What is CRA eligible?
The OCC’s CRA Final Rule: What is a Qualifying Activity?
- Determination of Qualifying Activity. Accompanying the Final Rule is the CRA Illustrative List [3] the OCC has determined are Qualifying Activities that will receive positive CRA consideration.
- Retail Loans. ...
- Community Development Loans, Investments and Services. ...
Does the Community Reinvestment Act apply to credit unions?
The Community Reinvestment Act should be expanded to cover credit unions, other nonbank lenders and insurers, according to the National Community Reinvestment Coalition. The Community Reinvestment Act should be expanded to cover credit unions, other nonbank lenders and insurers, according to the National Community Reinvestment Coalition.
What is the CRA Act?
on its Community Reinvestment Act (CRA) performance evaluation for 2018-2020. In its evaluation, the OCC assessed FNB's performance meeting the credit needs of low- and moderate-income (LMI) individuals as well as its deployment of capital and other ...
What is the CRA Act of 1970?
Understanding the Community Reinvestment Act (CRA) The CRA was passed to reverse the urban blight that had become evident in many American cities by the 1970s.
What is the purpose of the CRA notice?
Each office or branch of a bank must post a notice in its lobby that describes the purpose of the Community Reinvestment Act. This notice also explains that the public has a right to review a bank's CRA file and to make written comments about the bank's CRA performance.
Why is CRA important to banks?
CRA is designed to encourage banks to help rebuild and revitalize communities through sound lending and good business judgment that benefits the banks and the communities they serve.
What's the purpose of the Community Reinvestment Act quizlet?
What's The Community Reinvestment Act - CRA's Purpose? The Community Reinvestment Act - CRA requires lenders to meet the needs of their communities by investing in development and rehabilitation efforts, especially those that enable low- and moderate-income individuals and families to afford a home.
What was the purpose of President Carter's Community Reinvestment Act of 1977?
In 1977, President Jimmy Carter signed the Community Reinvestment Act (CRA) into law. Congress enacted the CRA to combat redlining and encourage banks to increase their lending in nearby low- and moderate-income (LMI) communities.
Who does the Community Reinvestment Act most benefit?
The Community Reinvestment Act (CRA), enacted in 1977, requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods.
How did the Community Reinvestment Act affect the US economy?
The Community Reinvestment Act encourages bank lending to low- and moderate-income neighborhoods. Enacted in 1977, it sought to eliminate bank “redlining” of poor neighborhoods. That had contributed to the growth of ghettos in the 1970s. In redlining, neighborhoods were designated as not good for investment.
What information is found in the Community Reinvestment Act public file?
The contents of the public file for covered financial institutions include both point-in-time (CRA evaluations) and ongoing information to help the public understand the bank's capacity and ability to serve assessment area communities through its lending and, as applicable, community development activities.
What information is found in the Community Reinvestment Act CRA public file that must be made available to the public upon request?
Your bank must maintain a public file, updated as of April 1 each year, that includes the following information: For the current year and two previous years, all written comments from the public about how your bank is helping meet community credit needs.
Who develops a CRA strategic plan?
Community Reinvestment Act (CRA) In lieu of one of the three primary evaluation methods, the CRA regulations provide banks the option to develop a strategic plan with the input of the community.
Was the CRA successful?
Other studies find that the CRA has been effective in encouraging financial institutions to lend to redlined neighborhoods. Several analyses conclude that the CRA had a positive influence in encouraging lending to low- and moderate-income borrowers and in low- and moderate-income neighborhoods.
Why did some Americans defend the Community Reinvestment Act of 1977 during the Great recession?
Critics were concerned the law would create distortions in credit markets and result in credit allocation by the federal bank regulators. They also noted an already heavy regulatory burden, and felt the CRA would encourage riskier lending.
How is the Community Reinvestment Act enforced?
The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank's CRA record into account when considering the bank's application to expand its business.
What is CRA for banks?
The Community Reinvestment Act of 1977 (CRA) encourages certain insured depository institutions to help meet the credit needs of the communities in which they are chartered, including low- and moderate-income (LMI) neighborhoods, consistent with the safe and sound operation of such institutions.
What is a CRA rating in banking?
The institution's CRA rating; A description of the financial institution; A description of the financial institution's assessment area(s); Conclusions of the financial institution's CRA performance, including the facts, data and analyses that were used to form such conclusions.
