's Affiliates
Sec. ____.22(c)(2)(ii)-1: How is this constraint on affiliate
lending applied?
A1. This constraint prohibits ``cherry-picking'' affiliate loans
within any one category of loans. The constraint requires an
institution that elects to have a particular category of affiliate
lending in a particular assessment area considered to include all loans
of that type made by all of its affiliates in that particular
assessment area. For example, assume that an institution has one or
more affiliates, such as a mortgage bank that makes loans in the
institution's assessment area. If the institution elects to include the
mortgage bank's home mortgage loans, it must include all of mortgage
bank's home mortgage loans made in its assessment area. The institution
cannot elect to include only those low- and moderate-income home
mortgage loans made by the mortgage bank affiliate and not home
mortgage loans to middle- and upper-income individuals or areas.
Sec. ____.22(c)(2)(ii)-2: How is this constraint applied if an
institution's affiliates are also insured depository institutions
subject to the CRA?
A2. Strict application of this constraint against ``cherry-
picking'' to loans of an affiliate that is also an insured depository
institution covered by the CRA would produce the anomalous result that
the other institution would, without its consent, not be able to count
its own loans. Because the agencies did not intend to deprive an
institution subject to the CRA of receiving consideration for its own
lending, the agencies read this constraint slightly differently in
cases involving a group of affiliated institutions, some of which are
subject to the CRA and share the same assessment area(s). In those
circumstances, an institution that elects to include all of its
mortgage affiliate's home mortgage loans in its assessment area would
not automatically be required to include all home mortgage loans in its
assessment area of another affiliate institution subject to the CRA.
However, all loans of a particular type made by any affiliate in the
institution's assessment area(s) must either be counted by the lending
institution or by another affiliate institution that is subject to the
CRA. This reading reflects the fact that a holding company may, for
business reasons, choose to transact different aspects of its business
in different subsidiary institutions. However, the method by which
loans are allocated among the institutions for CRA purposes must
reflect actual business decisions about the allocation of banking
activities among the institutions and should not be designed solely to
enhance their CRA evaluations.
Sec. ____.22(d) Lending by a Consortium or a Third Party
Sec. ____.22(d)-1: Will equity and equity-type investments in a
third party receive consideration under the lending test?
A1. If an institution has made an equity or equity-type investment
in a third party, community development loans made by the third party
may be considered under the lending test. On the other hand, asset-
backed and debt securities that do not represent an equity-type
interest in a third party will not be considered under the lending test
unless the securities are booked by the purchasing institution as a
loan. For example, if an institution purchases stock in a community
development corporation (``CDC'') that primarily lends in low- and
moderate-income areas or to low-and moderate-income individuals in
order to promote community development, the institution may claim a pro
rata share of the CDC's loans as community development loans. The
institution's pro rata share is based on its percentage of equity
ownership in the CDC. Sec. ____.23(b)-1 provides information concerning
consideration of an equity or equity-type investment under the
investment test and both the lending and investment tests.
Sec. ____.22(d)-2: How will examiners evaluate loans made by
consortia or third parties under the lending test?
A2. Loans originated or purchased by consortia in which an
institution participates or by third parties in which an institution
invests will only be considered if they qualify as community
development loans and will only be considered under the community
development criterion of the lending test. However, loans originated
directly on the books of an institution or purchased by the institution
are considered to have been made or purchased directly by the
institution, even if the institution originated or purchased the loans
as a result of its participation in a loan consortium. These loans
would be considered under all the lending test criteria appropriate to
them depending on the type of loan.
Sec. ____.22(d)-3: In some circumstances, an institution may invest
in a third party, such as a community development bank, that is also an
insured depository institution and is thus subject to CRA requirements.
If the investing institution requests its supervisory agency to
consider its pro rata share of community development loans made by the
third party, as allowed under 12 CFR____.22(d), may the third party
also receive consideration for these loans?
A3. Yes, as long as the financial institution and the third party
are not affiliates. The regulations state, at 12 CFR____.22(c)(2)(i),
that two affiliates may not both claim the same loan origination or
loan purchase. However, if the financial institution and the third
party are not affiliates, the third party may receive consideration for
the community development loans it originates, and the financial
institution that invested in the third party may also receive
consideration for its pro rata
[[Page 36635]]
share of the same community development loans under 12 CFR____.22(d).
Sec. ____.23--Investment Test
Sec. ____.23(a) Scope of Test
Sec. ____.23(a)-1: May an institution receive consideration under
the CRA regulations if it invests indirectly through a fund, the
purpose of which is community development, as that is defined in the
CRA regulations?
A1: Yes, the direct or indirect nature of the qualified investment
does not affect whether an institution will receive consideration under
the CRA regulations because the regulations do not distinguish between
``direct'' and ``indirect'' investments. Thus, an institution's
investment in an equity fund that, in turn, invests in projects that,
for example, provide affordable housing to low- and moderate-income
individuals, would receive consideration as a qualified investment
under the CRA regulations, provided the investment benefits one or more
of the institution's assessment area(s) or a broader statewide or
regional area(s) that includes one or more of the institution's
assessment area(s). Similarly, an institution may receive consideration
for a direct qualified investment in a nonprofit organization that, for
example, supports affordable housing for low- and moderate-income
individuals in the institution's assessment area(s) or a broader
statewide or regional area(s) that includes the institution's
assessment area(s).
Sec. ____.23(b) Exclusion
Sec. ____.23(b)-1: Even though the regulations state that an
activity that is considered under the lending or service tests cannot
also be considered under the investment test, may parts of an activity
be considered under one test and other parts be considered under
another test?
A1. Yes, in some instances the nature of an activity may make it
eligible for consideration under more than one of the performance
tests. For example, certain investments and related support provided by
a large retail institution to a CDC may be evaluated under the lending,
investment, and service tests. Under the service test, the institution
may receive consideration for any community development services that
it provides to the CDC, such as service by an executive of the
institution on the CDC's board of directors. If the institution makes
an investment in the CDC that the CDC uses to make community
development loans, the institution may receive consideration under the
lending test for its pro-rata share of community development loans made
by the CDC. Alternatively, the institution's investment may be
considered under the investment test, assuming it is a qualified
investment. In addition, an institution may elect to have a part of its
investment considered under the lending test and the remaining part
considered under the investment test. If the investing institution opts
to have a portion of its investment evaluated under the lending test by
claiming a share of the CDC's community development loans, the amount
of investment considered under the investment test will be offset by
that portion. Thus, the institution would only receive consideration
under the investment test for the amount of its investment multiplied
by the percentage of the CDC's assets that meet the definition of a
qualified investment.
Sec. ____.23(b)-2: If home mortgage loans to low- and moderate-
income borrowers have been considered under an institution's lending
test, may the institution that originated or purchased them also
receive consideration under the investment test if it subsequently
purchases mortgage-backed securities that are primarily or exclusively
backed by such loans?
A2. No. Because the institution received lending test consideration
for the loans that underlie the securities, the institution may not
also receive consideration under the investment test for its purchase
of the securities. Of course, an institution may receive investment
test consideration for purchases of mortgage-backed securities that are
backed by loans to low- and moderate-income individuals as long as the
securities are not backed primarily or exclusively by loans that the
same institution originated or purchased.
Sec. ____.23(e) Performance Criteria
Sec. ____.23(e)-1: When applying the performance criteria of
Sec. ____.23(e), may an examiner distinguish among qualified
investments based on how much of the investment actually supports the
underlying community development purpose?
A1. Yes. Although Sec. ____.23(e)(1) speaks in terms of the dollar
amount of qualified investments, the criterion permits an examiner to
weight certain investments differently or to make other appropriate
distinctions when evaluating an institution's record of making
qualified investments. For instance, an examiner should take into
account that a targeted mortgage-backed security that qualifies as an
affordable housing issue that has only 60 percent of its face value
supported by loans to low -or moderate-income borrowers would not
provide as much affordable housing for low- and moderate-income
individuals as a targeted mortgage-backed security with 100 percent of
its face value supported by affordable housing loans to low- and
moderate-income borrowers. The examiner should describe any
differential weighting (or other adjustment), and its basis in the
Public Evaluation. However, no matter how a qualified investment is
handled for purposes of Sec. ____.23(e)(1), it will also be evaluated
with respect to the qualitative performance criteria set forth in
Sec. ____.23(e)(2), (3) and (4) . By applying all criteria, a qualified
investment of a lower dollar amount may be weighed more heavily under
the Investment Test than a qualified investment with a higher dollar
amount, but with fewer qualitative enhancements.
Sec. ____.23(e)-2: How do examiners evaluate an institution's
qualified investment in a fund, the primary purpose of which is
community development, as that is defined in the CRA regulations?
A2. When evaluating qualified investments that benefit an
institution's assessment area(s) or a broader statewide or regional
area that includes its assessment area(s), examiners will look at the
following four performance criteria:
(1) The dollar amount of qualified investments;
(2) The innovativeness or complexity of qualified investments;
(3) The responsiveness of qualified investments to credit and
community development needs; and
(4) The degree to which the qualified investments are not routinely
provided by private investors.
With respect to the first criterion, examiners will determine the
dollar amount of qualified investments by relying on the figures
recorded by the institution according to generally accepted accounting
principles (GAAP). Although institutions may exercise a range of
investment strategies, including short-term investments, long-term
investments, investments that are immediately funded, and investments
with a binding, up-front commitment that are funded over a period of
time, institutions making the same dollar amount of investments over
the same number of years, all other performance criteria being equal,
would receive the same level of consideration. Examiners will include
both new and outstanding investments in this determination. The dollar
amount of qualified investments also will include the dollar amount of
[[Page 36636]]
legally binding commitments recorded by the institution according to
GAAP.
The extent to which qualified investments receive consideration,
however, depends on how examiners evaluate the investments under the
remaining three performance criteria--innovativeness and complexity,
responsiveness, and degree to which the investment is not routinely
provided by private investors. Examiners also will consider factors
relevant to the institution's CRA performance context, such as the
effect of outstanding long-term qualified investments, the pay-in
schedule, and the amount of any cash call, on the capacity of the
institution to make new investments.
Sec. ____.24--Service Test
Sec. ____.24(d) Performance Criteria--Retail Banking Services
Sec. ____.24(d)-1: How do examiners evaluate the availability and
effectiveness of an institution's systems for delivering retail banking
services?
A1. Convenient access to full service branches within a community
is an important factor in determining the availability of credit and
non-credit services. Therefore, the service test performance standards
place primary emphasis on full service branches while still considering
alternative systems, such as automated teller machines (``ATMs''). The
principal focus is on an institution's current distribution of
branches; therefore, an institution is not required to expand its
branch network or operate unprofitable branches. Under the service
test, alternative systems for delivering retail banking services, such
as ATMs, are considered only to the extent that they are effective
alternatives in providing needed services to low- and moderate-income
areas and individuals.
Sec. ____.24(d)-2: How do examiners evaluate an institution's
activities in connection with Individual Development Accounts (IDAs)?
A2. Although there is no standard IDA program, IDAs typically are
deposit accounts targeted to low- and moderate-income families that are
designed to help them accumulate savings for education or job-training,
down-payment and closing costs on a new home, or start-up capital for a
small business. Once participants have successfully funded an IDA,
their personal IDA savings are matched by a public or private entity.
