[Federal Register: July 11, 2007 (Volume 72, Number 132)]
[Notices]
[Page 37921-37959]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11jy07-143]
[[Page 37921]]
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Part III
Department of the Treasury
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Office of the Comptroller of the Currency
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Office of Thrift Supervision
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Federal Reserve System
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Federal Deposit Insurance Corporation
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Community Reinvestment Act; Interagency Questions and Answers Regarding
Community Reinvestment; Notice
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2007-0012]
FEDERAL RESERVE SYSTEM
[Docket No. OP-1290]
FEDERAL DEPOSIT INSURANCE CORPORATION
RIN 3064-AC97
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
[Docket ID OTS-2007-0030]
Community Reinvestment Act; Interagency Questions and Answers
Regarding Community Reinvestment; Notice
AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS).
ACTION: Notice and request for comment.
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SUMMARY: The staffs of the OCC, the Board, the FDIC, and OTS
(collectively, the ``agencies'') have combined three previously adopted
publications of informal staff guidance answering questions regarding
community reinvestment (Interagency Questions and Answers). The
Interagency Questions and Answers address frequently asked questions
about community reinvestment to assist agency personnel, financial
institutions, and the public. The agencies are proposing nine new
questions and answers, as well as substantive and technical revisions
to the existing Interagency Questions and Answers. Among the proposed
new questions and answers is one that addresses activities engaged in
by a majority-owned financial institution with a minority-or women-
owned financial institution or a low-income credit union. In addition,
three revisions are intended to encourage institutions to work with
homeowners who are unable to make mortgage payments by highlighting
that they can receive CRA consideration for foreclosure prevention
programs for low- and moderate-income homeowners, consistent with the
interagency Statement on Working with Mortgage Borrowers issued April
17, 2007. Public comment is invited on the proposed new and revised
questions and answers, as well as any other community reinvestment
issues.
DATES: Comments on the proposed questions and answers are requested by
September 10, 2007.
ADDRESSES: Comments should be directed to:
OCC: You may submit comments by any of the following methods:
E-mail: regs.comments@occ.treas.gov.
Fax: (202) 874-4448.
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 1-5, Washington, DC 20219.
Hand Delivery/Courier: 250 E Street, SW., Attn: Public
Information Room, Mail Stop 1-5, Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2007-0012'' in your comment. In general, OCC will enter
all comments received into the docket without change, including any
business or personal information that you provide such as name and
address information, e-mail addresses, or phone numbers. Comments,
including attachments and other supporting materials, received are part
of the public record and subject to public disclosure. Do not enclose
any information in your comment or supporting materials that you
consider confidential or inappropriate for public disclosure.
You may review comments and other related materials by any of the
following methods:
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC's Public Information Room, 250 E
Street, SW., Washington, DC. For security reasons, the OCC requires
that visitors make an appointment to inspect comments. You may do so by
calling (202) 874-5043. Upon arrival, visitors will be required to
present valid government-issued photo identification and submit to
security screening in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
Board: You may submit comments, identified by Docket No. OP-1290,
by any of the following methods:
Agency Web Site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.
.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
Fax: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm
as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper in Room MP-500
of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m.
and 5 p.m. on weekdays.
FDIC: You may submit comments, identified by RIN number 3064-AC97
by any of the following methods:
Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow instructions for submitting comments on
the Agency Web Site.
E-mail: Comments@FDIC.gov. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
Instructions: All submissions received must include the agency name
and RIN number. All comments received will be posted without change to
http://www.fdic.gov/regulations/laws/federal/propose.html including any
personal information provided.
OTS: You may submit comments, identified by ID OTS-2007-0030, by
any of the following methods:
E-mail: regs.comments@ots.treas.gov. Please include ID
OTS-2007-0030 in the subject line of the message and include your name
and telephone number in the message.
Fax: (202) 906-6518.
Mail: Regulation Comments, Chief Counsel's Office, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
Attention: ID OTS-2007-0030.
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Regulation Comments, Chief Counsel's Office, Attention: ID OTS-2007-
0030.
Instructions: All submissions received must include the agency name
and
[[Page 37923]]
docket number for this notice. All comments received will be entered
into the docket without change, including any personal information
provided. Comments, including attachments and other supporting
materials received are part of the public record and subject to public
disclosure. Do not enclose any information in your comment or
supporting materials that you consider confidential or inappropriate
for public disclosure.
Viewing Comments On-Site: You may inspect comments at the
Public Reading Room, 1700 G Street, NW., by appointment. To make an
appointment for access, call (202) 906-5922, send an e-mail to
public.info@ots.treas.gov, or send a facsimile transmission to (202)
906-6518. (Prior notice identifying the materials you will be
requesting will assist us in serving you.) We schedule appointments on
business days between 10 a.m. and 4 p.m. In most cases, appointments
will be available the next business day following the date we receive a
request.
FOR FURTHER INFORMATION CONTACT:
OCC: Margaret Hesse, Special Counsel, Community and Consumer Law
Division, (202) 874-5750; or Karen Tucker, National Bank Examiner,
Compliance Policy Division, (202) 874-4428, Office of the Comptroller
of the Currency, 250 E Street, SW., Washington, DC 20219.
Board: Anjanette M. Kichline, Senior Supervisory Consumer Financial
Services Analyst, (202) 785-6054; or Brent Lattin, Attorney, (202) 452-
3667, Division of Consumer and Community Affairs, Board of Governors of
the Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Mira Marshall, Acting Chief, CRA & Fair Lending Section,
(202) 898-3912; Faye Murphy, Fair Lending Specialist, Division of
Supervision and Consumer Protection, (202) 898-6613; or Susan van den
Toorn, Counsel, Legal Division, (202) 898-8707, Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
OTS: Celeste Anderson, Senior Project Manager, Compliance and
Consumer Protection, (202) 906-7990; or Richard Bennett, Counsel,
Regulations and Legislation Division, (202) 906-7409, Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
Background
The OCC, the Board, the FDIC, and OTS implement the Community
Reinvestment Act (CRA) (12 U.S.C. 2901 et seq.) through their CRA
regulations. See 12 CFR parts 25, 228, 345, and 563e. The OCC, Board,
and FDIC revised their CRA regulations in a joint final rule published
on August 2, 2005 (70 FR 44256) (2005 joint final rule). OTS did not
join the agencies in adopting the August 2005 joint final rule; OTS
published separate final rules on August 18, 2004 (69 FR 51155), March
2, 2005 (70 FR 10023), April 12, 2006 (71 FR 18614), and March 22, 2007
(72 FR 13429). Upon the effective date of OTS's March 2007 final rule,
July 1, 2007, OTS's CRA regulation will be substantially the same as
the CRA regulations of the OCC, Board, and FDIC.
The agencies' regulations are interpreted primarily through
``Interagency Questions and Answers Regarding Community Reinvestment,''
which provide guidance for use by agency personnel, financial
institutions, and the public, and which are supplemented periodically.
Interagency Questions and Answers were first published under the
auspices of the Federal Financial Institution Examination Council in
1996 (61 FR 54647), and were revised on July 12, 2001 (2001 Questions
and Answers) (66 FR 36620).
Subsequent to the adoption of the 2005 joint final rule, the OCC,
Board, and FDIC, after notice and public comment, published new
guidance in the form of questions and answers on March 10, 2006 (71 FR
12424) (2006 Questions and Answers). Because of the desire to provide
guidance about the 2005 joint final rule in a timely manner, the 2006
Questions and Answers addressed primarily matters related to the 2005
joint final rule, without updating the 2001 Questions and Answers. On
September 5, 2006, after notice and public comment, OTS published new
guidance in the form of questions and answers pertaining to the revised
definition of ``community development'' and certain other provisions of
the CRA rule common to all four agencies (OTS's September 2006
Questions and Answers). 71 FR 52375. The 2001 Questions and Answers
remained effective along with the new 2006 Questions and Answers and
OTS's September 2006 Questions and Answers.
These Proposed Interagency Questions and Answers and Request for
Comment
The document published today combines the previously adopted 2001
Questions and Answers with the 2006 Questions and Answers and OTS's
September 2006 Questions and Answers. In addition, the agencies are
proposing for comment nine new questions and answers that will be added
to the Interagency Questions and Answers. These nine new questions and
answers are described below. OTS is also proposing four new and one
revised questions and answers that are virtually identical to new and
revised questions and answers the OCC, Board, and FDIC adopted in the
2006 Questions and Answers. The proposed questions and answers that are
new for OTS are Q&As Sec. ----.12(u)(2)--1, Sec. ----.26(c)--1, Sec.
----.26(c)(3)--1, and Sec. ----.26(c)(4)--1; the proposed revised
question and answer for OTS is Q&A Sec. ----.26--1. These Q&As
primarily relate to intermediate small savings associations.