Are banks required to keep a CRA public file?
Your bank must maintain a public file, updated as of April 1 each year, that includes the following information: For the current year and two previous years, all written comments from the public about how your bank is helping meet community credit needs.
How do banks get CRA credits?
Under the Current CRA Rules, Banks Earn Most of Their CRA Credit through Community Development and Single-Family Mortgage Lending. Even though the banking industry has drastically changed since the CRA was enacted, the current regulations are working reasonably well.
What is the Community Reinvestment Act?
The Community Reinvestment Act encourages bank lending to low- and moderate-income neighborhoods. Enacted in 1977, it sought to eliminate bank “redlining” of poor neighborhoods. That had contributed to the growth of ghettos in the 1970s. In redlining, neighborhoods were designated as not good for investment.
What is the Reinvestment Act?
The Reinvestment Act mandated that the bank’s lending record to these neighborhoods is periodically reviewed by each bank’s regulatory agency. If a bank does poorly on this review, it might not get the approvals it seeks to grow its business.
Why did banks offer subprime mortgages?
Banks offered subprime mortgages because they made so much money from the derivatives, not the loans. Banks really needed this new product, thanks to the 2001 recession, which spanned March to November 2001. In December, Federal Reserve Chairman Alan Greenspan lowered fed funds rate to 1.75 percent.
What was the push factor of the CRA?
Fannie Mae and Freddie Mac reassured banks that they would securitize these subprime loans. It was the “pull” factor that complimented the “push” factor of the CRA. In May 1995, President Clinton directed bank regulators to make the CRA reviews more focused on results, less burdensome to the banks, and more consistent.
How did the Obama administration use the CRA?
The Obama administration used the CRA to penalize banks for discrimination that had nothing to do with housing. It lowered ratings of banks that discriminated in overdraft charges and auto loans. The administration also pursued new redlining cases against banks, an issue that hadn’t been at the forefront for decades.
What act was used to strengthen the enforcement of the Reinvestment Act?
Enforcement of the CRA. Regulators used provisions of the 1989 Financial Institutions Reform Recovery and Enforcement Act to strengthen enforcement of the Reinvestment Act. They could publicly rank banks as to how well they “greenlined” neighborhoods.
Does the CRA require banks to hit a dollar or percentage goal?
The CRA regulators use a variety of indicators, including interviews with local businesses. But they do not require banks to hit a dollar or percentage goal of loans. In other words, the Reinvestment Act doesn’t restrict banks’ ability to decide who is credit-worthy.
When was the Community Reinvestment Act enacted?
The Community Reinvestment Act (CRA), enacted in 1977 , requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods.
Who is responsible for CRA?
Three federal banking agencies, or regulators, are responsible for the CRA. Banks that have CRA obligations are supervised by one of these three regulators. Each regulator has a dedicated CRA site that provides information about the banks they oversee and those banks' CRA ratings and Performance Evaluations.
What is the role of the Federal Reserve?
The Federal Reserve supervises state member banks--or, state-chartered banks that have applied for and been accepted to be part of the Federal Reserve System--for CRA compliance. To carry out its role, the Federal Reserve.
2021 Final CRA Rule (Based on 1995 CRA Rule)
On December 14, 2021, the Office of the Comptroller of the Currency (OCC) issued a final rule to rescind the June 2020 CRA rule and replace it with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended.
Rescinded June 2020 Rule
The OCC issued a CRA final rule on December 14, 2021 (2021 final rule). The 2021 final rule rescinds and replaces the OCC's CRA rule published on June 5, 2020, and is effective on January 1, 2022. Guidance issued to implement the 2020 rule remains in effect for activities conducted October 1, 2020 through December 31, 2021.
CRA Performance Evaluations
OCC Bulletin 2020-99 confirmed that the OCC would continue to apply the examination procedures used under the 1995 CRA rule (1995 rule).
Search CRA Database
Search national banks and federal savings associations' CRA ratings and performance evaluations.
View CRA Exam Schedule
Get a list of national banks and federal savings associations scheduled for CRA examinations in the next quarter.
Additional Resources
National Banks Evaluated on the Basis of a Strategic Plan Under the CRA Get a list of national banks operating under approved CRA strategic plans and a reference to the authorizing regulation.