Financial institution participation in IDA programs comes in a variety
of forms, including providing retail banking services to IDA account
holders, providing matching dollars or operating funds to an IDA
program, designing or implementing IDA programs, providing consumer
financial education to IDA account holders or prospective account
holders, or other means. The extent of financial institutions'
involvement in IDAs and the products and services they offer in
connection with the accounts will vary. Thus, subject to
Sec. ____.23(b), examiners evaluate the actual services and products
provided by an institution in connection with IDA programs as one or
more of the following: community development services, retail banking
services, qualified investments, home mortgage loans, small business
loans, consumer loans, or community development loans.
Sec. ____.24(d)(3) Availability and Effectiveness of Alternative
Systems for Delivering Retail Banking Services?
Sec. ____.24(d)(3)-1: How will examiners evaluate alternative
systems for delivering retail banking services?
A1. The regulation recognizes the multitude of ways in which an
institution can provide services, for example, ATMs, banking by
telephone or computer, and bank-by-mail programs. Delivery systems
other than branches will be considered under the regulation to the
extent that they are effective alternatives to branches in providing
needed services to low-and moderate-income areas and individuals. The
list of systems in the regulation is not intended to be inclusive.
Sec. ____.24(d)(3)-2: Are debit cards considered under the service
test as an alternative delivery system?
A2. By themselves, no. However, if debit cards are a part of a
larger combination of products, such as a comprehensive electronic
banking service, that allows an institution to deliver needed services
to low- and moderate-income areas and individuals in its community, the
overall delivery system that includes the debit card feature would be
considered an alternative delivery system.
Sec. ____.24(e) Performance Criteria--Community Development Services
Sec. ____.24(e)-1: Under what conditions may an institution receive
consideration for community development services offered by affiliates
or third parties?
A1. At an institution's option, the agencies will consider services
performed by an affiliate or by a third party on the institution's
behalf under the service test if the services provided enable the
institution to help meet the credit needs of its community. Indirect
services that enhance an institution's ability to deliver credit
products or deposit services within its community and that can be
quantified may be considered under the service test, if those services
have not been considered already under the lending or investment test
(see Sec. ____.23(b)-1). For example, an institution that contracts
with a community organization to provide home ownership counseling to
low- and moderate-income home buyers as part of the institution's
mortgage program may receive consideration for that indirect service
under the service test. In contrast, donations to a community
organization that offers financial services to low- or moderate-income
individuals may be considered under the investment test, but would not
also be eligible for consideration under the service test. Services
performed by an affiliate will be treated the same as affiliate loans
and investments made in the institution's assessment area and may be
considered if the service is not claimed by any other institution. See
Secs. ____.22(c) and .23(c).
Sec. ____.25 Community Development Test for Wholesale or Limited
Purpose Institutions
Sec. ____.25(a) Scope of Test
Sec. ____.25(a)-1: How can certain credit card banks help to meet
the credit needs of their communities without losing their exemption
from the definition of ``bank'' in the Bank Holding Company Act (the
BHCA), as amended by the Competitive Equality Banking Act of 1987
(CEBA)?
A1. Although the BHCA restricts institutions known as CEBA credit
card banks to credit card operations, a CEBA credit card bank can
engage in community development activities without losing its exemption
under the BHCA. A CEBA credit card bank could provide community
development services and investments without engaging in operations
other than credit card operations. For example, the bank could provide
credit card counseling, or the financial expertise of its executives,
free of charge, to community development organizations. In addition, a
CEBA credit card bank could make qualified investments, as long as the
investments meet the guidelines for passive and noncontrolling
investments provided in the BHC Act and the Board's Regulation Y.
Finally, although a CEBA credit card bank cannot make any loans other
than credit card loans, under Sec. ____.25(d)(2) (community development
test--indirect activities), the bank could elect to have part of its
qualified passive and noncontrolling investments in a third-party
lending consortium considered as community development lending,
provided that the
[[Page 36637]]
consortium's loans otherwise meet the requirements for community
development lending. When assessing a CEBA credit card bank's CRA
performance under the community development test, examiners will take
into account the bank's performance context. In particular, examiners
will consider the legal constraints imposed by the BHCA on the bank's
activities, as part of the bank's performance context in
Sec. ____.21(b)(4).
Sec. ____.25(d) Indirect Activities
Sec. ____.25(d)-1: How are investments in third party community
development organizations considered under the community development
test?
A1. Similar to the lending test for retail institutions,
investments in third party community development organizations may be
considered as qualified investments or as community development loans
or both (provided there is no double counting), at the institution's
option, as described above in the discussion regarding Secs. ____.22(d)
and ____.23(b).
Sec. ____.25(e) Benefit to Assessment Area(s)
Sec. ____.25(e)-1: How do examiners evaluate a wholesale or limited
purpose institution's qualified investment in a fund that invests in
projects nationwide and which has a primary purpose of community
development, as that is defined in the regulations?
A1. If examiners find that a wholesale or limited purpose
institution has adequately addressed the needs of its assessment
area(s), they will give consideration to qualified investments, as well
as community development loans and community development services, by
that institution nationwide. In determining whether an institution has
adequately addressed the needs of its assessment area(s), examiners
will consider qualified investments that benefit a broader statewide or
regional area that includes the institution's assessment area(s).
Sec. ____.25(f) Community Development Performance Rating
Sec. ____.25(f)-1: Must a wholesale or limited purpose institution
engage in all three categories of community development activities
(lending, investment and service) to perform well under the community
development test?
A1. No, a wholesale or limited purpose institution may perform well
under the community development test by engaging in one or more of
these activities.
Sec. ____.26--Small Institution Performance Standards
Sec. ____.26(a) Performance Criteria
Sec. ____.26(a)-1: May examiners consider, under one or more of
the performance criteria of the small institution performance
standards, lending-related activities, such as community development
loans and lending-related qualified investments, when evaluating a
small institution?
A1. Yes. Examiners can consider ``lending-related activities,''
including community development loans and lending-related qualified
investments, when evaluating the first four performance criteria of the
small institution performance test. Although lending-related activities
are specifically mentioned in the regulation in connection with only
the first three criteria (i.e., loan-to-deposit ratio, percentage of
loans in the institution's assessment area, and lending to borrowers of
different incomes and businesses of different sizes), examiners can
also consider these activities when they evaluate the fourth criteria--
geographic distribution of the institution's loans.
Sec. ____.26(a)-2: What is meant by ``as appropriate'' when
referring to the fact that lending-related activities will be
considered, ``as appropriate,'' under the various small institution
performance criteria?
A2. ``As appropriate'' means that lending-related activities will
be considered when it is necessary to determine whether an institution
meets or exceeds the standards for a satisfactory rating. Examiners
will also consider other lending-related activities at an institution's
request.
Sec. ____.26(a)-3: When evaluating a small institution's lending
performance, will examiners consider, at the institution's request,
community development loans originated or purchased by a consortium in
which the institution participates or by a third party in which the
institution has invested?
A3. Yes. However, a small institution that elects to have examiners
consider community development loans originated or purchased by a
consortium or third party must maintain sufficient information on its
share of the community development loans so that the examiners may
evaluate these loans under the small institution performance criteria.
Sec. ____.26(a)-4: Under the small institution performance
standards, will examiners consider both loan originations and
purchases?
A4. Yes, consistent with the other assessment methods in the
regulation, examiners will consider both loans originated and purchased
by the institution. Likewise, examiners may consider any other loan
data the small institution chooses to provide, including data on loans
outstanding, commitments and letters of credit.
Sec. ____.26(a)-5: Under the small institution performance
standards, how will qualified investments be considered for purposes of
determining whether a small institution receives a satisfactory CRA
rating?
A5. The small institution performance standards focus on lending
and other lending-related activities. Therefore, examiners will
consider only lending-related qualified investments for the purposes of
determining whether the small institution receives a satisfactory CRA
rating.
Sec. ____.26(a)(1) Loan-to-Deposit Ratio
Sec. ____.26(a)(1)-1: How is the loan-to-deposit ratio calculated?
A1. A small institution's loan-to-deposit ratio is calculated in
the same manner that the Uniform Bank Performance Report/Uniform Thrift
Performance Report (UBPR/UTPR) determines the ratio. It is calculated
by dividing the institution's net loans and leases by its total
deposits. The ratio is found in the Liquidity and Investment Portfolio
section of the UBPR and UTPR. Examiners will use this ratio to
calculate an average since the last examination by adding the quarterly
loan-to-deposit ratios and dividing the total by the number of
quarters.
Sec. ____.26(a)(1)-2: How is the ``reasonableness'' of a loan-to-
deposit ratio evaluated?
A2. No specific ratio is reasonable in every circumstance, and each
small institution's ratio is evaluated in light of information from the
performance context, including the institution's capacity to lend,
demographic and economic factors present in the assessment area, and
the lending opportunities available in the assessment area(s). If a
small institution's loan-to-deposit ratio appears unreasonable after
considering this information, lending performance may still be
satisfactory under this criterion taking into consideration the number
and the dollar volume of loans sold to the secondary market or the
number and amount and innovativeness or complexity of community
development loans and lending-related qualified investments.
Sec. ____.26(a)(1)-3: If an institution makes a large number of
loans off-shore, will examiners segregate the domestic
[[Page 36638]]
loan-to-deposit ratio from the foreign loan-to-deposit ratio?
A3. No. Examiners will look at the institution's net loan-to-
deposit ratio for the whole institution, without any adjustments.
Sec. ____.26(a)(2) Percentage of Lending Within Assessment Area(s)
Sec. ____.26(a)(2)-1: Must a small institution have a majority of
its lending in its assessment area(s) to receive a satisfactory
performance rating?
A1. No. The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s) is but one
of the performance criteria upon which small institutions are
evaluated. If the percentage of loans and other lending related
activities in an institution's assessment area(s) is less than a
majority, then the institution does not meet the standards for
satisfactory performance only under this criterion. The effect on the
overall performance rating of the institution, however, is considered
in light of the performance context, including information regarding
economic conditions, loan demand, the institution's size, financial
condition and business strategies, and branching network and other
aspects of the institution's lending record.
Sec. ____.26(a)(3) & (4) Distribution of Lending Within Assessment
Area(s) by Borrower Income and Geographic Location
Sec. ____.26(a)(3) & (4)-1: How will a small institution's
performance be assessed under these lending distribution criteria?
A1. Distribution of loans, like other small institution performance
criteria, is considered in light of the performance context. For
example, a small institution is not required to lend evenly throughout
its assessment area(s) or in any particular geography. However, in
order to meet the standards for satisfactory performance under this
criterion, conspicuous gaps in a small institution's loan distribution
must be adequately explained by performance context factors such as
lending opportunities in the institution's assessment area(s), the
institution's product offerings and business strategy, and
institutional capacity and constraints. In addition, it may be
impracticable to review the geographic distribution of the lending of
an institution with few demographically distinct geographies within an
assessment area. If sufficient information on the income levels of
individual borrowers or the revenues or sizes of business borrowers is
not available, examiners may use proxies such as loan size for
estimating borrower characteristics, where appropriate.
Sec. ____.26(b) Performance Rating
Sec. ____.26(b)-1: How can a small institution achieve an
``outstanding'' performance rating?