The agencies are also proposing to revise many of the previously
adopted questions and answers. Most of the revisions are not
substantive, rather they clarify or update the existing questions and
answers, move existing questions and answers within the guidance (Q&As
Sec. ----.21(a)--1 and Sec. ----.28(b)--1), or merely conform the
numbering of the question to the correct regulatory provision. The
agencies also propose to delete an appendix that listed contact
information for Bureau of Census offices because institutions may now
obtain information from the FFIEC's Web site. The agencies are
explicitly requesting comment on specific questions and answers in
which the revisions may be deemed to be of significance. These proposed
revised questions and answers are also discussed below.
The proposed new and revised questions and answers have been added
to the combined Interagency Questions and Answers, which is being
published in its entirety to enable commenters to review the proposed
revisions in the context of the rest of the guidance. The text of the
combined Interagency Questions and Answers is found at the end of this
publication. Language that is proposed to be deleted as compared to the
2001 and 2006 Questions and Answers adopted by the OCC, Board, and FDIC
is bracketed; language that is proposed to be added to these agencies'
guidance is enclosed within arrows. Where these agencies' current
questions and answers differ substantially from those of OTS, the
differences are footnoted. After the agencies have considered any
comments received in response to this proposal, the agencies will
publish the final guidance in the Federal Register.
The Interagency Questions and Answers are grouped by the provision
of the CRA regulations that they discuss, are presented in the same
order as the regulatory provisions, and employ an abbreviated method of
citing to the regulations. For example, the small bank
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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 state nonmember banks, they appear at 12
CFR 345.26; and for thrifts, the small savings association performance
standards appear at 12 CFR 563e.26. Accordingly, the citation would be
to 12 CFR ----.26. Each question is numbered using a system that
consists of the regulatory citation (as described above) and a number,
connected by a dash. For example, the first question addressing 12 CFR
----.26 would be identified as Sec. ----.26--1.
Although a particular question and answer may be found under one
regulatory provision, e.g., 12 CFR ----.22 relating to the lending
test, its content may also be applicable to, for example, small
institutions, which are evaluated pursuant to small institution
performance standards found at 12 CFR ----.26. Thus, readers with a
particular interest in small institution issues, for example, should
also consult the guidance that describes the lending, investment, and
service tests. To assist readers in finding relevant guidance, the
Interagency Questions and Answers will be indexed by topic when they
are adopted as final guidance.
Proposed New Questions and Answers
The agencies specifically request comment on the nine proposed new
questions and answers described below.
I. Investments in minority- or women-owned financial institutions
and low-income credit unions.
The CRA statute provides that, when evaluating the CRA performance
of a non-minority-owned and non-women-owned (majority-owned) financial
institution, the agencies may consider as a factor capital investment,
loan participation, and other ventures undertaken by the institution in
cooperation with minority- and women-owned financial institutions and
low-income credit unions provided that these activities help meet the
credit needs of local communities in which such institutions are
chartered. 12 U.S.C. 2903(b). The agencies' CRA regulations do not
specifically address activities that a majority-owned financial
institution may engage in with a minority- or women-owned financial
institution or a low-income credit union.
The Interagency Questions and Answers currently describe
investments in minority- and women-owned financial institutions and
low-income credit unions as an example of a qualified investment in Q&A
Sec. ----.12(t)--4.
The agencies have been asked whether a majority institution's
activity in conjunction with a minority- or women-owned financial
institution or low-income credit union must benefit the majority-owned
institution's assessment area(s) or the broader statewide or regional
area that includes the majority-owned institution's assessment area(s).
The CRA statute specifies that the activities must help meet the credit
needs of local communities in which the minority- or women-owned
institutions or low-income credit unions are chartered.
The agencies generally evaluate institutions' activities in the
institution's assessment area(s) or a broader statewide or regional
area that includes the assessment area(s). For example, a community
development loan is defined, in part, as one benefiting the
institution's assessment area(s) or a broader statewide or regional
area that includes the institution's assessment area(s). 12 CFR --
--.12(h)(2)(ii). Similarly, the investment test evaluates an
institution's record of helping to meet the credit needs of its
assessment area(s) through qualified investments that benefit its
assessment area(s) or a broader statewide or regional area that
includes its assessment area(s). 12 CFR ----.23(a). In addition, the
service test evaluates an institution's record of helping to meet the
credit needs of its assessment area(s) through its provision of retail
banking and community development services. 12 CFR ----.24(a). Finally,
the community development test applicable to wholesale and limited
purpose institutions states that community development activities that
benefit the institution's assessment area(s) or the broader statewide
or regional area that includes its assessment area(s) are considered in
a CRA evaluation, and community development activities that benefit
areas outside the institution's assessment area(s) will be considered
if the institution has adequately addressed the needs of its assessment
area(s). 12 CFR ----.25(e).
The agencies propose a new question and answer, Sec. ----.12(g)--4,
that would give full effect to section 2903(b)'s broader geographic
language. The proposed question and answer would state that activities
engaged in by a majority-owned financial institution with a minority-
or women-owned financial institution or a low-income credit union that
benefit the local communities where the minority- or women-owned
financial institution or low-income credit union is located will be
favorably considered in the CRA performance evaluation of the majority-
owned institution. The minority- or women-owned institution or low-
income credit union need not be located in, and the activities need not
benefit, the assessment area(s) of the majority-owned institution or
the broader statewide or regional area that includes its assessment
area(s).
II. Intermediate small institutions' affordable home mortgage loans
and small business and small farm loans.
Q&A Sec. ----.12(h)--2 states that mortgage loans made by a retail
institution that is not required to report such loans under the Home
Mortgage Disclosure Act (HMDA) will be evaluated as home mortgage
loans, and that small business and small farm loans made by an
institution that is not required to report small business and small
farm loan data under the CRA regulations will, nonetheless, be
evaluated as small business and small farm loans. Institutions do not
have the option of having such loans considered as community
development loans.
The agencies are proposing a new question and answer, Sec. --
--.12(h)--3, which would clarify this guidance only as it affects
intermediate small institutions. Intermediate small institutions are
not required to collect and report small business and small farm loan
data pursuant to the CRA regulations. Further, some intermediate small
institutions may not be required to report home mortgage loans under
the HMDA. Unlike large or small retail institutions, intermediate small
institutions' lending is evaluated using two performance tests, which
are rated separately--the retail lending test and the community
development test. If the current guidance (Q&A Sec. ----.12(h)--2) were
applied to an intermediate small institution, its overall CRA
performance under the two tests may be adversely affected because home
mortgage loans and small loans to businesses and farms that have a
community development purpose could never be considered under the
community development test. The proposed question and answer would
permit institutions evaluated under the intermediate small institution
performance standards to choose to have such loans evaluated as
community development loans, provided the loans otherwise meet the
regulatory definition of ``community development,'' or as retail home
mortgages, small business loans, or small farm loans, as applicable. An
institution that elects to have certain home mortgage, small business,
or small farm loans considered as community
[[Page 37925]]
development loans should notify its examiners of that decision prior to
the start of its CRA examination.
Please note that the agencies are also proposing to revise Q&A
Sec. ----.12(h)--2 to except intermediate small institutions from
applicability of that guidance.
III. Examples of ``other loan data.''
The agencies' CRA regulations, at 12 CFR ----.22(a)(2), state that
originations and purchases of loans, as well as any other loan data the
institution may choose to provide, including data on loans outstanding,
commitments, and letters of credit will be considered in an
institution's evaluation. Q&A Sec. ----.22(a)(2)--3 provides that
information about home mortgage loan modification, extension, and
consolidation agreements (MECAs) may be provided by an institution to
examiners as ``other loan data.'' Other questions and answers found
throughout the guidance describe various lending-related activities as
``other loan data.'' See, e.g., Q&As Sec. ----.12(l)--2 and Sec. --
--.42(c)(2)--3.
The agencies are proposing a new question and answer, which will
follow the question and answer discussing MECAs, listing in one place
the other various activities mentioned throughout the interagency
guidance that may be provided to examiners for consideration as ``other
loan data.'' In addition, the proposed question and answer, Q&A Sec. --
--.22(a)(2)--4, includes a discussion about when information on loans
for properties with a certain amount or percentage of units set aside
for affordable housing may be provided to examiners as ``other loan
data.'' If these loans are in an amount greater than $1 million, they
would not be collected or reported as small business loans. If the
loans do not have a primary purpose of community development, they
would not be collected or reported as community development loans.
Therefore, to ensure that institutions may have these loans considered
during their CRA evaluations, the question and answer provides that
institutions may, at their option, provide information about them to
examiners as ``other loan data.''
IV. Purchased loan participations.
The agencies' staffs have received a number of questions about
whether institutions that purchase loan participations should collect
and report them, as applicable, as purchases of loans, and whether they
will receive lending consideration for such purchases. The proposed
question and answer, Q&A Sec. ----.22(a)(2)--6, provides that loan
participations are treated as the purchase of a loan, even though the
institution has purchased only a part of a loan. Institutions receive
the same consideration for their loan participations as they would
receive for a purchased whole loan of the same type and amount.