What is the Community Reinvestment Act?
Community Reinvestment Act. 1977. Intended to encourage depository institutions to help meet the credit needs of the communities in which they operate , including low- and moderate-income neighborhoods, consistent with safe and sound operations.
What was the purpose of the CRA?
The CRA was only one of a series of laws passed during the late 1960s and 1970s intended to expand access to credit. Fair lending practices were also addressed through the Fair Housing Act and the Equal Credit Opportunity Act. In 1975, the Home Mortgage Disclosure Act was enacted to increase transparency in mortgage lending.
What is the CRA?
CRA Defined. Enacted in 1977, the CRA affirms the obligation of federally insured depository institutions to help meet the credit needs of communities in which they are located. The obligations of the CRA are expected to be carried out within safe and sound banking practices. Banks are subject to laws and regulations like the CRA in return for ...
What is the Fair Housing Act?
Fair Housing Act. 1968. Part of the Civil Rights Act of 1968. The FHA makes it unlawful for any lender to discriminate in housing-related lending activities against any persons because of their race, color, religion, national origin, disability, family status or sex. Equal Opportunity Credit Act.
What law prohibits discrimination based on race, color, religion, national origin, sex, marital
Prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, source of income or whether a person exercises rights granted under the Consumer Credit Protection Act for any credit transaction and through the life of the loan. Home Mortgage Disclosure Act.
What is redlining in the CRA?
Prior to the passage of the CRA, “redlining”—or limiting or refusing to make loans in certain areas—was rampant. History suggests that this practice of drawing “red lines” around geographic areas initially stemmed from “residential security maps” created by the now-defunct Home Owners’ Loan Corp.
When was the Home Mortgage Disclosure Act enacted?
In 1975, the Home Mortgage Disclosure Act was enacted to increase transparency in mortgage lending. Public accountability for lending practices was heightened in 1989 when legislation required public disclosure of institutions’ CRA ratings and performance evaluations. Part of the Civil Rights Act of 1968.
When was the Community Reinvestment Act passed?
The Community Reinvestment Act (CRA) was enacted in 1977 to prevent redlining1 and to encourage banks and savings associations (collectively, banks) to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods and individuals. The CRA extended and clarified the long-standing expectation that banks will serve the convenience and needs of their local communities.
What does the OCC do?
The OCC evaluates a bank’s record of helping to meet the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The statute and the OCC’s CRA regulations (for national banks, 12 CFR 25, and for federal savings associations, 12 CFR 195) also mandate that the OCC consider this record when evaluating a bank’s application for: new charters; new branches or relocation of an existing branch; bank mergers and consolidations; and other similar corporate activities.
How often does the OCC evaluate a bank?
In general, the OCC conducts a CRA evaluation of a bank every three years. However, section 712 of the Gramm-Leach-Bliley Act6 mandated that small banks may be evaluated less frequently. A bank with current assets of $250 million or less that received an overall CRA rating of outstanding or satisfactory at its last CRA evaluation may be evaluated not more than once every 60 months or 48 months, respectively. The OCC may conduct a CRA evaluation sooner for reasonable cause or when reviewing the bank’s application for a depository facility such as through bank mergers, acquisitions, and branch openings.
Does CRA apply to savings banks?
CRA applies to FDIC-insured depository institutions, such as national banks, savings associations, and state-chartered commercial and savings banks. CRA does not apply to credit unions insured by the National Credit Union Share Insurance Fund (NCUSIF) or nonbank entities supervised by the Consumer Financial Protection Bureau (CFPB).
What is the Community Reinvestment Act?
[1] Congress enacted the CRA in 1977 as a community development initiative that sought to leverage the financial resources of private sector institutions. Senator William Proxmire of Wisconsin was the primary architect of the CRA. In the wake of the large public sector Great Society programs of the Johnson years in the 1960s, the public was wary of massive new government programs to revitalize communities. The genius of the CRA is that it was designed from its inception to tap into the financial might of the banking industry.
When was the CRA passed?
