Introduction to the Community Reinvestment Act Housing Action Illinois 2015 Housing Matters! Conference

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Valerie Bishop
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1 Intrductin t the Cmmunity Reinvestment Act Husing Actin Illinis 2015 Husing Matters! Cnference Nvember 5, 2015

2 Develping Bank Partnerships Bank Mtives fr Partnerships: l Welfare f the cmmunity and the bank l Market Share l Incme l Risk Mitigatin l Reputatin l Cmmunity Reinvestment Act 2

3 CRA Basics The Cmmunity Reinvestment Act (CRA) l Federal law passed in 1977 l Encurages banks t meet the credit needs f the cmmunities they re licensed t serve l Including lw- and mderate-incme neighbrhds. l Cnsistent with safety and sundness 3

4 CRA Basics Three Regulatrs CRA applies t financial institutins regulated by: l Federal Depsit Insurance Crpratin l Federal Reserve Banks l Office f the Cmptrller f the Currency 4

5 CRA Basics Duties f Regulatrs CRA directs regulatrs t evaluate hw well every bank helps t meet the credit needs f its cmmunity and t assign ne f these ratings t every bank: Outstanding Satisfactry Needs t Imprve Substantial Nncmpliance 5

6 CRA Basics - Duties f Regulatrs CRA als requires the regulatrs t: l Issue a public reprt cntaining the facts and data underlying each rating l Take a bank s rating int accunt when reviewing certain applicatins frm the bank l Encurage banks t help meet credit needs in their cmmunities 6

7 Types f Banks Under CRA l Large Banks > $1.221 billin* Reprt small business lans annually 5% - 10% f banks l Intermediate Small Banks (ISB) $305 millin - $1.221 billin* 20% - 25% f banks l Small Banks <$305 millin in assets* Abut 70% f federally regulated financial institutins *effective 1/1/2015: threshlds updated annually. 7

8 Large Bank CRA Exam Lending Test Evaluates l # and $ f l l l l Hme mrtgage Small business Small farm lans Made in its cmmunity l Incme level areas where thse lans were made l Incme levels f brrwers l CD lans l Flexible and innvative lending practices 50% f rating Investment Test # and $ f investments with a CD purpse Innvative, cmplex, respnsive and availability therwise 25% f rating Service Test Retail services prvided t peple and areas f different incme levels CD services 25% f rating 8

9 Intermediate Small Bank CRA Exam Lending Test # and $ f Hme mrtgage Small business Small farm lans Made in the bank s cmmunity Incme level f the areas where the lans were made Incme levels f brrwers Cmmunity develpment lans Flexible and innvative lending practices CD Test Lans Investments Services Respnsiveness an imprtant cnsideratin The bank must be rated Satisfactry n bth tests t be Satisfactry verall 9

10 Small Bank CRA Exam l Lending Test = 100% f rating l Five evaluatin criteria: l Lan t depsit rati l In / ut rati l Brrwer distributin l Gegraphic distributin l Respnses t cmplaints 10

11 CRA Basics Key Terms l Lw- and Mderate-Incme < 80% f area median incme l Cmmunity Develpment l l l l Affrdable Husing fr LMI Cmmunity Services fr LMI Ecnmic Develpment - jb creatin fr LMI Revitalize & Stabilize LMI gegraphies Distressed r Underserved gegraphies Neighbrhd Stabilizatin Prgram Activities 11

12 CRA Basics Key Terms l Assessment Area Gegraphic area in which a bank is evaluated fr CRA l Primary Purpse Either mre than 50% LMI beneficiaries Or express, bna fide intent l Perfrmance Cntext Lcal ecnmic cnditins and credit and CD needs and the capacity f a bank t meet thse needs 12

13 Perfrmance Cntext Banks are evaluated fr CRA based n the needs and ecnmic cnditins f their markets and their capacity t meet thse needs their Perfrmance Cntext. 13

14 Cntext What Yu Can D l Help Banks l Maintain awareness f CD needs l Identify pprtunities t becme invlved l Target investments and services t LMI l Help Regulatrs l Identify credit needs l Understand lcal pririties 14

15 Cncentric Circles f Opprtunity l Actual Market Share l Market Share Available with Extra Effrt l Deals Bankable if Enhanced l Universe f Ecnmic Needs 15

16 Steps t Partnerships l Understand CRA l Understand the lcal market l Understand lcal banks l Identify yur surces f influence l Talk with bankers 16

17 QUESTIONS 17

18 Questins r Cmments Cntact Infrmatin: Paul Ginger, District Cmmunity Affairs Officer Office f the Cmptrller f the Currency paul.ginger@cc.treas.gv

19 Regulatry Resurces n CRA l Federal Reserve Bank f Atlanta, Cmmunity Reinvestment: Des Yur Bank Measure Up? an excellent nline intrductin t CRA l Federal Financial Institutins Examinatin Cuncil Extensive infrmatin n all aspects f CRA l Cmptrller f the Currency Cmmunity Reinvestment Act webpage: 19

20 Regulatry Resurces n CRA The fllwing tw FDIC web sites are useful fr researching the banks gathering depsits and therwise ding business in yur area: l FDIC Institutin Directry l FDIC Summary f Depsits l Cmptrller f the Currency Cmmunity Affairs (see ur publicatins n a wide variety f cmmunity develpment tpics): 20

21 Other CRA Resurces Bth f the fllwing publicatins were issued befre the changes t CRA that were made in 2005 and that created the Intermediate Small Bank categry, but bth still cntain useful verall appraches t develping relatinships with banks. l Husing Assistance Cuncil, A Guide t the Cmmunity Reinvestment Act fr Husing in Rural America l The Finance Prject, "Using the Cmmunity Reinvestment Act t Help Finance Initiatives fr Children, Families and Cmmunities (n lnger nline) 21

The Allstate Foundation Domestic Violence Program 2015 Moving Ahead Financial Empowerment Grant

The Allstate Foundation Domestic Violence Program 2015 Moving Ahead Financial Empowerment Grant The Allstate Fundatin Dmestic Vilence Prgram 2015 Mving Ahead Financial Empwerment Grant Due Date: September 1, 2015 Online applicatin: https://www.grantrequest.cm/sid_1010?sa=sna&fid=35296 The Allstate