Although this proposed question and answer interprets the large
institution lending test, 12 CFR ----.22(a)(2), the same guidance would
also apply to the other examination types--small institution test,
community development test applicable to wholesale and limited purpose
institutions, and the strategic plan. (For guidance about reporting
loan participations, see proposed new Q&A Sec. ----.42(b)(2)--4 and Q&A
Sec. ----.42(a)(2)--1, as proposed to be revised.)
V. Small business loans secured by a one-to-four family residence.
In 2005, the agencies published technical revisions to their CRA
regulations that reflected changes in the standards for defining
metropolitan statistical areas made by the U.S. Office of Management
and Budget (OMB) in December 2000; census tracts designated by the U.S.
Census Bureau (Census); and changes to the Board's Regulation C (12 CFR
part 203), which implements the HMDA. 70 FR 15570 (Mar. 28, 2005). In
the supplementary information published with the agencies' technical
revisions, the agencies discussed the effect that the Board's revisions
to Regulation C regarding the treatment of refinancings of home
mortgage loans would have on CRA evaluations. 70 FR at 15573. As
explained in the supplementary information, revised Regulation C
defined the term, ``refinancing,'' so that a loan is reportable as a
refinancing if it satisfies and replaces an existing obligation, and
both the new and the existing obligation are secured by a lien on a
dwelling. 12 CFR 203.2(k). The agencies revised the definition of
``home mortgage loan'' in their CRA regulations to include
refinancings, as well as home purchase loans and home improvement
loans, as defined in the Board's regulations at 12 CFR 203.2. See 12
CFR ----.12(l).
For banks subject to the Call Report instructions: Because of the
change in the Regulation C definition, loans to refinance small
business or small farm loans are reportable as home mortgage loans for
HMDA purposes (and would ordinarily be considered as home mortgage
loans for CRA purposes) if they are secured by a dwelling and the
replaced loan also was secured by a dwelling. If a dwelling continues
to serve as collateral solely through an abundance of caution and where
the terms of the loan, as a consequence, have not been made more
favorable than they would have been in the absence of the lien, then
the refinancing is also reportable for Call Report and CRA purposes as
a loan to a small business or a loan to a small farm. If a refinancing
of a small business or small farm loan is reported both as a home
mortgage loan under HMDA and as a loan to a small business or a loan to
a small farm on the Call Report and on the CRA disclosure, there is the
potential for ``double counting'' of these loans in CRA examinations.
See 70 FR at 15573.
For savings associations subject to the Thrift Financial Reporting
instructions: Because of the change in the Regulation C definition, a
savings association's loans to refinance small business or small farm
loans are reportable as home mortgage loans if they are secured by a
dwelling and the replaced loan also was secured by a dwelling. This is
true even if the loans are reported as non-mortgage commercial loans on
the Thrift Financial Report (TFR). This results in the potential for
``double counting'' of the loans in CRA examinations. See 70 FR at
15573.
To clarify some of these issues, the agencies are proposing a new
question and answer, Q&A Sec. ----.22(a)(2)--7, to provide guidance
about small business and small farm loans where a dwelling serves as
collateral.
VI. Investments in a national or regional fund.
The agencies are proposing additional guidance, Q&A Sec. --
--.23(a)--2, to clarify that an institution that makes a loan or
investment in a national or regional community development fund should
be able to demonstrate that the investment meets the geographic
requirements of the CRA regulation. If a fund does not become involved
in a community development activity that meets both the purpose and
geographic requirements of the regulation for the institution, the
institution's investment generally would not be considered under the
investment or community development tests. The agencies are also
proposing to highlight in the Q&A an example of a fund providing
foreclosure relief to low- and moderate-income homeowners.
VII. Examination as an intermediate small institution.
The agencies allow a one-year ``lag period'' between when an
institution is no longer a small institution (i.e., it had assets
meeting or exceeding the small institution asset threshold amount
delineated in 12 CFR ----.12(u)(1) as of December 31 of both of the
prior two calendar years) and when it reports CRA data to be used in
its evaluation under the lending, investment, and service tests. See 12
CFR ----.42(b). The lag
[[Page 37926]]
period allows the institution to collect loan data for one year before
being evaluated under the lending, investment, and service tests.
The agencies' staffs have been asked whether an institution that
was a small institution, but not an intermediate small institution,
will also be allowed a one-year lag period before it is evaluated as an
intermediate small institution once it becomes an intermediate small
institution. The proposed question and answer, Q&A Sec. ----.26(a)(2)--
1, clarifies that there is no lag period between becoming an
intermediate small institution and being examined as an intermediate
small institution because there is no data collection and reporting
requirement for intermediate small institutions.
VIII. Reporting of a participation in a community development loan.
Under the CRA regulations, an institution is required to report the
aggregate number and aggregate amount of community development loans
originated or purchased. 12 CFR ----.42(b)(2). The agencies' staffs
have been asked what loan purchase amount institutions that purchase
participations in community development loans should report--the
principal balance of the loan at origination or the amount of the
participation purchased.
The agencies are proposing a new question and answer, Q&A Sec. --
--.42(b)(2)--4, to clarify that institutions that purchase community
development loan participations should report only the amount of their
purchase. The proposed data collection and reporting of purchases of
community development loan participations is different from the
collection and reporting of purchases of small business and small farm
loan participations. An institution reports the amount at the
origination of the loan when it purchases a participation in a small
business or small farm loan. See Q&A Sec. ----.42(a)(2)--1. As
explained in that question and answer, reporting the amount of the loan
at origination is consistent with the Call Report's or Thrift Financial
Report'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. However, when assessing the volume of small
business and small farm loan purchases for purposes of evaluating
lending test performance under the CRA, examiners evaluate an
institution's small business and small farm lending based on the amount
of the participation that is purchased. See id.
The CRA regulations require that, when reporting small business and
small farm loans originated or purchased, institutions report, among
other things, the amount of the loans at origination. 12 CFR --
--.42(a)(2). However, when reporting community development loan data,
an institution reports only the aggregate number and aggregate amount
of community development loans originated or purchased. 12 CFR --
--.42(b)(2). Because the regulation does not specify whether the amount
of purchased community development loans must be the amount of the loan
at origination or the amount of the loan at purchase, the agencies
propose that institutions should report the amount of the loan
participations purchased. Reporting only the amount of the loan
participation that was purchased will provide a more accurate picture
of institutions' community development loan activities. The agencies
specifically request comment on whether having a different collection
and reporting treatment for community development loans is appropriate.
IX. Refinanced or renewed community development loans.
The agencies are proposing a question and answer, Q&A Sec. --
--.42(b)(2)--5, to clarify that, generally, the same limitations that
apply to the reporting of refinancings and renewals of small business
and small farm loans apply to refinancings and renewals of community
development loans. See Q&A Sec. ----.42(a)--5. Generally, an
institution may report only one community development loan origination
(including a renewal or refinancing of that loan that is treated as an
origination) per loan per year. If the loan amount is increased upon
renewal or refinancing, the institution may report only the increase if
the origination of the loan was also reported during the same year.
Revised Questions and Answers
The agencies are proposing revisions to a number of previously
adopted questions and answers. Many of the proposed revisions update
the guidance to reflect the 2005 technical revisions that conformed the
agencies' regulations to OMB, Census, and Board regulatory revisions,
and to the changes made in the 2005 joint final rule and OTS's March
2007 final rule. In many instances, the proposed revisions merely
clarify existing guidance by conforming the guidance to the revised
regulations, improving readability, or adopting current terminology.
Although most of the proposed revisions are deemed to be
insignificant clarifications, the agencies specifically request comment
on the following revised questions and answers:
I. Activities that promote economic development.
Q&A Sec. ----.12(g)(3)--1 describes the types of activities that
promote economic development by financing small businesses and small
farms. The agencies are proposing to revise Q&A Sec. ----.12(g)(3)--1
to clarify the language in the current answer and to add loans to or
investments in Rural Business Investment Companies (RBICs) and New
Markets Tax Credit-eligible Community Development Entities (CDEs) as
types of loans or investments that the agencies will presume to promote
economic development.
After notice and comment, the agencies added an investment in a
RBIC as an example of a qualified investment in Q&A Sec. ----.12(t)--4.
71 FR at 12433; 71 FR at 52379 (OTS). The purpose of the Rural Business
Investment Program, which is a joint initiative between the U.S. Small
Business Administration and the U.S. Department of Agriculture, is
intended to promote economic development by financing small businesses
located primarily in rural areas. Thus, the agencies propose to revise
Q&A Sec. ----.12(g)(3)--1 to provide that there is a presumption that
an investment in a RBIC will promote economic development.
Likewise, the agencies are proposing that loans to or investments
in CDEs will be presumed to promote economic development. Loans to or
investments in CDEs pursuant to the New Markets Tax Credit program
generally have a primary purpose of community development, as that term
is defined in the CRA regulations. To the extent that a CDE lends to or
invests in small businesses or farms, a loan to or investment in the
CDE promotes economic development by financing small businesses or
farms. Also, because the primary mission of the CDE is to service
``low-income communities,'' loans and investments made by the CDE
generally would help to revitalize or stabilize low- or moderate-income
geographies. Thus, the agencies propose to revise Q&A Sec. --
--.12(g)(3)--1 to provide that there is also a presumption that an
investment in a CDE will promote economic development.