A1. A small institution that meets each of the standards for a
``satisfactory'' rating and exceeds some or all of those standards may
warrant an ``outstanding'' performance rating. In assessing performance
at the ``outstanding'' level, the agencies consider the extent to which
the institution exceeds each of the performance standards and, at the
institution's option, its performance in making qualified investments
and providing services that enhance credit availability in its
assessment area(s). In some cases, a small institution may qualify for
an ``outstanding'' performance rating solely on the basis of its
lending activities, but only if its performance materially exceeds the
standards for a ``satisfactory'' rating, particularly with respect to
the penetration of borrowers at all income levels and the dispersion of
loans throughout the geographies in its assessment area(s) that display
income variation. An institution with a high loan-to-deposit ratio and
a high percentage of loans in its assessment area(s), but with only a
reasonable penetration of borrowers at all income levels or a
reasonable dispersion of loans throughout geographies of differing
income levels in its assessment area(s), generally will not be rated
``outstanding'' based only on its lending performance. However, the
institution's performance in making qualified investments and its
performance in providing branches and other services and delivery
systems that enhance credit availability in its assessment area(s) may
augment the institution's satisfactory rating to the extent that it may
be rated ``outstanding.''
Sec. ____.26(b)-2: Will a small institution's qualified
investments, community development loans, and community development
services be considered if they do not directly benefit its assessment
area(s)?
A2. Yes. These activities are eligible for consideration if they
benefit a broader statewide or regional area that includes a small
institution's assessment area(s), as discussed more fully in
Secs. ____.12(i) & 563e.12(h)-6.
Sec. ____.27--Strategic Plan
Sec. ____.27(c) Plans in General
Sec. ____.27(c)-1: To what extent will the agencies provide
guidance to an institution during the development of its strategic
plan?
A1. An institution will have an opportunity to consult with and
provide information to the agencies on a proposed strategic plan.
Through this process, an institution is provided guidance on procedures
and on the information necessary to ensure a complete submission. For
example, the agencies will provide guidance on whether the level of
detail as set out in the proposed plan would be sufficient to permit
agency evaluation of the plan. However, the agencies' guidance during
plan development and, particularly, prior to the public comment period,
will not include commenting on the merits of a proposed strategic plan
or on the adequacy of measurable goals.
Sec. ____.27(c)-2: How will a joint strategic plan be reviewed if
the affiliates have different primary Federal supervisors?
A2. The agencies will coordinate review of and action on the joint
plan. Each agency will evaluate the measurable goals for those
affiliates for which it is the primary regulator.
Sec. ____.27(f) Plan Content
Sec. ____.27(f)(1) Measurable Goals
Sec. ____.27(f)(1)-1: How should ``measurable goals'' be specified
in a strategic plan?
A1. Measurable goals (e.g., number of loans, dollar amount,
geographic location of activity, and benefit to low-and moderate-income
areas or individuals) must be stated with sufficient specificity to
permit the public and the agencies to quantify what performance will be
expected. However, institutions are provided flexibility in specifying
goals. For example, an institution may provide ranges of lending
amounts in different categories of loans. Measurable goals may also be
linked to funding requirements of certain public programs or indexed to
other external factors as long as these mechanisms provide a
quantifiable standard.
Sec. ____.27(g) Plan Approval
Sec. ____.27(g)(2) Public Participation
Sec. ____.27(g)(2)-1: How will the public receive notice of a
proposed strategic plan?
A1. An institution submitting a strategic plan for approval by the
agencies is required to solicit public comment on the plan for a period
of
[[Page 36639]]
thirty (30) days after publishing notice of the plan at least once in a
newspaper of general circulation. The notice should be sufficiently
prominent to attract public attention and should make clear that public
comment is desired. An institution may, in addition, provide notice to
the public in any other manner it chooses.
Sec. ____.28--Assigned Ratings
Sec. ____.28-1: Are innovative lending practices, innovative or
complex qualified investments, and innovative community development
services required for a ``satisfactory'' or ``outstanding'' CRA rating?
A1. No. Moreover, the lack of innovative lending practices,
innovative or complex qualified investments, or innovative community
development services alone will not result in a ``needs to improve''
CRA rating. However, the use of innovative lending practices,
innovative or complex qualified investments, and innovative community
development services may augment the consideration given to an
institution's performance under the quantitative criteria of the
regulations, resulting in a higher level of performance rating.
Sec. ____.28-2: How is performance under the quantitative and
qualitative performance criteria weighed when examiners assign a CRA
rating?
A2. The lending, investment, and service tests each contain a
number of performance criteria designed to measure whether an
institution is effectively helping to meet the credit needs of its
entire community, including low- and moderate-income neighborhoods, in
a safe and sound manner. Some of these performance criteria are
quantitative, such as number and amount, and others, such as the use of
innovative or flexible lending practices, the innovativeness or
complexity of qualified investments, and the innovativeness and
responsiveness of community development services, are qualitative. The
performance criteria that deal with these qualitative aspects of
performance recognize that these loans, qualified investments, and
community development services sometimes require special expertise and
effort on the part of the institution and provide a benefit to the
community that would not otherwise be possible. As such, the agencies
consider the qualitative aspects of an institution's activities when
measuring the benefits received by a community. An institution's
performance under these qualitative criteria may augment the
consideration given to an institution's performance under the
quantitative criteria of the regulations, resulting in a higher level
of performance and rating.
Sec. ____.28(a) Ratings in General
Sec. ____.28(a)-1: How are institutions with domestic branches in
more than one state assigned a rating?
A1. The evaluation of an institution that maintains domestic
branches in more than one state (``multistate institution'') will
include a written evaluation and rating of its CRA record of
performance as a whole and in each state in which it has a domestic
branch. The written evaluation will contain a separate presentation on
a multistate institution's performance for each metropolitan
statistical area and the nonmetropolitan area within each state, if it
maintains one or more domestic branch offices in these areas. This
separate presentation will contain conclusions, supported by facts and
data, on performance under the performance tests and standards in the
regulation. The evaluation of a multistate institution that maintains a
domestic branch in two or more states in a multistate metropolitan area
will include a written evaluation (containing the same information
described above) and rating of its CRA record of performance in the
multistate metropolitan area. In such cases, the statewide evaluation
and rating will be adjusted to reflect performance in the portion of
the state not within the multistate metropolitan statistical area.
Sec. ____.28(a)-2: How are institutions that operate within only a
single state assigned a rating?
A2. An institution that operates within only a single state
(``single-state institution'') will be assigned a rating of its CRA
record based on its performance within that state. In assigning this
rating, the agencies will separately present a single-state
institution's performance for each metropolitan area in which the
institution maintains one or more domestic branch offices. This
separate presentation will contain conclusions, supported by facts and
data, on the single-state institution's performance under the
performance tests and standards in the regulation.
Sec. ____.28(a)-3: How do the agencies weight performance under
the lending, investment and service test for large retail institutions?
A3. A rating of ``outstanding,'' ``high satisfactory,'' ``low
satisfactory,'' ``needs to improve,'' or ``substantial noncompliance,''
based on a judgment supported by facts and data, will be assigned under
each performance test. Points will then be assigned to each rating as
described in the first matrix set forth below. A large retail
institution's overall rating under the lending, investment and service
tests will then be calculated in accordance with the second matrix set
forth below, which incorporates the rating principles in the
regulation.
Points Assigned for Performance Under Lending, Investment and Service Tests
|
|
Lending |
Service |
Investment |
Outstanding |
12 |
6 |
6 |
High
Satisfactory |
9 |
4 |
4 |
Low
Satisfactory |
6 |
3 |
3 |
Needs to
Improve |
3 |
1 |
1 |
Substantial
Noncompliance |
0 |
0 |
0 |
----------------------------------------------------------------------------------------------------------------
Composite
Rating Point Requirements
[Add points from three tests] |
Rating |
Total points |
Outstanding |
20 or over. |
Satisfactory |
11 through 19. |
Needs to
Improve |
5 through 10. |
Substantial
Noncompliance |
0 through 4. |
The Truth in Lending Act regarding rescission of certain
mortgage transactions and regarding disclosures and certain loan term
restrictions in connection with credit transactions that are subject to
the Home Ownership and Equity Protection Act;
The Real Estate Settlement Procedures Act regarding the giving
and accepting of referral fees, unearned fees or kickbacks in connection
with certain mortgage transactions; and
The Federal Trade Commission Act regarding unfair or deceptive
acts or practices. Examiners will determine the effect of evidence of
illegal credit practices as set forth in examination procedures and Sec.
____.28(c) of the regulation. Violations of other provisions of the
consumer protection laws generally will not adversely affect an
institution's CRA rating, but may warrant the inclusion of comments in an
institution's performance evaluation. These comments may address the
institution's policies, procedures, training programs, and internal
assessment efforts. Sec. ____.29--Effect of CRA Performance on
Applications Sec. ____.29(a) CRA Performance Sec. ____.29(a)-1: What
weight is given to an institution's CRA performance examination in
reviewing an application? A1. In cases in which CRA performance is a
relevant factor, information from a CRA performance examination of the
institution is a particularly important consideration in the applications
process because it represents a detailed evaluation of the institution's
CRA performance by its Federal supervisory agency. In this light, an
examination is an important, and often controlling, factor in the
consideration of an institution's record. In some cases, however, the
examination may not be recent or a specific issue raised in the
application process, such as progress in addressing weaknesses noted by
examiners, progress in implementing commitments previously made to the
reviewing agency, or a supported allegation from a commenter, is relevant
to CRA performance under the regulation and was not addressed in the
examination. In these circumstances, the applicant should present
sufficient information to supplement its record of performance and to
respond to the substantive issues raised in the application proceeding.
Sec. ____.29(a)-2: What consideration is given to an institution's
commitments for future action in reviewing an application by those
agencies that consider such commitments? A2. Commitments for future action
are not viewed as part of the CRA record of performance. In general,
institutions cannot use commitments made in the applications process to
overcome a seriously deficient record of CRA performance. However,
commitments for improvements in an institution's performance may be
appropriate to address specific weaknesses in an otherwise satisfactory
record or to address CRA performance when a financially troubled
institution is being acquired. Sec. ____.29(b) Interested Parties Sec.
____.29(b)-1: What consideration is given to comments from interested
parties in reviewing an application? A1. Materials relating to CRA
performance received during the applications process can provide valuable
information. Written comments, which may express either support for or
opposition to the application, are made a part of the record in accordance
with the agencies' procedures, and are carefully considered in making the
agencies' decision. Comments should be supported by facts about the
applicant's performance and should be as specific as possible in
explaining the basis for supporting or opposing the application. These
comments must be submitted within the time limits provided under the
agencies' procedures. Sec. ____.29(b)-2: Is an institution required to
enter into agreements with private parties? A2. No. Although
communications between an institution and members of its community may
provide a valuable method for the institution to assess how best to
address the credit needs of the community, the CRA does not require an
institution to enter into agreements with private parties. These
agreements are not monitored or enforced by the agencies. Sec.
