Intrductin t the Cmmunity Reinvestment Act Husing Actin Illinis 2015 Husing Matters! Cnference Nvember 5, 2015
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
QUESTIONS 17
Questins r Cmments Cntact Infrmatin: Paul Ginger, District Cmmunity Affairs Officer Office f the Cmptrller f the Currency paul.ginger@cc.treas.gv 312-360-8876
Regulatry Resurces n CRA l Federal Reserve Bank f Atlanta, Cmmunity Reinvestment: Des Yur Bank Measure Up? an excellent nline intrductin t CRA https://www.frbatlanta.rg/banking/publicatins/cmmunityreinvestment-act.aspx l Federal Financial Institutins Examinatin Cuncil Extensive infrmatin n all aspects f CRA http://www.ffiec.gv/cra/default.htm l Cmptrller f the Currency Cmmunity Reinvestment Act webpage: http://www.cc.treas.gv/tpics/cmpliance-bsa/cra/indexcra.html 19
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 http://www2.fdic.gv/idasp/ l FDIC Summary f Depsits http://www2.fdic.gv/sd/ l Cmptrller f the Currency Cmmunity Affairs (see ur publicatins n a wide variety f cmmunity develpment tpics): http://www.cc.treas.gv/tpics/cmmunity-affairs/indexcmmunity-affairs.html 20
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 http://www.ruralhme.rg/strage/dcuments/craguide.pdf l The Finance Prject, "Using the Cmmunity Reinvestment Act t Help Finance Initiatives fr Children, Families and Cmmunities (n lnger nline) 21