II. Examples of community development loans.
Q&A Sec. ----.12(h)--1 provides examples of community development
loans. For the same reasons as addressed above in connection with the
proposed revision to Q&A Sec. ----.12(g)(3)--1, the agencies propose to
revise the fourth bullet in the answer
[[Page 37927]]
to Q&A Sec. ----.12(h)--1 to add a loan to a New Markets Tax Credit-
eligible CDE as an example of a community development loan.
The agencies also propose to add a new bullet to the same question
and answer stating that another example of a community development loan
is a loan in an amount greater than $1 million to a business, when the
loan is made as part of the Small Business Administration's (SBA's) 504
Certified Development Company program. (Such loans in amounts of $1
million or less would be small business loans for CRA purposes.) The
SBA's 504 loan program is a long-term financing tool for economic
development within a community. (See 13 CFR 120.800 et seq. for
additional information about SBA's 504 program.) The 504 program
provides growing businesses with long-term, fixed-rate financing for
major fixed assets, such as land and buildings. A Certified Development
Company is a nonprofit corporation that works with the SBA and private-
sector lenders to provide financing to local small businesses. Loans to
businesses under the 504 program must meet job creation criteria or a
community development goal, or have a public policy goal. Generally, to
meet the job creation criteria, a business must create or retain one
job for every $50,000 provided by the SBA, except for ``Small
Manufacturers,'' which have a $100,000 job creation or retention goal.
Examples of the 504 program's public policy goals include business
district revitalization, rural development, and expansion of minority
business development. Based on the economic development and community
revitalization purposes and goals of the 504 program, the agencies
believe that loans to businesses made in connection with the program
would have a primary purpose of community development, as defined in
the CRA regulations.
III. Examples of community development services.
Q&A Sec. ----.12(i)--3 provides examples of community development
services. The agencies propose to add a new example of a community
development service to this question and answer. The agencies believe
that increasing access to financial services by opening or maintaining
branches or other facilities that help to revitalize or stabilize a
low- or moderate-income area, designated disaster area, or a distressed
or underserved nonmetropolitan middle-income area would have a primary
purpose of community development under the fourth prong of the
definition of ``community development.'' Thus, the agencies propose to
add a new bullet in the answer to state that opening or maintaining
branches and other facilities that help to revitalize or stabilize low-
or moderate-income geographies, designated disaster areas, or
distressed or underserved nonmetropolitan middle-income geographies is
an example of a community development service and would be considered
as a community development service unless the opening or maintaining of
the branches or other facilities has been considered in the evaluation
of the institution's retail banking services under 12 CFR ----.24(d).
See Q&As Sec. ----.12(g)(4)(ii)--2, Sec. ----.12(g)(4)(iii)--3, and
Sec. ----.12(g)(4)(iii)--4 for additional guidance about activities
that revitalize or stabilize designated disaster areas and distressed
or underserved nonmetropolitan middle-income geographies, respectively.
(With regard to an institution that is evaluated under the service
test, branch openings are already considered as part of the
availability and effectiveness of the institution's systems for
delivering retail banking services. See 12 CFR ----.24(d)(2).
Similarly, whether an institution maintains branches is also considered
under the service test when examiners evaluate the distribution of the
institution's branches based on geography income and the institution's
record of opening and closing branches. See 12 CFR----.24(d)(1) & (2).
The agencies also propose to revise the example of community
development services describing various types of consumer counseling
services to highlight credit counseling that can assist borrowers in
avoiding foreclosure on their homes.
Finally, the agencies propose to add to the examples of financial
services with the primary purpose of community development that
increase access to financial services for low- or moderate-income
individuals individual development accounts (IDAs) and free payroll
check cashing. (A cross-reference to this revised Q&A would be added to
Q&A Sec. ----.24(d)--2, which provides guidance about how examiners
evaluate an institution's activities in connection with IDAs.)
IV. Federal Home Loan Bank unpaid dividends.
Since the 1995 revision of the CRA regulations, the agencies have
agreed that Federal Home Loan Bank (FHLB) stock does not have a
sufficient connection to community development to be considered a
qualified investment. See Joint Final Rule, 60 FR 22156, 22161 (May 4,
1995). The agencies' staffs have received questions from financial
institutions about whether funds retained by the FHLBs to support the
Affordable Housing Program (AHP), in lieu of being paid out in
dividends to investing institutions, would receive consideration as
qualified investments. The agencies propose to clarify that the
required annual AHP contributions of the FHLBs are not qualified
investments because they are not investments by the investing financial
institution members, but rather a use of its own funds by the FHLB. The
agencies propose to revise Q&A Sec. ----.12(t)--3 to state that FHLB
unpaid dividends are not qualified investments.
V. Examples of qualified investments.
Q&A Sec. ----.12(t)--4 provides examples of qualified investments.
For the same reasons as addressed above in connection with the proposed
revision to Q&A Sec. ----.12(g)(3)--1, the agencies propose to revise
the first bullet in the answer to Q&A Sec. ----.12(t)--4 to add an
investment in a New Markets Tax Credit-eligible CDE as an example of a
qualified investment.
The agencies also propose to add a new fourth bullet that clarifies
that an investment in a community development venture capital company
that promotes economic development by financing small businesses would
also be an example of a qualified investment. Although private
community development venture capital companies are not statutorily
authorized and government insured or guaranteed like the examples in
the current third bullet of the Q&A (e.g., small business investment
companies), community development venture capital companies may provide
financing for small businesses that 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.
VI. Small institution adjustment.
Q&A Sec. ----.12(u)(2)--1, which was adopted by the OCC, Board,
and FDIC in the 2006 Questions and Answers, provides information about
the annual adjustments to the asset-size thresholds for small
institutions and intermediate small institutions. (OTS does not
currently have a comparable Q&A but is proposing to add one through
this notice.) The agencies are proposing that this Q&A also refer the
reader to the FFIEC's Web site for historical and current asset-size
threshold information.
[[Page 37928]]
VII. Responsive lending activities.
Q&A Sec. ----.22(a)--1 discusses types of lending activities that
help meet the credit needs of an institution's assessment areas and
that may warrant favorable consideration as activities that are
responsive to the needs of the institution's assessment areas. The
agencies propose to revise the answer to highlight that establishing
loan programs that provide relief to low- and moderate-income
homeowners who are facing foreclosure is another type of lending
activity that would warrant favorable consideration as being responsive
to the needs of an institution's assessment areas. The agencies
encourage institutions to develop and participate in such programs,
consistent with safe and sound lending practices.
VIII. Constraints on affiliate lending.
Q&A Sec. ----.22(c)(2)(i)--1 explains the constraint that no
affiliate may claim a loan origination or loan purchase if another
institution claims the same loan origination or loan purchase. The
agencies propose to revise the answer by adding illustrative examples
to help explain this provision. The answer states that a bona fide sale
of a loan originated by one affiliate to another affiliate would be
considered a loan origination by the first institution and a loan
purchase by the other affiliate; however, the same institution may not
claim both the origination and the purchase of the same loan. The
question would also be revised to indicate that this guidance is
relevant to all institutions, regardless of their examination type.
IX. Retail banking services delivery systems.
Q&A Sec. ----.24(d)--1 explains how examiners evaluate the
availability and effectiveness of an institution's systems for
delivering retail banking services. The agencies propose to revise Q&A
Sec. ----.24(d)--1 to correspond more closely to the service test
performance criteria. The regulation provides that examiners will
evaluate the current distribution of an institution's branches and, in
the context of its current distribution of the institution's branches,
the institution's record of opening and closing branches, particularly
branches located in low- or moderate-income geographies or primarily
serving low- or moderate-income individuals. The text of the answer
would be modified to conform more closely to the regulatory language.
X. Assessment areas may not extend substantially beyond
metropolitan statistical area (MSA) boundaries.
Q&As Sec. ----.41(e)(4)--1 and Sec. ----.41(e)(4)--2 address the
maximum size of an assessment area and whether one assessment area may
consist of both an MSA and two counties that both abut the MSA. The
agencies propose to revise these two questions and answers to reflect
the changes in the Standards for Defining Metropolitan and Micropolitan
Statistical Areas by the OMB. Although the OMB continues to designate
MSAs, the OMB no longer designates Consolidated MSAs (CMSAs), which
consisted of Primary MSAs. The OMB has also adopted a new area
designation: Metropolitan division. As previously noted, in the 2005
technical revisions, the agencies aligned their CRA regulations with
the OMB's new nomenclature. See 70 FR 15570.