____.41--Assessment Area Delineation Sec. ____.41(a) In General Sec.
____.41(a)-1: How do the agencies evaluate ``assessment areas'' under the
revised CRA regulations compared to how they evaluated ``local
communities'' that institutions delineated under the original CRA
regulations? A1. The revised rule focuses on the distribution and level of
an institution's lending, investments, and services rather than on how and
why an institution delineated its ``local community'' or assessment
area(s) in a particular manner. Therefore, the agencies will not evaluate
an institution's delineation of its assessment area(s) as a separate
performance criterion as they did under the original regulation. Rather,
the agencies will only review whether the assessment area delineated by
the institution complies with the limitations set forth in the regulations
at Sec. ____.41(e). Sec. ____.41(a)-2: If an institution elects to have
the agencies consider affiliate lending, will this decision affect the
institution's assessment area(s)? A2. If an institution elects to have the
lending activities of its affiliates considered in the evaluation of the
institution's lending, the geographies in which the affiliate lends do not
affect the institution's delineation of assessment area(s). Sec.
____.41(a)-3: Can a financial institution identify a specific ethnic group
rather than a geographic area as its assessment area? A3. No, assessment
areas must be based on geography. Sec. ____.41(c) Geographic Area(s) for
Institutions Other than Wholesale or Limited Purpose Institutions Sec.
____.41(c)(1) Generally Consist of one or More MSAs or one or More
Contiguous Political Subdivisions Sec. ____.41(c)(1)-1: Besides cities,
towns, and counties, what other units of local government are political
subdivisions for CRA purposes? A1. Townships and Indian reservations are
political subdivisions for CRA purposes. Institutions should be aware that
the boundaries of townships and Indian reservations may not be consistent
with the boundaries of [[Page 36641]] the census tracts or block numbering
areas (``geographies'') in the area. In these cases, institutions must
ensure that their assessment area(s) consists only of whole geographies by
adding any portions of the geographies that lie outside the political
subdivision to the delineated assessment area(s). Sec. ____.41(c)(1)-2:
Are wards, school districts, voting districts, and water districts
political subdivisions for CRA purposes? A2. No. However, an institution
that determines that it predominantly serves an area that is smaller than
a city, town or other political subdivision may delineate as its
assessment area the larger political subdivision and then, in accordance
with Sec. ____.41(d), adjust the boundaries of the assessment area to
include only the portion of the political subdivision that it reasonably
can be expected to serve. The smaller area that the institution delineates
must consist of entire geographies, may not reflect illegal
discrimination, and may not arbitrarily exclude low- or moderate-income
geographies. Sec. ____.41(d) Adjustments to Geographic Area(s) Sec.
____.41(d)-1: When may an institution adjust the boundaries of an
assessment area to include only a portion of a political subdivision? A1.
Institutions must include whole geographies (i.e., census tracts or block
numbering areas) in their assessment areas and generally should include
entire political subdivisions. Because census tracts and block numbering
areas are the common geographic areas used consistently nationwide for
data collection, the agencies require that assessment areas be made up of
whole geographies. If including an entire political subdivision would
create an area that is larger than the area the institution can reasonably
be expected to serve, an institution may, but is not required to, adjust
the boundaries of its assessment area to include only portions of the
political subdivision. For example, this adjustment is appropriate if the
assessment area would otherwise be extremely large, of unusual
configuration, or divided by significant geographic barriers (such as a
river, mountain, or major highway system). When adjusting the boundaries
of their assessment areas, institutions must not arbitrarily exclude low-
or moderate-income geographies or set boundaries that reflect illegal
discrimination. Sec. ____.41(e) Limitations on Delineation of an
Assessment Area Sec. ____.41(e)(3) May not Arbitrarily Exclude Low- or
Moderate-Income Geographies Sec. ____.41(e)(3)-1: How will examiners
determine whether an institution has arbitrarily excluded low- or
moderate-income geographies? A1. Examiners will make this determination on
a case-by-case basis after considering the facts relevant to the
institution's assessment area delineation. Information that examiners will
consider may include:
Income levels in the institution's assessment area(s) and
surrounding geographies;
Locations of branches and deposit-taking ATMs;
Loan distribution in the institution's assessment area(s) and
surrounding geographies;
The institution's size;
The institution's financial condition; and
The business strategy, corporate structure and product offerings
of the institution. Sec. ____.41(e)(4) May Not Extend Substantially Beyond
a CMSA Boundary or Beyond a State Boundary Unless Located in a Multistate
MSA Sec. ____.41(e)(4)-1: What are the maximum limits on the size of an
assessment area? A1. An institution shall not delineate an assessment area
extending substantially across the boundaries of a consolidated
metropolitan statistical area (CMSA) or the boundaries of an MSA, if the
MSA is not located in a CMSA. Similarly, an assessment area may not extend
substantially across state boundaries unless the assessment area is
located in a multistate MSA. An institution may not delineate a whole
state as its assessment area unless the entire state is contained within a
CMSA. These limitations apply to wholesale and limited purpose
institutions as well as other institutions. An institution shall delineate
separate assessment areas for the areas inside and outside a CMSA (or MSA
if the MSA is not located in a CMSA) if the area served by the
institution's branches outside the CMSA (or MSA) extends substantially
beyond the CMSA (or MSA) boundary. Similarly, the institution shall
delineate separate assessment areas for the areas inside and outside of a
state if the institution's branches extend substantially beyond the
boundary of one state (unless the assessment area is located in a
multistate MSA). In addition, the institution should also delineate
separate assessment areas if it has branches in areas within the same
state that are widely separate and not at all contiguous. For example, an
institution that has its main office in New York City and a branch in
Buffalo, New York, and each office serves only the immediate areas around
it, should delineate two separate assessment areas. Sec. ____.41(e)(4)-2:
Can an institution delineate one assessment area that consists of an MSA
and two large counties that abut the MSA but are not adjacent to each
other? A2. As a general rule, an institution's assessment area should not
extend substantially beyond the boundary of an MSA if the MSA is not
located in a CMSA. Therefore, the MSA would be a separate assessment area,
and because the two abutting counties are not adjacent to each other and,
in this example, extend substantially beyond the boundary of the MSA, the
institution would delineate each county as a separate assessment area (so,
in this example, there would be three assessment areas). However, if the
MSA and the two counties were in the same CMSA, then the institution could
delineate only one assessment area including them all. Sec. ____.42--Data
collection, reporting, and disclosure Sec. ____.42-1: When must an
institution collect and report data under the CRA regulations? A1. All
institutions except small institutions are subject to data collection and
reporting requirements. A small institution is a bank or thrift that, as
of December 31 of either of the prior two calendar years, had total assets
of less than $250 million and was independent or an affiliate of a holding
company that, as of December 31 of either of the prior two calendar years,
had total banking and thrift assets of less than $1 billion. For example:
Date |
Institution's
asset size
(in millions) |
Data
collection
required for
following calendar
year? |
12/31/94 |
$240 |
No. |
12/31/95 |
260 |
No. |
12/31/96 |
230 |
No. |
12/31/97 |
280 |
No. |
12/31/98 |
260 |
Yes, beginning
1/01/ 99. |
------------------------------------------------------------------------
All institutions that are subject to the data collection and reporting
requirements must report the data for a calendar year by March 1 of the
[[Page 36642]] subsequent year. In the example, above, the institution
would report the data collected for calendar year 1999 by March 1, 2000.
The Board of Governors of the Federal Reserve System is handling the
processing of the reports for all of the primary regulators. The reports
should be submitted in a prescribed electronic format on a timely basis.
The mailing address for submitting these reports is: Attention: CRA
Processing, Board of Governors of the Federal Reserve System, 1709 New
York Avenue, NW., 5th Floor, Washington, DC 20006. Sec. ____.42-2: Should
an institution develop its own program for data collection, or will the
regulators require a certain format? A2. An institution may use the free
software that is provided by the FFIEC to reporting institutions for data
collection and reporting or develop its own program. Those institutions
that develop their own programs must follow the precise format for the new
CRA data collection and reporting rules. This format may be obtained by
contacting the CRA Assistance Line at (202) 872-7584. Sec. ____.42-3: How
should an institution report data on lines of credit? A3. Institutions
must collect and report data on lines of credit in the same way that they
provide data on loan originations. Lines of credit are considered
originated at the time the line is approved or increased; and an increase
is considered a new origination. Generally, the full amount of the credit
line is the amount that is considered originated. In the case of an
increase to an existing line, the amount of the increase is the amount
that is considered originated and that amount should be reported. However,
consistent with the Call Report and TFR instructions, institutions would
not report an increase to a small business or small farm line of credit if
the increase would cause the total line of credit to exceed $1 million, in
the case of a small business line, or $500,000, in the case of a small
farm line. Of course, institutions may provide information about such line
increases to examiners as ``other loan data.'' Sec. ____.42-4: Should
renewals of lines of credit be collected and/or reported? A4. Renewals of
lines of credit for small business, small farm or consumer purposes should
be collected and reported, if applicable, in the same manner as renewals
of small business or small farm loans. See Sec. ____.42(a)-5. Institutions
that are HMDA reporters continue to collect and report home equity lines
of credit at their option in accordance with the requirements of 12 CFR
part 203. Sec. ____.42-5: When should merging institutions collect data?
A5. Three scenarios of data collection responsibilities for the calendar
year of a merger and subsequent data reporting responsibilities are
described below.
Two institutions are exempt from CRA collection and reporting
requirements because of asset size. The institutions merge. No data
collection is required for the year in which the merger takes place,
regardless of the resulting asset size. Data collection would begin after
two consecutive years in which the combined institution had year-end
assets of at least $250 million or was part of a holding company that had
year-end banking and thrift assets of at least $1 billion.
Institution A, an institution required to collect and report the
data, and Institution B, an exempt institution, merge. Institution A is
the surviving institution. For the year of the merger, data collection is
required for Institution A's transactions. Data collection is optional for
the transactions of the previously exempt institution. For the following
year, all transactions of the surviving institution must be collected and
reported.
Two institutions that each are required to collect and report
the data merge. Data collection is required for the entire year of the
merger and for subsequent years so long as the surviving institution is
not exempt. The surviving institution may file either a consolidated
submission or separate submissions for the year of the merger but must
file a consolidated report for subsequent years. Sec. ____.42-6: Can small
institutions get a copy of the data collection software even though they
are not required to collect or report data? A6. Yes. Any institution that
is interested in receiving a copy of the software may send a written
request to: Attn.: CRA Processing, Board of Governors of the Federal
Reserve System, 1709 New York Ave, NW., 5th Floor, Washington, DC 20006.
They may also call the CRA Assistance Line at (202) 872-7584 or send
Internet e-mail to CRAHELP@FRB.GOV.
Sec. ____.42-7: If a small institution is designated a wholesale or
limited purpose institution, must it collect data that it would not
otherwise be required to collect because it is a small institution? A7.
No. However, small institutions must be prepared to identify those loans,
investments and services to be evaluated under the community development
test. Sec. ____.42(a) Loan Information Required To Be Collected and
Maintained Sec. ____.42(a)-1: Must institutions collect and report data on
all commercial loans under $1 million at origination? A1. No. Institutions
that are not exempt from data collection and reporting are required to
collect and report only those commercial loans that they capture in the
Call Report, Schedule RC-C, Part II, and in the TFR, Schedule SB. Small
business loans are defined as those whose original amounts are $1 million
or less and that were reported as either ``Loans secured by nonfarm or
nonresidential real estate'' or ``Commercial and Industrial loans'' in
Part I of the Call Report or TFR. Sec. ____.42(a)-2: For loans defined as
small business loans, what information should be collected and maintained?