After the passage of the CRA in 1977, Congress has strengthened Senator’s Proxmire’s objectives of bank accountability to the public and to local areas. The first time Congress amended CRA was in 1989 when it passed the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). FIRREA was focused on the bailout and rescue of the savings and loans industry. Section 1212 of Title XII of the law included an amendment to CRA requiring the federal agencies to make publicly available CRA exams including the rating awarded to banks. The exams were to include specific analysis discussing the extent to which banks were meeting credit needs of low- and moderate-income people and communities. For example, the exams were required to reach conclusions about the assessment factors described in the CRA regulations for evaluating banks. [48]
What is an ANPR?
[53] An ANPR is not a specific proposal to change the CRA regulation , but rather consists of a series of questions for stakeholders to consider and answer. The responses to the ANPR then inform any proposed changes to the CRA regulations; the agencies must then ask the public to comment on any proposed changes before they become final.
What are the changes to the CRA?
The federal bank agencies implemented a significant change to the regulations implementing CRA in 1995, in part to codify the requirements of Riegle-Neal regarding the geographical areas to be examined. The other major thrust of the changes was to increase the objectivity of CRA performance measures. The agencies developed standardized exams for banks of various sizes. For example, large banks with assets above $1 billion now undergo the most comprehensive exams that include a lending test, an investment test, and a service test. The lending test routinely examines home and small business lending and includes performance measures such as the percent of loans to LMI borrowers and census tracts. The investment test scrutinizes the number, dollar amount, and responsiveness to community needs of investments such as those in Low-Income Housing Tax Credits or Small Business Investment Corporations (SBICs). Lastly, the service test examines the number and percent of branches in LMI tracts, the availability of basic services, and the provision of community development services like financial counseling.
When did Senator Proxmire start hearing on the CRA?
As Chairman of the Senate Banking, Housing, and Urban Affairs Committee, Senator Proxmire convened three days of hearings on the CRA starting on March 23, 1977. In his opening statement, the Senator outlined his four premises necessitating the CRA. The four premises are:
What is the CRA?
The CRA imposes an affirmative obligation on banks to serve all communities, including low- and moderate-income communities. Examiners from federal bank agencies scrutinize lending, investment, and services to low- and moderate-income (LMI) neighborhoods and rate banks.
What is the purpose of the CRA?
The CRA can be thought of as an effort to atone for the public and private sector sins of discrimination, segregation, and the perpetuation of poverty in communities of color and working class communities.
Enforcement of The CRA
The CRA and The Subprime Mortgage Crisis
- The Federal Reserve Board found there wasn’t a connection between CRA and the subprime mortgage crisis.1Its research showed that 60 percent of subprime loans went to higher-income borrowers outside of the CRA areas. Furthermore, 20 percent of the subprime loans that did go to ghetto areas were originated by lenders that weren't trying to conform to the CRA. In other word…
What Made Securitization Possible
- Both studies indicate that securitization made higher subprime lending possible. What made securitization possible? First, the 1999 repeal of Glass-Steagall by the Gramm-Leach-Bliley Act. This allowed banks to use deposits to invest in derivatives. Banking lobbyists said they couldn’t compete with foreign firms, and that they would only go into low-risk securities, reducing the ris…
The Role of Enron
- Who wrote and advocated for passage of both bills? Texas Senator Phil Gramm, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs. He was heavily lobbied by Enronwhere his wife, who had formerly held the post of Chairwoman of the Commodities Future Trading Commission, was a board member. Enron was a major contributor to Senator Gramm’s campaig…
How Securitization Worked
- How did securitization work? First, hedge funds and others sold mortgage-backed securities, collateralized debt obligations, and other derivatives. A mortgage-backed security is a financial product whose price is based on the value of the mortgages that are used for collateral. Once you get a mortgage from a bank, it sells it to a hedge fund on the secondary market. The hedge fund…
The Need For More Mortgages
- The combination of a derivative backed by real estate, and insurance, was a very profitable hit! But it required more and more mortgages to back the securities. This drove up demand for mortgages. To meet this demand, banks and mortgage brokers offered home loans to just about anyone. Banks offered subprime mortgages because they made so much money from the deriv…
The Increase in Subprime Mortgages
- As a result, the percentage of subprime mortgagesdoubled, from 10 percent to 20 percent, of all mortgages between 2001 and 2006. By 2007, it had grown into a $1.3 trillion industry. The creation of mortgage-backed securities and the secondary market was what got us out of the 2001 recession. It also created an asset bubble in real estatein 2005. The demand for mortgage…