The proposed revisions to Q&As Sec. ----.41(e)(4)--1 and Sec. --
--.41(e)(4)--2 adopt the revised nomenclature and also memorialize
guidance that the agencies provided in the supplementary information
that was published with the 2005 technical revisions. The agencies had
noted in the supplementary information that one commenter suggested
that the agencies, in their 2005 technical revisions, replace ``CMSA''
with ``CSA'' (combined statistical area), another new area standard
that OMB adopted in 2000. The agencies declined to do so, but advised
in the supplementary information that it may be appropriate for some
institutions to delineate an assessment area based on a CSA. However,
because CSAs can vary greatly in area and population, the agencies
indicated that whether an assessment area should consist of a CSA is a
determination to be made by each institution, considering its size,
business strategy, capacity, and constraints, and subject to review by
the appropriate agency. The agencies further noted that, if an
institution designates an assessment area comprised of a CSA that, for
example, consists of an MSA and a micropolitan statistical area (a new
area standard adopted by OMB that is less populated than an MSA and
considered a nonmetropolitan area for CRA purposes), examiners will
separately evaluate performance in the MSA and the micropolitan
statistical area within the assessment area because each of these areas
has a distinct median income. Proposed revised Q&As Sec. --
--.41(e)(4)--1 and Sec. ----.41(e)(4)--2 incorporate this information.
XI. Reporting data under the CRA regulations.
Q&A Sec. ----.42--1 addresses when an institution must collect and
report data. It focuses on a growing institution: One that was a small
institution but that, over time, has outgrown that classification. The
agencies propose to revise this question and answer for two reasons.
First, because the definition of ``small institution'' has been revised
and the asset-size threshold for small institutions is adjusted
annually, the text and example in the guidance require updating. The
proposed revision refers to the definition of a ``small institution''
in the agencies' CRA regulations so that the asset-size threshold does
not become out-of-date as a result of annual adjustments. It also
directs readers to the FFIEC's Web site for examples, over time, based
on the revised and adjusted asset-size thresholds for small
institutions. Second, the mailing address to which an institution
reports CRA data has been changed, and the proposed new guidance
reflects the revised address.
XII. Reporting home equity lines of credit for both home
improvement and business purposes.
Q&A Sec. ----.42(a)--7 addresses the reporting of a home equity
line of credit, part of which is for home improvement purposes and part
of which is for small business purposes. Because of changes in the
treatment of refinancings of loans secured by dwellings in the Board's
Regulation C (12 CFR part 203), which implements the HMDA (described
above), the agencies are proposing to revise this question and answer
to make it consistent with the revised Regulation C requirements.
XIII. Participations in small business or small farm loans.
Q&A Sec. ----.42(a)(2)--1 provides guidance regarding the
reporting of the amount of a small business or small farm loan that an
institution purchases. The agencies propose to revise this question and
answer to clarify that the guidance also applies to purchases of small
business or small farm loan participations. The CRA regulations
explicitly require institutions to collect and maintain ``the loan
amount at origination'' when collecting data about small business and
small farm loans. 12 CFR----.42(a)(2). The agencies are proposing to
revise the question and answer to clarify that this data collection
requirement applies to participations, as well as to the purchase of
whole loans.
OTS Request for Comments
OTS specifically solicits comment on whether it should adopt the
four new and one revised questions and answers that are virtually
identical to guidance the OCC, Board, and FDIC adopted in the 2006
Questions and Answers. Those new questions and answers for OTS are Q&As
Sec. ----.12(u)(2)--1, Sec. ----26(c)--1, Sec. ----.26(c)(3)--1, and
Sec. ----.26(c)(4)--
[[Page 37929]]
1; the proposed revised question and answer for OTS is Q&A Sec. --
--.26--1.
General Comments
In addition to the specific requests for comments on the proposed
new and revised questions and answers, public comment is invited on
issues raised by the CRA and the Interagency Questions and Answers. If,
after reading the Interagency Questions and Answers, financial
institutions, examiners, community organizations, or other interested
parties have unanswered questions or comments about the agencies'
community reinvestment regulations, they should submit them to the
agencies. Such questions may be addressed in future revisions to the
Interagency Questions and Answers.
Solicitation of Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999, 12 U.S.C. 4809,
requires the agencies to use ``plain language'' in all proposed and
final rules published after January 1, 2000. Although this proposed
guidance is not a proposed rule, comments are nevertheless invited on
whether the proposed interagency questions and answers are stated
clearly and effectively organized, and how the guidance might be
revised to make it easier to read.
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
OCC and the FDIC certified that the 2005 joint final rule would not
have a significant economic impact on a substantial number of small
entities. 70 FR at 44264. Pursuant to section 605(b) of the Regulatory
Flexibility Act, OTS certified that its March 22, 2007, April 12, 2006,
March 2, 2005, and August 18, 2004 final rules would not have a
significant economic impact on a substantial number of small entities.
72 FR 13429, 13434 (March 22, 2007); 71 FR 18614, 18617 (April 12,
2006); 70 FR 10023, 10030 (March 2, 2005); 69 FR 51155, 51161 (August
18, 2004).
The Board prepared a final regulatory flexibility analysis in
connection with the 2005 joint final rule and found that the final rule
minimized the economic impact on small entities by making the twelve
small member banks that were not eligible for the streamlined CRA
process prior to adoption of the joint final rule, eligible for the
streamlined CRA process. Further, the joint final rule was intended by
all three agencies to reduce unnecessary burden while maintaining or
improving the CRA regulations' effectiveness in evaluating performance.
In the agencies' continuing efforts to provide clear,
understandable regulations and to comply with the letter and 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 institutions.
The text of the combined Interagency Questions and Answers
Regarding Community Reinvestment follows.
Language that is proposed to be deleted as compared to the current
OCC, Board, and FDIC questions and answers is bracketed; language that
is proposed to be added to these agencies' questions and answers is
enclosed within arrows. Where these agencies' current questions and
answers differ substantially from those of OTS, the differences are
footnoted.
Interagency Questions and Answers Regarding Community Reinvestment
Sec. ----.11 Authority, purposes, and scope.
Sec. ----.11(c) Scope.
Sec. Sec. ----.11(c)(3) & 563e.11(c)(2) Certain special purpose
institutions.
Sec. Sec. ----.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. 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.
Sec. [ Sec. ]----.12(f) [ & 563e.12(e)] Branch.
Sec. [ Sec. ]----.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[rtrif],[ltrif]'' and mobile `ATMs' and `RSFs' are
considered ``ATMs'' and ``RSFs.''
Sec. [ Sec. ]----.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.
Sec. [ Sec. ]----.12([h][rtrif]g[ltrif])[ & 563.12(g)] Community
development.
Sec. [ Sec. ]----.12([h][rtrif]g[ltrif])[ & 563.12(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
[[Page 37930]]
revitalize or stabilize low- or moderate-income areas[rtrif],
designated disaster areas, or underserved or distressed nonmetropolitan
middle-income geographies[ltrif].
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])[ & 563e.12(g)]--2: Must a
community development activity occur inside a low- or moderate-income
area [rtrif], designated disaster area, or underserved or distressed
nonmetropolitan middle-income area[ltrif] 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][rtrif], regardless of their location,[ltrif]
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 [rtrif], designated disaster areas, or underserved or
distressed nonmetropolitan middle-income areas[ltrif] (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.
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])[ & 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.
[rtrif]Sec. ----.12(g)--4: The CRA provides that, in assessing the
CRA performance of non-minority- and non-women-owned (majority-owned)
financial institutions, examiners may consider as a factor capital
investments, loan participations, and other ventures undertaken by the
institutions in cooperation with minority- or women-owned financial
institutions and low-income credit unions, provided that these
activities help meet the credit needs of local communities in which the
minority- or women-owned institutions or low-income credit unions are
chartered. Must such activities also benefit the majority-owned
financial institution's assessment area?
A4. No. Although the regulations generally provide that an
institution's CRA activities will be evaluated for the extent to which
they benefit the institution's assessment area(s) or a broader
statewide or regional area that includes the institution's assessment
area(s), the agencies apply a broader geographic criterion when
evaluating capital investments, loan participations, and other ventures
undertaken by that institution in cooperation with minority- or women-
owned institutions or low-income credit unions, as provided by the CRA.
Thus, such activities will be favorably considered in the CRA
performance evaluation of the institution (as loans, investments, or
services, as appropriate), even if the minority- or women-owned
institution or low-income credit union is not located in, or such
activities do not benefit, the assessment area(s) of the majority-owned
institution or the broader statewide or regional area that includes its
assessment area(s). The activities must, however, help meet the credit
needs of the local communities in which the minority- or women-owned
institutions or low-income credit unions are chartered.[ltrif]
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(1)[ & 563e.12(g)]
Affordable housing (including multifamily rental housing) for low- or
moderate-income individuals
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(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 [rtrif],[ltrif] 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[rtrif],[ltrif] 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[rtrif],[ltrif] or community action plan, is community
development.
Sec. [Sec. ]----.12([h] [rtrif]g[ltrif])(3)[ & 563e.12(g)(3)]
Activities that promote economic development by financing businesses or
farms that meet certain size eligibility standards.