A2. Institutions that are not exempt from data collection and reporting
are required to collect and maintain in a standardized, machine readable
format information on each small business loan originated or purchased for
each calendar year:
A unique number or alpha-numeric symbol that can be used to
identify the relevant loan file;
The loan amount at origination;
The loan location; and
An indicator whether the loan was to a business with gross
annual revenues of $1 million or less. The location of the loan must be
maintained by census tract or block numbering area. In addition,
supplemental information contained in the file specifications includes a
date associated with the origination or purchase and whether a loan was
originated or purchased by an affiliate. The same requirements apply to
small farm loans. Sec. ____.42(a)-3: Will farm loans need to be segregated
from business loans? A3. Yes. Sec. ____.42(a)-4: Should institutions
collect and report data on all agricultural loans under $500,000 at
origination? A4. Institutions are to report those farm loans that they
capture in the Call Report, Schedule RC-C, Part II and Schedule SB of the
TFR. Small farm loans are defined as those whose original amounts are
$500,000 or less and were reported as either ``Loans to finance
agricultural production and other loans to farmers'' or ``Loans [[Page
36643]] secured by farmland'' in Part I of the Call Report and TFR. Sec.
____.42(a)-5: Should institutions collect and report data about small
business and small farm loans that are refinanced or renewed? A5. An
institution should collect information about small business and small farm
loans that it refinances or renews as loan originations. (A refinancing
generally occurs when the existing loan obligation or note is satisfied
and a new note is written, while a renewal refers to an extension of the
term of a loan. However, for purposes of small business and small farm CRA
data collection and reporting, it is no longer necessary to distinguish
between the two.) When reporting small business and small farm data,
however, an institution may only report one origination (including a
renewal or refinancing treated as an origination) per loan per year,
unless an increase in the loan amount is granted. If an institution
increases the amount of a small business or small farm loan when it
extends the term of the loan, it should always report the amount of the
increase as a small business or small farm loan origination. The
institution should report only the amount of the increase if the original
or remaining amount of the loan has already been reported one time that
year. For example, a financial institution makes a term loan for $25,000;
principal payments have resulted in a present outstanding balance of
$15,000. In the next year, the customer requests an additional $5,000,
which is approved, and a new note is written for $20,000. In this example,
the institution should report both the $5,000 increase and the renewal or
refinancing of the $15,000 as originations for that year. These two
originations may be reported together as a single origination of $20,000.
Sec. ____.42(a)-6: Does a loan to the ``fishing industry'' come under the
definition of a small farm loan? A6. Yes. Instructions for Part I of the
Call Report and Schedule SB of the TFR include loans ``made for the
purpose of financing fisheries and forestries, including loans to
commercial fishermen'' as a component of the definition for ``Loans to
finance agricultural production and other loans to farmers.'' Part II of
Schedule RC-C of the Call Report and Schedule SB of the TFR, which serve
as the basis of the definition for small business and small farm loans in
the revised regulation, capture both ``Loans to finance agricultural
production and other loans to farmers'' and ``Loans secured by farmland.''
Sec. ____.42(a)-7: How should an institution report a home equity line of
credit, part of which is for home improvement purposes, but the
predominant part of which is for small business purposes? A7. The
institution has the option of reporting the portion of the home equity
line that is for home improvement purposes under HMDA. That portion of the
loan would then be considered when examiners evaluate home mortgage
lending. If the line meets the regulatory definition of a ``community
development loan,'' the institution should collect and report information
on the entire line as a community development loan. If the line does not
qualify as a community development loan, the institution has the option of
collecting and maintaining (but not reporting) the entire line of credit
as ``Other Secured Lines/Loans for Purposes of Small Business.'' Sec.
____.42(a)-8: When collecting small business and small farm data for CRA
purposes, may an institution collect and report information about loans to
small businesses and small farms located outside the United States? A8. At
an institution's option, it may collect data about small business and
small farm loans located outside the United States; however, it cannot
report this data because the CRA data collection software will not accept
data concerning loan locations outside the United States. Sec.
____.42(a)-9: Is an institution that has no small farm or small business
loans required to report under CRA? A9. Each institution subject to data
reporting requirements must, at a minimum, submit a transmittal sheet,
definition of its assessment area(s), and a record of its community
development loans. If the institution does not have community development
loans to report, the record should be sent with ``0'' in the community
development loan composite data fields. An institution that has not
purchased or originated any small business or small farm loans during the
reporting period would not submit the composite loan records for small
business or small farm loans. Sec. ____.42(a)-10: How should an
institution collect and report the location of a loan made to a small
business or farm if the borrower provides an address that consists of a
post office box number or a rural route and box number? A10. Prudent
banking practices dictate that an institution know the location of its
customers and loan collateral. Therefore, institutions typically will know
the actual location of their borrowers or loan collateral beyond an
address consisting only of a post office box. Many borrowers have street
addresses in addition to post office box numbers or rural route and box
numbers. Institutions should ask their borrowers to provide the street
address of the main business facility or farm or the location where the
loan proceeds otherwise will be applied. Moreover, in many cases in which
the borrower's address consists only of a rural route number or post
office box, the institution knows the location (i.e., the census tract or
block numbering area) of the borrower or loan collateral. Once the
institution has this information available, it should assign a census
tract or block numbering area to that location (geocode) and report that
information as required under the regulation. For loans originated or
purchased in 1998 or later, if the institution cannot determine the
borrower's street address, and does not know the census tract or block
numbering area, the institution should report the borrower's state,
county, MSA, if applicable, and ``NA,'' for ``not available,'' in lieu of
a census tract or block numbering area code. Sec. ____.42(a)(2) Loan
Amount at Origination Sec. ____.42(a)(2)-1: When an institution purchases
a small business or small farm loan, which amount should the institution
collect and report--the original amount of the loan or the amount at
purchase? A1. When collecting and reporting information on purchased small
business and small farm loans, an institution collects and reports the
amount of the loan at origination, not at the time of purchase. This is
consistent with the Call Report's and TFR's use of the ``original amount
of the loan'' to determine whether a loan should be reported as a ``loan
to a small business'' or a ``loan to a small farm'' and in which loan size
category a loan should be reported. When assessing the volume of small
business and small farm loan purchases for purposes of evaluating lending
test performance under CRA, however, examiners will evaluate an
institution's activity based on the amounts at purchase. Sec.
____.42(a)(2)-2: How should an institution collect data about multiple
loan originations to the same business? A2. If an institution makes
multiple originations to the same business, the loans should be collected
and reported as separate originations rather than combined and reported as
they are on the Call Report or TFR, which reflect loans outstanding,
rather than [[Page 36644]] originations. However, if institutions make
multiple originations to the same business solely to inflate artificially
the number or volume of loans evaluated for CRA lending performance, the
agencies may combine these loans for purposes of evaluation under the CRA.
Sec. ____.42(a)(2)-3: How should an institution collect data pertaining to
credit cards issued to small businesses? A3. If an institution agrees to
issue credit cards to a business' employees, all of the credit card lines
opened on a particular date for that single business should be reported as
one small business loan origination rather than reporting each individual
credit card line, assuming the criteria in the ``small business loan''
definition in the regulation are met. The credit card program's ``amount
at origination'' is the sum of all of the employee/business credit cards'
credit limits opened on a particular date. If subsequently issued credit
cards increase the small business credit line, the added amount is
reported as a new origination. Sec. ____.42(a)(3) The Loan Location Sec.
____.42(a)(3)-1: Which location should an institution record if a small
business loan's proceeds are used in a variety of locations? A1. The
institution should record the loan location by either the location of the
business headquarters or the location where the greatest portion of the
proceeds are applied, as indicated by the borrower. Sec. ____.42(a)(4)
Indicator of Gross Annual Revenue Sec. ____.42(a)(4)-1: When indicating
whether a small business borrower had gross annual revenues of $1 million
or less, upon what revenues should an institution rely? A1. Generally, an
institution should rely on the revenues that it considered in making its
credit decision. For example, in the case of affiliated businesses, such
as a parent corporation and its subsidiary, if the institution considered
the revenues of the entity's parent or a subsidiary corporation of the
parent as well, then the institution would aggregate the revenues of both
corporations to determine whether the revenues are $1 million or less.
Alternatively, if the institution considered the revenues of only the
entity to which the loan is actually extended, the institution should rely
solely upon whether gross annual revenues are above or below $1 million
for that entity. However, if the institution considered and relied on
revenues or income of a cosigner or guarantor that is not an affiliate of
the borrower, such as a sole proprietor, the institution should not adjust
the borrower's revenues for reporting purposes. Sec. ____.42(a)(4)-2: If
an institution that is not exempt from data collection and reporting does
not request or consider revenue information to make the credit decision
regarding a small business or small farm loan, must the institution
collect revenue information in connection with that loan? A2. No. In those
instances, the institution should enter the code indicating ``revenues not
known'' on the individual loan portion of the data collection software or
on an internally developed system. Loans for which the institution did not
collect revenue information may not be included in the loans to businesses
and farms with gross annual revenues of $1 million or less when reporting
this data. Sec. ____.42(a)(4)-3: What gross revenue should an institution
use in determining the gross annual revenue of a start-up business? A3.
The institution should use the actual gross annual revenue to date
(including $0 if the new business has had no revenue to date). Although a
start-up business will provide the institution with pro forma projected
revenue figures, these figures may not accurately reflect actual gross
revenue. Sec. ____.42(a)(4)-4: When collecting and reporting the gross
annual revenue of small business or farm borrowers, do institutions
collect and report the gross annual revenue or the adjusted gross annual
revenue of its borrowers? A4. Institutions collect and report the gross
annual revenue, rather than the adjusted gross annual revenue, of their
small business or farm borrowers. The purpose of this data collection is
to enable examiners and the public to judge whether the institution is
lending to small businesses and farms or whether it is only making small
loans to larger businesses and farms. The regulation does not require
institutions to request or consider revenue information when making a
loan; however, if institutions do gather this information from their
borrowers, the agencies expect them to collect and report the borrowers'
gross annual revenue for purposes of CRA. The CRA regulations similarly do
not require institutions to verify revenue amounts; thus, institutions may
rely on the gross annual revenue amount provided by borrowers in the
ordinary course of business. If an institution does not collect gross
annual revenue information for its small business and small farm
borrowers, the institution would not indicate on the CRA data collection
software that the gross annual revenues of the borrower are $1 million or
less. (See Sec. ____.42(a)(4)-2.) Sec. ____.42(b) Loan Information
Required To Be Reported Sec. ____.42(b)(1) Small Business and Small Farm
Loan Data Sec. ____.42(b)(1)-1: For small business and small farm loan
information that is collected and maintained, what data should be
reported? A1. Each institution that is not exempt from data collection and
reporting is required to report in machine-readable form annually by March
1 the following information, aggregated for each census tract or block
numbering area in which the institution originated or purchased at least
one small business or small farm loan during the prior year:
The number and amount of loans originated or purchased with
original amounts of $100,000 or less;
The number and amount of loans originated or purchased with
original amounts of more than $100,000 but less than or equal to $250,000;
The number and amount of loans originated or purchased with
original amounts of more than $250,000 but not more than $1 million, as to
small business loans, or $500,000, as to small farm loans; and To the
extent that information is available, the number and amount of loans to
businesses and farms with gross annual revenues of $1 million or less
(using the revenues the institution considered in making its credit
decision). Sec. ____.42(b)(2) Community Development Loan Data Sec.
____.42(b)(2)-1: What information about community development loans must
institutions report? A1. Institutions subject to data reporting
requirements must report the aggregate number and amount of community
development loans originated and purchased during the prior calendar year.
Sec. ____.42(b)(2)-2: If a loan meets the definition of a home mortgage,
small business, or small farm loan AND qualifies as a community
development loan, where should it be reported? Can FHA, VA and SBA loans
be reported as community development loans? A2. Except for multifamily
affordable housing loans, which may be reported by retail institutions
both under HMDA as home mortgage loans and as community development loans,
in order to avoid double counting, retail institutions must report loans
that meet the definitions of home mortgage, small [[Page 36645]] business,
or small farm loans only in those respective categories even if they also
meet the definition of community development loans. As a practical matter,
this is not a disadvantage for retail institutions because any affordable
housing mortgage, small business, small farm or consumer loan that would
otherwise meet the definition of a community development loan will be
considered elsewhere in the lending test. Any of these types of loans that
occur outside the institution's assessment area can receive consideration
under the borrower characteristic criteria of the lending test. See Sec.
____.22(b)(2) & (3)-4. Limited purpose and wholesale institutions also
must report loans that meet the definitions of home mortgage, small
business, or small farm loans in those respective categories; however,
they must also report any loans from those categories that meet the
regulatory definition of ``community development loans'' as community
development loans. There is no double counting because wholesale and
limited purpose institutions are not subject to the lending test and,
therefore, are not evaluated on their level and distribution of home
mortgage, small business, small farm and consumer loans. Sec.
____.42(b)(2)-3: When the primary purpose of a loan is to finance an
affordable housing project for low-or moderate-income individuals, but,
for example, only 40 percent of the units in question will actually be
occupied by individuals or families with low or moderate incomes, should
the entire loan amount be reported as a community development loan? A3.
Yes. As long as the primary purpose of the loan is a community development
purpose, the full amount of the institution's loan should be included in
its reporting of aggregate amounts of community development lending.
However, as noted in Sec. ____.22(b)(4)-1, examiners may make qualitative
distinctions among community development loans on the basis of the extent
to which the loan advances the community development purpose. Sec.
____.42(b)(3) Home Mortgage Loans Sec. ____.42(b)(3)-1: Must institutions
that are not required to collect home mortgage loan data by the HMDA
collect home mortgage loan data for purposes of the CRA? A1. No. If an
institution is not required to collect home mortgage loan data by the
HMDA, the institution need not collect home mortgage loan data under the
CRA. Examiners will sample these loans to evaluate the institution's home
mortgage lending. If an institution wants to ensure that examiners
consider all of its home mortgage loans, the institution may collect and
maintain data on these loans. Sec. ____.42(c) Optional Data Collection and
Maintenance Sec. ____.42(c)(1) Consumer Loans Sec. ____.42(c)(1)-1: What
are the data requirements regarding consumer loans? A1. There are no data
reporting requirements for consumer loans. Institutions may, however, opt
to collect and maintain data on consumer loans. If an institution chooses
to collect information on consumer loans, it may collect data for one or
more of the following categories of consumer loans: motor vehicle, credit
card, home equity, other secured, and other unsecured. If an institution
collects data for loans in a certain category, it must collect data for
all loans originated or purchased within that category. The institution
must maintain these data separately for each category for which it chooses
to collect data. The data collected and maintained should include for each
loan:
A unique number or alpha-numeric symbol that can be used to
identify the relevant loan file;
The loan amount at origination or purchase;
The loan location; and
The gross annual income of the borrower that the institution
considered in making its credit decision. Generally, guidance given with
respect to data collection of small business and small farm loans,
including, for example, guidance regarding collecting loan location data,
and whether to collect data in connection with refinanced or renewed
loans, will also apply to consumer loans. Sec. ____.42(c)(1)(iv) Income of
Borrower Sec. ____.42(c)(1)(iv)-1: If an institution does not consider
income when making an underwriting decision in connection with a consumer
loan, must it collect income information? A1. No. Further, if the
institution routinely collects, but does not verify, a borrower's income
when making a credit decision, it need not verify the income for purposes
of data maintenance. Sec. ____.42(c)(1)(iv)-2: May an institution list
``0'' in the income field on consumer loans made to employees when
collecting data for CRA purposes as the institution would be permitted to
do under HMDA? A2. Yes. Sec. ____.42(c)(1)(iv)-3: When collecting the
gross annual income of consumer borrowers, do institutions collect the
gross annual income or the adjusted gross annual income of the borrowers?
A3. Institutions collect the gross annual income, rather than the adjusted
gross annual income, of consumer borrowers. The purpose of income data
collection in connection with consumer loans is to enable examiners to
determine the distribution, particularly in the institution's assessment
area(s), of the institution's consumer loans, based on borrower
characteristics, including the number and amount of consumer loans to
low-, moderate-, middle-, and upper-income borrowers, as determined on the
basis of gross annual income. The regulation does not require institutions
to request or consider income information when making a loan; however, if
institutions do gather this information from their borrowers, the agencies
expect them to collect the borrowers' gross annual income for purposes of
CRA. The CRA regulations similarly do not require institutions to verify
income amounts; thus, institutions may rely on the gross annual income
amount provided by borrowers in the ordinary course of business. Secs.
____.42(c)(1)(iv)-4: Whose income does an institution collect when a
consumer loan is made to more than one borrower? A4. An institution that
chooses to collect and maintain information on consumer loans collects the
gross annual income of all primary obligors for consumer loans, to the
extent that the institution considered the income of the obligors when
making the decision to extend credit. Primary obligors include
co-applicants and co-borrowers, including co-signers. An institution does
not, however, collect the income of guarantors on consumer loans, because
guarantors are only secondarily liable for the debt. Sec. ____.42(c)(2)
Other Loan Data Sec. ____.42(c)(2)-1: Schedule RC-C, Part II of the Call
Report does not allow banks to report loans for commercial and industrial
purposes that are secured by residential real estate, unless the security
interest in the nonfarm residential real estate is taken only as an
abundance of caution. (See Secs. ____.12(u) & 563e.12(t)-3.) Loans
extended to small businesses with gross annual revenues of $1 million or
less may, however, be secured by residential real estate. May a bank
collect this information to supplement its small business lending data at
the time of examination? [[Page 36646]] A1. Yes. If these loans promote
community development, as defined in the regulation, the bank should
collect and report information about the loans as community development
loans. Otherwise, at the bank's option, it may collect and maintain data
concerning loans, purchases, and lines of credit extended to small
businesses and secured by nonfarm residential real estate for
consideration in the CRA evaluation of its small business lending. A bank
may collect this information as ``Other Secured Lines/Loans for Purposes
of Small Business'' in the individual loan data. This information should
be maintained at the bank but should not be submitted for central
reporting purposes. Sec. ____.42(c)(2)-2: Must an institution collect data
on loan commitments and letters of credit? A2. No. Institutions are not
required to collect data on loan commitments and letters of credit.
Institutions may, however, provide for examiner consideration information
on letters of credit and commitments. Sec. ____.42(c)(2)-3: Are commercial
and consumer leases considered loans for purposes of CRA data collection?
A3. Commercial and consumer leases are not considered small business or
small farm loans or consumer loans for purposes of the data collection
requirements in 12 CFR ____.42(a) & (c)(1). However, if an institution
wishes to collect and maintain data about leases, the institution may
provide this data to examiners as ``other loan data'' under 12 CFR
____.42(c)(2) for consideration under the lending test. Sec. ____.42(d)
Data on Affiliate Lending Sec. ____.42(d)-1: If an institution elects to
have an affiliate's home mortgage lending considered in its CRA
evaluation, what data must the institution make available to examiners?
A1. If the affiliate is a HMDA reporter, the institution must identify
those loans reported by its affiliate under 12 CFR part 203 (Regulation C,
implementing HMDA). At its option, the institution may either provide
examiners with the affiliate's entire HMDA Disclosure Statement or just
those portions covering the loans in its assessment area(s) that it is
electing to consider. If the affiliate is not required by HMDA to report
home mortgage loans, the institution must provide sufficient data
concerning the affiliate's home mortgage loans for the examiners to apply
the performance tests. Sec. ____.43--Content and Availability of Public
File Sec. ____.43(a) Information Available to the Public Sec.
____.43(a)(1) Public Comments Sec. ____.43(a)(1)-1: What happens to
comments received by the agencies? A1. Comments received by a Federal
financial supervisory agency will be on file at the agency for use by
examiners. Those comments are also available to the public unless they are
exempt from disclosure under the Freedom of Information Act. Sec.
____.43(a)(1)-2: Is an institution required to respond to public comments?
A2. No. All institutions should review comments and complaints carefully
to determine whether any response or other action is warranted. A small
institution subject to the small institution performance standards is
specifically evaluated on its record of taking action, if warranted, in
response to written complaints about its performance in helping to meet
the credit needs in its assessment area(s) (Sec. ____.26(a)(5)). For all
institutions, responding to comments may help to foster a dialogue with
members of the community or to present relevant information to an
institution's Federal financial supervisory agency. If an institution
responds in writing to a letter in the public file, the response must also
be placed in that file, unless the response reflects adversely on any
person or placing it in the public file violates a law. Sec.
____.43(a)(1)-3: May an institution include a response to its CRA
Performance Evaluation in its public file? A3. Yes. However, the format
and content of the evaluation, as transmitted by the supervisory agency,
may not be altered or abridged in any manner. In addition, an institution
that received a less than satisfactory rating during it most recent
examination must include in its public file a description of its current
efforts to improve its performance in helping to meet the credit needs of
its entire community. The institution must update the description on a
quarterly basis. Sec. ____.43(b) Additional Information Available to the
Public Sec. ____.43(b)(1) Institutions Other Than Small Institutions Sec.
____.43(b)(1)-1: Must an institution that elects to have affiliate lending
considered include data on this lending in its public file? A1. Yes. The
lending data to be contained in an institution's public file covers the
lending of the institution's affiliates, as well as of the institution
itself, considered in the assessment of the institution's CRA performance.
An institution that has elected to have mortgage loans of an affiliate
considered must include either the affiliate's HMDA Disclosure Statements
for the two prior years or the parts of the Disclosure Statements that
relate to the institution's assessment area(s), at the institution's
option. Sec. ____.43(b)(1)-2: May an institution retain the compact disc
provided by the Federal Financial Institution Examination Council that
contains its CRA Disclosure Statement in its public file, rather than
printing a hard copy of the CRA Disclosure Statement for retention in its
public file? A2. Yes, if the institution can readily print out from the
compact disc (or a duplicate of the compact disc) its CRA Disclosure
Statement for a consumer when the public file is requested. If the request
is at a branch other than the main office or the one designated branch in
each state that holds the complete public file, the bank should provide
the CRA Disclosure Statement in a paper copy, or in another format
acceptable to the requestor, within 5 calendar days, as required by Sec.