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(3)[ & 563.12(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] [rtrif]The concept of[ltrif]
``community development'' under [Sec. Sec. ] [rtrif]12 CFR[ltrif]--
--.12([h][rtrif]g[ltrif])(3)[and 563e.12(g)(3)] [rtrif]involves both a
``size'' test and a ``purpose'' test. An institution's[ltrif][, a]
loan, investment, or service[, whether made][rtrif]meets the ``size''
test if it finances, either[ltrif] directly or through an intermediary,
[must meet both a size test and a purpose test. An activity meets the
size
[[Page 37931]]
requirement if it finances entities that] [rtrif]entities that[ltrif]
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 [rtrif]``[ltrif]purpose test,[rtrif]''[ltrif] the
[activity][rtrif] institution's loan, investment, or service[ltrif]
must promote economic development. [An activity is][rtrif] These
activities are[ltrif] considered to promote economic development if [it
supports][rtrif] they support[ltrif] 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[rtrif],[ltrif] or
tribal governments. The agencies will presume that any loan to or
investment in a SBDC, SBIC, [or][rtrif] Rural Business Investment
Company,[ltrif] New Markets Venture Capital Company[rtrif], or New
Markets Tax Credit-eligible Community Development Entity[ltrif]
promotes economic development. [rtrif](But also refer to Q&As Sec. --
--.42(b)(2)-- 2, Sec. ----.12(h)--2, and Sec. ----.12(h)--3 for more
information about which loans may be considered community development
loans.)[ltrif]
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 same geography that does not directly
provide additional jobs or services to the community.
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(4)[ & 563e.12(g)(4)]
Activities that revitalize or stabilize [low- or moderate-
income][rtrif] certain[ltrif] geographies.
Sec. ----.12(g)(4)--1: Is the revised definition of community
development, effective September 1, 2005 [rtrif](under the OCC, Board,
and FDIC rules) and effective April 12, 2006 (under OTS's rule),
[ltrif]applicable to all [banks][rtrif] institutions[ltrif] or only to
intermediate small [banks][rtrif] institutions[ltrif]? \1\
---------------------------------------------------------------------------
\1\ The inserts and deletions are shown as compared to the
current Q&A for the OCC, Board, and FDIC. The current Q&A for OTS
reads: ``Is the same definition of community development applicable
to all savings associations? Yes, one definition of community
development is applicable to all savings associations.'' 71 FR at
52377.
---------------------------------------------------------------------------
A1. The revised definition of community development is applicable
to all [banks][rtrif] institutions[ltrif]. [rtrif]Examiners will not
use the revised definition to qualify activities that were funded or
provided prior to September 1, 2005 (under the OCC, Board, and FDIC
rules) or prior to April 12, 2006 (under OTS's rule).[ltrif]
Sec. ----.12(g)(4)--2: Will activities that provide housing for
middle-income and upper-income persons qualify for favorable
consideration as community development activities when they help to
revitalize or stabilize a distressed or underserved nonmetropolitan
middle-income geography or designated disaster areas?
A2. An activity that provides housing for middle- or upper-income
individuals qualifies as an activity that revitalizes or stabilizes a
distressed nonmetropolitan middle-income geography or a designated
disaster area if the housing directly helps to revitalize or stabilize
the community by attracting new, or retaining existing, businesses or
residents and, in the case of a designated disaster area, is related to
disaster recovery. The Agencies generally will consider all activities
that revitalize or stabilize a distressed nonmetropolitan middle-income
geography or designated disaster area, but will give greater weight to
those activities that are most responsive to community needs, including
needs of low- or moderate-income individuals or neighborhoods. Thus,
for example, a loan solely to develop middle- or upper-income housing
in a community in need of low- and moderate-income housing would be
given very little weight if there is only a short-term benefit to low-
and moderate-income individuals in the community through the creation
of temporary construction jobs. ([A][rtrif] Except in connection with
intermediate small institutions, a[ltrif] housing-related loan is not
evaluated as a ``community development loan'' if it has been reported
or collected by the institution or its affiliate as a home mortgage
loan, unless it is a multifamily dwelling loan. See [rtrif] 12 CFR
[ltrif][Sec. ]----.12([i][rtrif]h[ltrif])(2)(i) and Q&As Sec. [Sec.
]----.12([i][rtrif]h[ltrif]) [& 563e.12(h)]--2[rtrif] and Sec.
--.12(h)--3[ltrif].) An activity will be presumed to revitalize or
stabilize such a geography or area if the activity is consistent with a
bona fide government revitalization or stabilization plan or disaster
recovery plan. See Q&As Sec. [Sec. ]--
--.12([h][rtrif]g[ltrif])(4)(i)[& 563.12(g)(4)]--1 and Sec. [Sec. ]--
--.12([i][rtrif]h[ltrif]) [& 563e.12(h)]--[4][rtrif]5[ltrif].
In underserved nonmetropolitan middle-income geographies,
activities that provide housing for middle- and upper-income
individuals may qualify as activities that revitalize or stabilize such
underserved areas if the activities also provide housing for low- or
moderate-income individuals. For example, a loan to build a mixed-
income housing development that provides housing for middle- and upper-
income individuals in an underserved nonmetropolitan middle-income
geography would receive positive consideration if it also provides
housing for low- or moderate-income individuals.
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(4)[rtrif](i)[ltrif][&
563e.12(g)(4)] Activities that revitalize or stabilize low- or
moderate-income geographies.
Sec. [Sec. ]----.12([h][rtrif]g[ltrif])(4)[rtrif](i)[ltrif][&
563e.12(g)(4)]--1: What [are] activities [that][rtrif]are
considered[ltrif]to ``revitalize or stabilize'' a low- or moderate-
income geography[rtrif], and how are those activities
considered[ltrif]?
A1. Activities that revitalize or stabilize a low- or moderate-
income geography are activities that help to attract [rtrif]new,
or[ltrif][and] retain [rtrif]existing,[ltrif] businesses
[and][rtrif]or[ltrif] 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. Sec. 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[rtrif],[ltrif] or tribal government plan for the revitalization
or stabilization of the [rtrif]low- or moderate-income[ltrif]
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
[[Page 37932]]
or stabilize a low- or moderate-income geography, see
[rtrif]Q&As[ltrif] Sec. [Sec. ]----.12([h][rtrif]g[ltrif])[&
563e.12(g)]--2 and Sec. [Sec. ]----.12 ([i][rtrif]h[ltrif])[&
563.12(h)]--4.
Sec. ----.12(g)(4)(ii) Activities that revitalize or stabilize
designated disaster areas.
Sec. ----.12(g)(4)(ii)--1: What is a ``designated disaster area''
and how long does it last?
A1. A ``designated disaster area'' is a major disaster area
designated by the federal government. Such disaster designations
include, in particular, Major Disaster Declarations administered by the
Federal Emergency Management Agency (FEMA) (http://www.fema.gov), but
excludes counties designated to receive only FEMA Public Assistance
Emergency Work Category A (Debris Removal) and/or Category B (Emergency
Protective Measures).
Examiners will consider [bank][rtrif]institution[ltrif] activities
related to disaster recovery that revitalize or stabilize a designated
disaster area for 36 months following the date of designation. Where
there is a demonstrable community need to extend the period for
recognizing revitalization or stabilization activities in a particular
disaster area to assist in long-term recovery efforts, this time period
may be extended.
Sec. ----.12(g)(4)(ii)--2: What activities are considered to
``revitalize or stabilize'' a designated disaster area, and how are
those activities considered?
A2. The Agencies generally will consider an activity to revitalize
or stabilize a designated disaster area if it helps to attract new, or
retain existing, businesses or residents and is related to disaster
recovery. An activity will be presumed to revitalize or stabilize the
area if the activity is consistent with a bona fide government
revitalization or stabilization plan or disaster recovery plan. The
Agencies generally will consider all activities relating to disaster
recovery that revitalize or stabilize a designated disaster area, but
will give greater weight to those activities that are most responsive
to community needs, including the needs of low- or moderate-income
individuals or neighborhoods. Qualifying activities may include, for
example, providing financing to help retain businesses in the area that
employ local residents, including low- and moderate-income individuals;
providing financing to attract a major new employer that will create
long-term job opportunities, including for low- and moderate-income
individuals; providing financing or other assistance for essential
community-wide infrastructure, community services, and rebuilding
needs; and activities that provide housing, financial assistance, and
services to individuals in designated disaster areas and to individuals
who have been displaced from those areas, including low- and moderate-
income individuals (see, e.g., Q&As Sec. ----.12([j][rtrif]i[ltrif])[&
563e.12(i)]-3; Sec. ----.12([s][rtrif]t[ltrif])[& 563e.12(r)]--4;
Sec. ----.22(b)(2) & (3)-4; Sec. ----.22(b)(2) & (3)--5; and Sec. --
--.24(d)(3)-1).
Sec. ----.12(g)(4)(iii) Activities that revitalize or stabilize
distressed or underserved nonmetropolitan middle-income geographies.
Sec. ----.12(g)(4)(iii)--1: What criteria are used to identify
distressed or underserved nonmetropolitan, middle-income geographies?
A1. Eligible nonmetropolitan middle-income geographies are those
designated by the Agencies as being in distress or that could have
difficulty meeting essential community needs (underserved). A
particular geography could be designated as both distressed and
underserved. As defined in [rtrif]12 CFR[ltrif][Sec. ]----.12(k), a
geography is a census tract delineated by the United States Bureau of
the Census.
A nonmetropolitan middle-income geography will be designated as
distressed if it is in a county that meets one or more of the following
triggers: (1) An unemployment rate of at least 1.5 times the national
average, (2) a poverty rate of 20 percent or more, or (3) a population
loss of 10 percent or more between the previous and most recent
decennial census or a net migration loss of five percent or more over
the five-year period preceding the most recent census.
A nonmetropolitan middle-income geography will be designated as
underserved if it meets criteria for population size, density, and
dispersion that indicate the area's population is sufficiently small,
thin, and distant from a population center that the tract is likely to
have difficulty financing the fixed costs of meeting essential
community needs. The Agencies will use as the basis for these
designations the ``urban influence codes,'' numbered ``7,'' ``10,''
``11,'' and ``12,'' maintained by the Economic Research Service of the
United States Department of Agriculture.
The Agencies [will] publish data source information along with the
list of eligible nonmetropolitan census tracts on the Federal Financial
Institutions Examination Council Web site (http://www.ffiec.gov).
Sec. ----.12(g)(4)(iii)--2: How often will the Agencies update the
list of designated distressed and underserved nonmetropolitan middle-
income geographies?
A2. The Agencies will review and update the list annually [as
needed]. The list [will be] [rtrif]is[ltrif] published on the Federal
Financial Institutions Examination Council Web site (http://www.ffiec.gov
).
To the extent that changes to the designated census tracts occur,
the Agencies have determined to adopt a one-year ``lag period.'' This
lag period will be in effect for the twelve months immediately
following the date when a census tract that was designated as
distressed or underserved is removed from the designated list.
Revitalization or stabilization activities undertaken during the lag
period will receive consideration as community development activities
if they would have been considered to have a primary purpose of
community development if the census tract in which they were located
were still designated as distressed or underserved.
Sec. ----.12(g)(4)(iii)--3: What activities are considered to
``revitalize or stabilize'' a distressed nonmetropolitan middle-income
geography, and how are those activities evaluated?
A3: An activity revitalizes or stabilizes a distressed
nonmetropolitan middle-income geography if it helps to attract new, or
retain existing, businesses or residents. An activity will be presumed
to revitalize or stabilize the area if the activity is consistent with
a bona fide government revitalization or stabilization plan. The
Agencies generally will consider all activities that revitalize or
stabilize a distressed nonmetropolitan middle-income geography, but
will give greater weight to those activities that are most responsive
to community needs, including needs of low- or moderate-income
individuals or neighborhoods. Qualifying activities may include, for
example, providing financing to attract a major new employer that will
create long-term job opportunities, including for low- and moderate-
income individuals, and activities that provide financing or other
assistance for essential infrastructure or facilities necessary to
attract or retain businesses or residents. See Q&As Sec. [Sec. ]--
--.12([h]([rtrif]g[ltrif])(4)[& 563e.12(g)(4)[rtrif](i)[ltrif]]--1 and
Sec. [Sec. ]----.12([i] [rtrif]h[ltrif] )[& 563e.12(h)]--[4]
[rtrif]5[ltrif] .
Sec. ----.12(g)(4)(iii)--4: What activities are considered to
``revitalize or stabilize'' an underserved nonmetropolitan middle-
income
[[Page 37933]]
geography, and how are those activities evaluated?
A4. The regulation provides that activities revitalize or stabilize
an underserved nonmetropolitan middle-income geography if they help to
meet essential community needs, including needs of low- or moderate-
income individuals. Activities such as financing for the construction,
expansion, improvement, maintenance, or operation of essential
infrastructure or facilities for health services, education, public
safety, public services, industrial parks, or affordable housing, will
be evaluated under these criteria to determine if they qualify for
revitalization or stabilization consideration. Examples of the types of
projects that qualify as meeting essential community needs, including
needs of low- or moderate-income individuals, would be a new or
expanded hospital that serves the entire county, including low- and
moderate-income residents; an industrial park for businesses whose
employees include low- or moderate-income individuals; a new or
rehabilitated sewer line that serves community residents, including
low- or moderate-income residents; a mixed-income housing development
that includes affordable housing for low- and moderate-income families;
or a renovated elementary school that serves children from the
community, including children from low- and moderate-income families.
Other activities in the area, such as financing a project to build
a sewer line spur that connects services to a middle- or upper-income
housing development while bypassing a low- or moderate-income
development that also needs the sewer services, generally would not
qualify for revitalization or stabilization consideration in
geographies designated as underserved. However, if an underserved
geography is also designated as distressed or a disaster area,
additional activities may be considered to revitalize or stabilize the
geography, as explained in Q&As Sec. ----.12(g)(4)(ii)--2 and Sec. --
--.12(g)(4)(iii)--3.
Sec. [Sec. ] ----.12([i] [rtrif]h[ltrif] )[& 563e.12(h)] Community
development loan.
Sec. [Sec. ] ----.12([i] [rtrif]h[ltrif] )[& 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), [rtrif]New Markets Tax Credit-eligible
Community Development Entities,[ltrif] 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[.] [rtrif];[ltrif]
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[.][rtrif]; and
Businesses, in an amount greater than $1 million, when
made as part of the Small Business Administration's 504 Certified
Development Company program.[ltrif]
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.
Sec. [Sec. ]----.12([i][rtrif]h[ltrif])[ & 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 [rtrif]the[ltrif] 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[rtrif],
unless the small institution is an intermediate small institution (see
Sec. ----.12(h)--3)[ltrif]. Multifamily dwelling loans, however, may
be considered as community development loans as well as home mortgage
loans. See also [rtrif]Q&A[ltrif] Sec. ----.42(b)(2)--2.
[rtrif]Sec. ----.12(h)--3: May an intermediate small institution
that is not subject to HMDA reporting have home mortgage loans
considered as community development loans? Similarly, may an
intermediate small institution have small business and small farm loans
and consumer loans considered as community development loans?
A3. Yes. These loans may be considered, at the institution's
option, as community development loans provided they meet the
regulatory definition of ``community development.'' However, these
loans may not be considered under both the lending test and the
community development test for intermediate small institutions. Thus,
if an institution elects that these loans be considered under the
community development test, the loans may not also be considered under
the lending test, and would be excluded from the lending test
analysis.[ltrif]
Sec. [Sec. ]----.12([ i ][rtrif]h[ltrif])[ & 563e.12(h) ] --[3]
[rtrif]4[ltrif]: 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.''
Sec. [Sec. ]----.12([i] [rtrif]h[ltrif])[ & 563e.12(h)]--
[4][rtrif]5[ltrif]: 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?
[[Page 37934]]
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] [rtrif]low- or moderate-income[ltrif] 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] [rtrif]low-
or moderate-income[ltrif] area (or a nearby area)[, which]
[rtrif]that[ltrif] employs or serves residents of the area[,] and
[rtrif],[ltrif] thus[rtrif],[ltrif] stabilizes the area, may be
considered to have a community development purpose. For example, in [an
underserved, distressed] [rtrif]a low-income[ltrif] area, a loan for a
pharmacy that employs and [provides supplies to][rtrif]serves[ltrif]
residents of the area promotes community development.
Sec. [Sec. ]----.12([i][rtrif]h[ltrif])[ & 563e.12(h)]--
[5][rtrif]6[ltrif]: 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 multistate 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 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).
Sec. [Sec. ]----.12([i][rtrif]h[ltrif])[ & 563e.12(h)]--
[6][rtrif]7[ltrif]: 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 [rtrif],[ltrif] 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).
Sec. [Sec. ]----.12([i][rtrif]h[ltrif])[ & 563e.12(h)]--
[7][rtrif]8[ltrif]: 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,
[rtrif]designated disaster areas, or underserved or distressed
nonmetropolitan middle-income areas, [ltrif] 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 [rtrif]12
CFR [ltrif] [Sec. Sec. ]----.12([h][rtrif]g[ltrif])[ 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.
Sec. [Sec. ]----.12([j][rtrif]i[ltrif] )[& 563e.12(i)] Community
development service.
Sec. [Sec. ]----.12([j][rtrif]i[ltrif])[& 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
[[Page 37935]]
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.
Sec. [Sec. ]----.12([j][rtrif]i[ltrif])[& 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.