____.43(c)(2)(ii). Sec. ____.43(c) Location of Public Information Sec.
____.43(c)-1: What is an institution's ``main office''? A1. An
institution's main office is the main, home, or principal office as
designated in its charter. Sec. ____.43(c)-2: May an institution maintain
a copy of its public file on an intranet or the Internet? A2. Yes, an
institution may keep all or part of its public file on an intranet or the
Internet, provided that the institution maintains all of the information,
either in paper or electronic form, that is required in Sec. ____.43 of
the regulations. An institution that opts to keep part or all of its
public file on an intranet or the Internet must follow the rules in Secs.
____.43(c)(1) and (2) as to what information is required to be kept at a
main office and at a branch. The institution also must ensure that the
information required to be maintained at a main office and branch, if kept
electronically, can be readily downloaded and printed for any member of
the public who requests a hard copy of the information. [[Page 36647]]
Sec. ____.44--Public Notice by Institutions Sec. ____.44-1: Are there any
placement or size requirements for an institution's public notice? A1. The
notice must be placed in the institution's public lobby, but the size and
placement may vary. The notice should be placed in a location and be of a
sufficient size that customers can easily see and read it. Sec.
____.45--Publication of Planned Examination Schedule Sec. ____.45-1: Where
will the agencies publish the planned examination schedule for the
upcoming calendar quarter? A1. The agencies may use the Federal Register,
a press release, the Internet, or other existing agency publications for
disseminating the list of the institutions scheduled to for CRA
examinations during the upcoming calendar quarter. Interested parties
should contact the appropriate Federal financial supervisory agency for
information on how the agency is publishing the planned examination
schedule. Sec. ____.45-2: Is inclusion on the list of institutions that
are scheduled to undergo CRA examinations in the next calendar quarter
determinative of whether an institution will be examined in that quarter?
A2. No. The agencies attempt to determine as accurately as possible which
institutions will be examined during the upcoming calendar quarter.
However, whether an institution's name appears on the published list does
not conclusively determine whether the institution will be examined during
that quarter. The agencies may need to defer a planned examination or
conduct an unforeseen examination because of scheduling difficulties or
other circumstances. Appendix A to Part ____--Ratings Appendix A to Part
____--1: Must an institution's performance fit each aspect of a particular
rating profile in order to receive that rating? A1. No. Exceptionally
strong performance in some aspects of a particular rating profile may
compensate for weak performance in others. For example, a retail
institution that uses non-branch delivery systems to obtain deposits and
to deliver loans may have almost all of its loans outside the
institution's assessment area. Assume that an examiner, after
consideration of performance context and other applicable regulatory
criteria, concludes that the institution has weak performance under the
lending test criteria applicable to lending activity, geographic
distribution, and borrower characteristics within the assessment area. The
institution may compensate for such weak performance by exceptionally
strong performance in community development lending in its assessment area
or a broader statewide or regional area that includes its assessment area.
Appendix B to Part ____--CRA Notice Appendix B to Part____--1: What agency
information should be added to the CRA notice form? A1. The following
information should be added to the form: OCC-supervised institutions only:
The address of the deputy comptroller of the district in which the
institution is located should be inserted in the appropriate blank. These
addresses can be found at 12 CFR 4.5(a). OCC-, FDIC-, and Board-supervised
institutions: ``Officer in Charge of Supervision'' is the title of the
responsible official at the appropriate Federal Reserve Bank. Appendix
A--Regional Offices of the Bureau of the Census To obtain median family
income levels of census tracts, MSAs, block numbering areas and statewide
nonmetropolitan areas, contact the appropriate regional office of the
Bureau of the Census as indicated below. The list shows the states covered
by each regional office. Atlanta (404) 730-3833 Alabama, Florida, Georgia
Boston (617) 424-0510 Connecticut, Maine, Massachusetts, New Hampshire,
Rhode Island, Vermont Charlotte (704) 344-6144 Kentucky, North Carolina,
South Carolina, Tennessee, Virginia Chicago (312) 353-9747 Illinois,
Indiana, Wisconsin Dallas (214) 655-3050 Louisiana, Mississippi, Texas
Denver (303) 969-7750 Arizona, Colorado, Montana, Nebraska, Nevada, New
Mexico, North Dakota, South Dakota, Utah, Wyoming Detroit (313) 259-1875
Michigan, Ohio, West Virginia Kansas City (913) 551-6711 Arkansas, Iowa,
Kansas, Minnesota, Missouri, Oklahoma Los Angeles (818) 904-6339 Southern
California, Hawaii New York (212) 264-4730 New York, New Jersey--selected
counties Philadelphia (215) 656-7578 Delaware, District of Columbia,
Maryland, New Jersey--selected counties, Pennsylvania Seattle (206)
553-5835 Alaska, Northern California, Idaho, Oregon, Washington
Index |
Keyword |
Q & A |
Affiliate
lending |
Sec.
____.22(b)(1)-1
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(c)(1)-1
Sec. ____.22(c)(2)(i)-1
Sec. ____.22(c)(2)(ii)-1
Sec. ____.41(a)-2
Sec. ____.42(d)-1
Sec. ____.43(b)(1)-1 |
Affiliates |
Sec.
____.12(a)-1
Sec. ____.27(c)-2 |
Affordable
housing |
Secs.
____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h)(1) & 563e.12(g)(1)-1
Sec. ____.42(b)(2)-3 |
Alternative
delivery systems |
Sec.
____.24(d)-1
Sec. ____.24(d)(3)-1
Sec. ____.24(d)(3)-2 |
Applications,
corporate |
Sec.
____.29(a)-1
Sec. ____.29(a)-2
Sec. ____.29(b)-1 |
Assessment
area |
Sec.
____.22(b)(2) & (3)-2
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(b)(2) & (3)-4
Sec. ____.26(a)(2)-1
Sec. ____.41(a)-1
Sec. ____.41(a)-2
Sec. ____.41(a)-3
Sec. ____.41(c)(1)-1
Sec. ____.41(c)(1)-2
Sec. ____.41(d)-1
Sec. ____.41(e)(3)-1
Sec. ____.41(e)(4)-1
Sec. ____.41(e)(4)-2 |
Assessment
area, benefit to |
Secs.
____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-6
Sec. ____.25(e)-1
Sec. ____.26(b)-2 |
Assets |
Secs.
____.12(t) & 563e.12(s)-1
Secs. ____.12(t) & 563e.12(s)-2 |
ATMs |
Secs.
____.12(f) & 563e.12(e)-1
Sec. ____.24(d)-1
Sec. ____.24(d)(3)-1
Sec. ____.41(e)(3)-1 |
Borrower
characteristics |
Sec.
____.22(b)(2) & (3)-1
Sec. ____.22(b)(2) & (3)-5
Sec. ____.26(a)(3) & (4)-1
Sec. ____.42(c)(1)(iv)-3 |
Branch |
Secs.
____.12(f) & 563e.12(e)-1
Sec. ____.28(a)-1
Sec. ____.41(e)(3)-1 |
Brokerage |
Secs.
____.12(m) & 563e.12(l)-2 |
CEBA credit
card banks |
Sec.
____.25(a)-1 |
Charitable
contributions or activities |
Secs.
____.12(j) & 563e.12(i)-2
Secs. ____.12(s) & 563e.12(r)-4
Secs. ____.12(s) & 563e.12(r)-5 |
Child care
services |
Secs.
____.12(h) & 563e.12(g)-1 |
Commercial
loans |
Sec.
____.12(u) & 563e.12(t)-2
Sec. ____.42(a)-1
Sec. ____.42(c)(2)-1 |
Commitments |
Sec.
____.22(a)(2)-1
Sec. ____.26(a)-4
Sec. ____.29(a)-2
Sec. ____.42(c)(2)-2 |
Community
contact interviews |
Sec.
____.21(b)(2)-2 |
Community
development |
Secs.
____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h) & 563e.12(g)(3)-1
Sec. ____.42(b)(2)-3 |
Community
development activities |
Sec.
____.21(a)-1 |
Community
development loan |
Secs.
____.12(i) & 563e.12(h)-1
Secs. ____.12(i) & 563e.12(h)-2
Secs. ____.12(i) & 563e.12(h)-3
Secs. ____.12(i) & 563e.12(h)-4
Secs. ____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-6
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(s) & 563e.12(r)-6
Secs. ____.12(u) & 563e.12(t)-1
Sec. ____.22(b)(4)-1
Sec. ____.22(d)-3
Sec. ____.23(b)-1
Sec. ____.25(d)-1
Sec. ____.26(a)-1
Sec. ____.26(a)-3
Sec. ____.26(b)-2
Sec. ____.42(b)(2)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(2)-3 |
Community
development service |
Secs.
____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(j) & 563e.12(i)-1
Secs. ____.12(j) & 563e.12(i)-2
Secs. ____.12(j) & 563e.12(i)-3
Secs. ____.12(s) & 563e.12(r)-7
Sec. ____.23(b)-1
Sec. ____.26(b)-2
Sec. ____.42(c)(2)-1 |
Community
development test |
Sec.
____.25(f)-1 |
Community
services |
Secs.
____.12(h) & 563e.12(g)-2
Sec. ____.25(d)-1 |
Complexity |
Sec.
____.22(b)(5)-1
Sec. ____.23(e)-2
Sec. ____.28-1 |
Consortia |
Sec.
____.22(d)-2
Sec. ____.26(a)-3 |
Consumer loan |
Secs.
____.12(k) & 563e.12(j)-1
Secs. ____.12(k) & 563e.12(j)-2
Secs. ____.12(k) & 563e.12(j)-3
Sec. ____.22(a)(1)-2
Sec. ____.42(c)(1)-1
Sec. ____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Secs. ____.42(c)(1)(iv)-4 |
CRA disclosure
statement |
Sec.
____.43(b)(1)-2 |
Credit cards |
Secs.
____.12(i) & 563e.12(h)-3
Secs. ____.12(u) & 563e.12(t)-4
Sec. ____.42(a)(2)-3 |
Data
collection |
Sec. ____.42-1
Sec. ____.42-2
Sec. ____.42-5
Sec. ____.42-7
Sec. ____.42(a)-1
Sec. ____.42(a)-2
Sec. ____.42(a)-4
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)-10
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(2)-2
Sec. ____.42(a)(2)-3
Sec. ____.42(a)(3)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(3)-1
Sec. ____.42(c)(1)-1
Sec. ____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Sec. ____.42(c)(1)(iv)-3
Sec. ____.42(c)(2)-1
Sec. ____.42(c)(2)-2 |
Data reporting |
Sec. ____.42-1
Sec. ____.42-3
Sec. ____.42-4
Sec. ____.42(a)-1
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)-9
Sec. ____.42(a)-10
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(2)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(2)-3 |
Debit cards |
Sec.
____.42(d)(3)-2 |
Economic
development |
Secs.
____.12(h) & 563e.12(g)-2 |
Educational
services |
Secs.
____.12(h) & 563e.12(g)-1 |
Employees'
charitable activities |
Secs.
____.12(j) & 563e.12(i)-2 |
Employees'
income |
Sec.