Sec. [Sec. ]----.12[j][rtrif]i[ltrif])[ & 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 financial services to low- and moderate-income
individuals through branches and other facilities located in low- and
moderate-income areas, unless the provision of such services has been
considered in the evaluation of [a bank's][rtrif]an
institution's[ltrif] retail banking services under [rtrif]12
CFR[ltrif][Sec. ]----.24(d);
[rtrif]Increasing access to financial services by opening
or maintaining branches or other facilities that help to revitalize or
stabilize a low- or moderate-income geography, a designated disaster
area, or a distressed or underserved nonmetropolitan middle-income
geography, unless the opening or maintaining of such branches or other
facilities has been considered in the evaluation of the institution's
retail banking services under 12 CFR ----.24(d);[ltrif]
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 financial services
education to promote community development and affordable housing,
including credit counseling to assist borrowers in avoiding foreclosure
on their homes;
Establishing school savings programs [and
developing][rtrif];[ltrif]
[rtrif]Developing[ltrif] or teaching financial [education]
[rtrif]literacy[ltrif] 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;
Providing international [remittances]
[rtrif]remittance[ltrif] services that increase access to financial
services by low- and moderate-income persons (for example, by offering
reasonably priced international [remittances] [rtrif]remittance[ltrif]
services in connection with a low-cost account); 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, [rtrif]individual development
accounts (IDAs),[ltrif] or free government [rtrif]or payroll[ltrif]
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.
Sec. [Sec. ]----.12([k][rtrif]j[ltrif] )[& 563e.12(j)] Consumer loan.
Sec. [Sec. ]----.12([k][rtrif]j[ltrif])[& 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.
Sec. [Sec. ]----.12 ([k][rtrif]j[ltrif])[& 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.
Sec. [Sec. ]----.12 ([k][rtrif]j[ltrif])[& 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.
Sec. [Sec. ]----.12 ([m][rtrif]l[ltrif])[& 563e.12(l)] Home mortgage
loan.
Sec. [Sec. ]----.12 ([m][rtrif]l[ltrif])[& 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,'' [rtrif]and
``refinancing,'' [ltrif] as defined in the HMDA regulation, Regulation
C, 12 CFR part 203. This definition also includes multifamily (five-or-
more families) dwelling loans[,] [rtrif]and[ltrif] loans for the
purchase of manufactured homes[, and refinancings of home improvement
and home purchase
[[Page 37936]]
loans]. [rtrif]See also Q&A Sec. ----.22(a) (2)--7.[ltrif]
Sec. [Sec. ]----.12 ([m][rtrif]l[ltrif])[& 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] [rtrif]these[ltrif] 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.
Sec. [Sec. ]----.12 ([n][rtrif]m[ltrif]) [& 563e.12(m)] Income
level.
Sec. [Sec. ]----.12 ([n][rtrif]m[ltrif])[& 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 [rtrif]approximately[ltrif] 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.'']
[Alternatively, institutions] [rtrif]Institutions[ltrif] may obtain
[a list of the 1990 Census Bureau-calculated] [rtrif]2000 geography
income information[ltrif] and the annually updated HUD median family
incomes for metropolitan statistical areas (MSAs) and statewide
nonmetropolitan areas by [calling] [rtrif]accessing[ltrif] the Federal
Financial Institution Examination Council's (FFIEC's) [HMDA Help]
[rtrif]Web site at http://www.ffiec.gov/cra or by calling the FFIEC's
CRA Assistance[ltrif] Line at (202) [452-2016][rtrif]872-7584[ltrif].
[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.]
Sec. [Sec. ]----.12 ([o][rtrif] n[ltrif])[& 563e.12(n)] Limited
purpose institution
Sec. [Sec. ]----.12 ([o][rtrif]n[ltrif])[& 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.
Sec. [Sec. ]----.12 ([o][rtrif]n[ltrif])[& 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] [rtrif]retail[ltrif] lending provided as an
incident to the institution's wholesale lending?
Are the [rtrif]retail[ltrif] loans provided as an
accommodation to the institution's wholesale customers?
Are the [rtrif]other types of[ltrif] 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?
Sec. [Sec. ]----.12([o][rtrif]n[ltrif])[ & 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.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 563e.12(r)] Qualified
investment.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 563e.12(r)]1: Does the
CRA regulation provide
[[Page 37937]]
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.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 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. [rtrif]Certain municipal bonds
in underserved nonmetropolitan middle-income geographies may also be
qualified investments. See Q&A Sec. ----.12(g)(4)(iii)-- 4.[ltrif]
Housing-related bonds or securities must primarily address affordable
housing (including multifamily rental housing) needs [rtrif]of low- or
moderate-income individuals[ltrif] in order to qualify. See also
[rtrif]Q&A[ltrif] Sec. ----.23(b)--2.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 563e.12(r)]--3: Are
Federal Home Loan Bank stocks [rtrif]or unpaid dividends[ltrif] and
membership reserves with the Federal Reserve Banks ``qualified
investments''?
A3. No. Federal Home Loan Bank (FHLB) stocks [rtrif]or unpaid
dividends[ltrif] 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 [rtrif]as a community development service[ltrif] for
technical assistance they provide on behalf of applicants and
recipients of funding from the FHLB's Affordable Housing Program. See
[rtrif]Q&A[ltrif] Sec. [Sec. ]----.12([j][rtrif]i[ltrif])[ &
563e.12(i)]--3.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 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), [rtrif] New Markets Tax Credit-eligible
Community Development Entities,[ltrif] 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), specialized SBICs, and Rural Business
Investment Companies (RBICs) that promote economic development by
financing small businesses;[rtrif]
Community development venture capital companies that
promote economic development by financing small businesses;[ltrif]
Facilities that promote community development [rtrif]by
providing community services[ltrif] 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] [rtrif]literacy programs[ltrif]; and
Organizations supporting activities essential to the
capacity of low- and 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] [rtrif]low- or moderate-income individuals[ltrif] to work.
[rtrif]See also Q&As Sec. ----.12(g)(4)(ii)--2; Sec. --
--.12(g)(4)(iii)--3; Sec. ----.12(g)(4)(iii)--4.[ltrif]
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ &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.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 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
[rtrif]responsiveness,[ltrif] innovativeness[rtrif],[ltrif] and
complexity of the community development loan within the bounds of safe
and sound banking practices.
Sec. [Sec. ]----.12([s][rtrif]t[ltrif])[ & 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] [rtrif]as[ltrif] a community development service
[rtrif]if the activity meets the regulatory definition of ``community
development service.''[ltrif]
Sec. ----.12(t)--[rtrif]8[ltrif]: When evaluating a qualified
investment, what consideration will be given for prior-period
investments?
A1. When evaluating [a bank's][rtrif]an institution's[ltrif]
qualified investment record, examiners will consider investments that
were made prior to the current examination, but that are still
outstanding. Qualitative factors will affect the weighting given to
both current period and outstanding prior-period qualified investments.
For example, a prior-period outstanding investment with a multi-year
impact that addresses assessment area community development needs may
receive more consideration than a current period investment of a
comparable amount that is less responsive to area community development
needs.
Sec. [Sec. ]----.12([t][rtrif]u[ltrif])[ & 563e.12(s)] Small
institution.
[Sec. Sec. ----.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
[[Page 37938]]
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.]
Sec. [Sec. ]----.12([t][rtrif]u[ltrif])[& 563e.12(s)]--
[2][rtrif]1[ltrif]: How are Federal and State branch assets of a
foreign bank calculated for purposes of the CRA?
A[2][rtrif]1[ltrif]. A Federal or State branch of a foreign bank is
considered a small institution if the Federal or State branch has
[rtrif]assets[ltrif] less than [$250 million in assets] [rtrif]the
asset threshold delineated in 12 CFR ----.12(u)(1) for small
institutions.[ltrif] [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)).]
[rtrif]Sec. ----.12(u)(2) Small Institution Adjustment[ltrif]
Sec. ----.12(u)(2)--1: How often will the asset size thresholds
for small [banks] [rtrif]institutions[ltrif] and intermediate small
[banks] [rtrif]institutions[ltrif] be changed, and how will these
adjustments be communicated? \2\
---------------------------------------------------------------------------
\2\ The inserts and deletions are shown as compared to the
current Q&A for the OCC, Board, and FDIC. There currently is no
comparable Q&A for OTS.
---------------------------------------------------------------------------
A1. The asset size thresholds for ``small [banks]
[rtrif]institutions[ltrif]'' and ``intermediate small [banks]
[rtrif]institutions[ltrif]'' will be adjusted annually based on changes
to the Consumer Price Index. More specifically, the dollar thresholds
will be adjusted annually based on the year-to-year change in the
average of the Consumer Price Index for Urban Wage Earners and Clerical
Workers, not seasonally adjusted for each twelve-month period ending in
November, with rounding to the nearest million. Any changes in the
asset size thresholds will be published in the Federal Register.
[rtrif]Historical and current asset-size threshold information may be
found on the FFIEC's Web site at http://www.ffiec.gov/cra.[ltrif]
Sec. [Sec. ]----.12([u][rtrif]v[ltrif])[& 563e.12(t)] Small Business
Loan
Sec. [Sec. ]----.12([u][rtrif]v[ltrif])[& 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 Report'' (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[.] [rtrif]of ``community development.''[ltrif]
Sec. [Sec. ]----.12([u][rtrif]v[ltrif])[& 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]
[rtrif]of[ltrif] $1 million [rtrif]or less[ltrif].
Sec. [Sec. ]----.12([u][rtrif]v