____.42(c)(1)(iv)-2 |
Examination
schedule |
Sec. ____.45-1
Sec. ____.45-2 |
Federal branch |
Secs.
____.12(t) & 563e.12(s)-2 |
Federal Home
Loan Bank |
Secs.
____.12(s) & 563e.12(r)-3 |
Federal
Reserve Bank membership reserves. |
Secs.
____.12(s) & 563e.12(r)-3 |
Financial
services, provision of |
Secs.
____.12(j) & 563e.12(i)-1 |
Fisheries |
Sec.
____.42(a)-6 |
Flexibility |
Sec.
____.22(b)(5)-1 |
Forestries |
Sec.
____.42(a)-6 |
Geographic
distribution |
Sec.
____.22(b)(2) & (3)-1
Sec. ____.22(b)(2) & (3)-2
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(b)(2) & (3)-4
Sec. ____.26(a)(3) & (4)-1 |
Geography |
Sec.
____.41(d)-1 |
Guaranteed
loans |
Sec.
____.22(a)(2)-4 |
Guarantor |
Secs.
____.42(c)(1)(iv)-4 |
Health
services |
Secs.
____.12(h) & 563e.12(g)-1 |
High cost area |
Secs.
____.12(h) & 563e.12(g)-3 |
HMDA reporting |
Secs.
____.12(i) & 563e.12(h)-2
Sec. ____.42(b)(3)-1 |
Home equity
line of credit |
Secs.
____.12(k) & 563e.12(j)-2
Sec. ____.42(a)-7 |
Home equity
loan |
Secs.
____.12(k) & 563e.12(j)-1 |
Home mortgage
lending |
Secs.
____.22(a)(1)-1
Sec. ____.42(d)-1 |
Home mortgage
loan |
Secs.
____.12(m) & 563e.12(1)-1
Secs. ____.12(m) & 563e.12(1)-2
Sec. ____.23(b)-2
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(3)-1 |
Illegal credit
practices |
Sec.
____.28(c)-1 |
Income |
Sec.
____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Sec. ____.42(c)(1)(iv)-3 |
Income level |
Secs.
____.12(n) & 563e.12(m)-1 |
Indirect
investments |
Sec.
____.23(a)-1 |
Individual
development accounts (IDAs) |
Sec.
____.24(d)-2 |
Innovativeness |
Sec.
____.22(b)(5)-1
Sec. ____.23(e)-2
Sec. ____.28-1 |
Institutional
capacity and constraints |
Sec.
____.21(b)(4)-1 |
Internet |
Sec.
____.43(c)-2 |
Intranet |
Sec.
____.43(c)-2 |
Leases |
Sec.
____.42(c)(2)-3 |
Lending
activity |
Sec.
____.22(b)(1)-1 |
Lending
distribution |
Sec.
____.26(a)(3) & (4)-1 |
Lending within
assessment area |
Sec.
____.22(b)(2) & (3)-3
Sec. ____.26(a)(2)-1
Sec. ____.26(a)(3) & (4)-1 |
Letters of
credit |
Sec.
____.22(a)(2)-1
Sec. ____.26(a)-4
Sec. ____.42(c)(2)-2 |
Limited
purpose institution |
Secs.
____.12(o) & 563e.12(n)-1
Secs. ____.12(o) & 563e.12(n)-2
Secs. ____.12(o) & 563e.12(n)-3
Sec. ____.42-7 |
Lines of
credit |
Sec. ____.42-3
Sec. ____.42-4 |
Loan amount |
Sec.
____.42(a)(2)-1 |
Loan
application activity |
Sec.
____.22(a)(2)-2 |
Loan location |
Sec.
____.42(a)-10
Sec. ____.42(a)(3)-1 |
Loan
originations, multiple |
Sec.
____.42(a)(2)-2 |
Loan
production office (LPO) |
Secs.
____.12(f) & 563e.12(e)-2 |
Loans,
outside-assessment area |
Sec.
____.22(b)(2) & (3)-4 |
Loan-to-deposit
ratio |
Sec.
____.26(a)(1)-1
Sec. ____.26(a)(1)-2
Sec. ____.26(a)(1)-3 |
Main office |
Sec.
____.43(c)-1 |
Measurable
goals |
Sec.
____.27(f)(1)-1 |
MECAs |
Sec.
____.22(a)(2)-3 |
Merging
institutions |
Sec. ____.42-5 |
Mortgage-backed
securities |
Secs.
____.12(s) & 563e.12(r)-2
Sec. ____.23(b)-2 |
Multi-purpose
loan |
Secs.
____.12(k) & 563e.12(j)-3
Sec. ____.42(a)-7 |
Municipal
bonds |
Secs.
____.12(s) & 563e.12(r)-2 |
National fund |
Sec.
____.25(e)-1 |
New Markets
Venture Capital Company |
Secs.
____.12(h)(3) & 563e.12(g)(3)-1 |
Niche
institution |
Secs.
____.12(o) & 563e.12(n)-3 |
Nonprofit
organization |
Secs.
____.12(u) & 563e.12(t)-1 |
Past
performance |
Sec.
____.21(b)(5)-1 |
Performance
context |
Sec.
____.21(b)-1
Sec. ____.21(b)(2)-1
Sec. ____.21(b)(2)-2
Sec. ____.21(b)(4)-1
Sec. ____.21(b)(5)-1
Sec. ____.21(b)(5)-2 |
Performance
criteria |
Sec.
____.22(b)-1
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.26(a)-1
Sec. ____.26(a)-2
Sec. ____.28-2 |
Performance
evaluation |
Sec.
____.43(a)(1)-3 |
Performance
rating |
Sec.
____.26(a)-2
Sec. ____.26(a)-5
Sec. ____.26(b)-1
Sec. ____.28-1
Sec. ____.28-2
Sec. ____.28(a)-1
Sec. ____.28(a)-2
Sec. ____.28(a)-3
Appendix A to Part ____-1 |
Political
subdivision |
Sec.
____.41(c)(1)-1
Sec. ____.41(c)(1)-2
Sec. ____.41(d)-1 |
Primary
purpose |
Secs.
____.12(i) & 563e.12(h)-7
Sec. ____.42(b)(2)-3 |
Public comment |
Sec.
____.27(g)(2)-1
Sec. ____.29(b)-1
Sec. ____.29(b)-2
Sec. ____.43(a)(1)-1
Sec. ____.43(a)(1)-2 |
Public file |
Sec.
____.43(a)(1)-2
Sec. ____.43(a)(1)-3
Sec. ____.43(b)(1)-1
Sec. ____.43(b)(1)-2
Sec. ____.43(c)-2 |
Public notice |
Sec. ____.44-1
Appendix B to Part ____-1 |
Qualified
investment |
Secs.
____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(s) & 563e.12(r)-1
Secs. ____.12(s) & 563e.12(r)-2
Secs. ____.12(s) & 563e.12(r)-3
Secs. ____.12(s) & 563e.12(r)-4
Secs. ____.12(s) & 563e.12(r)-5
Secs. ____.12(s) & 563e.12(r)-6
Secs. ____.12(s) & 563e.12(r)-7
Sec. ____.23(b)-1
Sec. ____.23(b)-2
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.25(d)-1
Sec. ____.26(a)-1
Sec. ____.26(a)-5
Sec. ____.26(b)-2 |
Qualitative
factors |
Sec.
____.21(a)-1
Sec. ____.22(b)(4)-1
Sec. ____.22(b)(5)-1
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.28-1
Sec. ____.28-2 |
Ratings matrix |
Sec.
____.28(a)-3 |
Refinancings |
Sec.
____.42(a)-5 |
Regional area |
Secs.
____.12(i) & 563e.12(h)-6 |
Remote service
facility (RSF) |
Secs.
____.12(f) & 563e.12(e)-1 |
Renewals |
Sec. ____.42-4
Sec. ____.42(a)-5 |
Responsiveness |
Sec.
____.22(a)-1 Sec. ____.23(e)-2 |
Retail banking
services |
Sec.
____.24(d)-1 |
Revenue |
Sec.
____.42(a)(4)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-3
Sec. ____.42(a)(4)-4 |
Revitalize or
stabilize |
Secs.
____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h)(4) & 563e.12(g)(4)-1
Secs. ____.12(i) & 563e.12(h)-4 |
SBIC or SBDC |
Sec.
____.12(h)(3)____563e.12(g)(3)-1 |
Similarly
situated lenders |
Sec.
____.21(b)(5)-2 |
Small business
loan |
Secs.
____.12(u) & 563e.12(t)-1
Secs. ____.12(u) & 563e.12(t)-2
Secs. ____.12(u) & 563e.12(t)-3
Secs. ____.12(u) & 563e.12(t)-4
Sec. ____.42(a)-2
Sec. ____.42(a)-3
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(2)-3
Sec. ____.42(a)(3)-1
Sec. ____.42(a)(4)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(c)(2)-1 |
Small farm
loan |
Sec.
____.42(a)-3
Sec. ____.42(a)-4
Sec. ____.42(a)-5
Sec. ____.42(a)-6
Sec. ____.42(a)-8
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(a)(2)-2 |
Small
institution |
Secs.
____.12(t) & 563e.12(s)-1
Secs. ____.12(t) & 563e.12(s)-2
Sec. ____.42-6
Sec. ____.42-7 |
Small
institution performance standards |
Sec.
____.26(a)-1
Sec. ____.26(a)-2
Sec. ____.26(a)-3
Sec. ____.26(a)-4
Sec. ____.26(a)-5
Sec. ____.26(a)(3) & (4)-1
Sec. ____.26(b)-1
Sec. ____.26(b)-2 |
Social
services |
Secs.
____.12(h) & 563e.12(g)-1 |
Software for
data collection and reporting. |
Sec. ____.42-2
Sec. ____.42-6
Sec. ____.42(c)(2)-1 |
Special
purpose insitution |
Secs.
____.11(c)(3) & 563e.11(c)(2)-1
Secs. ____.11(c)(3) & 563e.11(c)(2)-2 |
State branch |
Secs.
____.12(t) & 563e.12(s)-2 |
Strategic plan |
Sec.
____.27(c)-1
Sec. ____.27(c)-2
Sec. ____.27(f)(1)-1
Sec. ____.27(g)(2)-1 |
Subsidiary |
Sec.
____.12(a)-1 |
Third party
investments |
Sec.
____.22(d)-1 Sec. ____.22(d)-2
Sec. ____.22(d)-3
Sec. ____.25(d)-1
Sec. ____.26(a)-3 |
Wholesale
institution |
Secs.
____.12(o) & 563e.12(n)-2
Secs. ____.12(w) & 563e.12(v)-1
Sec. ____.42-7 |
----------------------------------------------------------------------------------------------------------------
End of text of the Interagency Questions and Answers Dated: July 5, 2001.
Joanne Giese, Assistant Executive Secretary, Federal Financial
Institutions Examination Council. Billing Codes OCC: 4810-33-P (25%) FRB:
6210-01-P (25%) FDIC: 6714-01-P (25%) OTS: 6720-01-P (25%) [FR Doc.
01-17246 Filed 7-11-01; 8:45 am] BILLING CODES 4810-33-P; 6210-01-P;
6714-01-P; 6720-01-P |