FDIC San Francisco Region Bankers’ Forum

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1 FDIC San Francisco Region Bankers’ Forum Community Reinvestment Act – Recent Amendments August 31, 2005

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FDIC San Francisco Region Bankers’ Forum. Community Reinvestment Act – Recent Amendments August 31, 2005. Overview. Provide an overview of the Amendments Provide tips on how to achieve your bank’s optimal CRA performance Questions & Answers. Amendments. - PowerPoint PPT Presentation

Transcript of FDIC San Francisco Region Bankers’ Forum

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FDIC San Francisco Region Bankers’ Forum

Community Reinvestment Act –

Recent AmendmentsAugust 31, 2005

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Overview

Provide an overview of the Amendments

Provide tips on how to achieve your bank’s optimal CRA performance

Questions & Answers

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Amendments

1) Increased small bank threshold2) New category: Intermediate Small

Banks3) Expanded definition of “Community

Development”4) Clarified the effects of discriminatory

or certain credit practices on CRA rating

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Existing CRA Tests Small Banks – TA less than $250M

Streamlined lending test Large Banks – TA > $250M

Includes small banks affiliated w/holding co. exceeding $1B in TA

3 part Test – Lending, Investments, & Services

Collected and reported data on small business and small farm loans

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New CRA Tests Small Banks – No change Intermediate Small Banks – New Test

TA $250M to $1 billion Subject to small bank streamlined lending test

and new flexible community development test No collection of data for small business/farm

loans Large Banks – over $1 billion

No change

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Intermediate Small Banks Two Separately Rated Tests

Must receive Satisfactory in both tests New Flexible Community

Development Test Innovative and Complexity

Asset Size based on Changes to CPI

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Intermediate Small Banks

Not required to collect and report small business and small farm loans

Not required to collect and report location of HMDA loans outside MSA

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HMDA Data An important note for HMDA

reporters:

The collection of borrower’s race, ethnicity, gender, and income are still required for loans made outside an MSA.

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Community Development

Important to identify and participate

Activities must have primary purpose

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Community Development – Existing Rules Primary Purpose:

Affordable housing Community services targeted to

LMI individuals Activities that promoted

economic development Activities that revitalize or

stabilize LMI geographies

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Community Development (expanded) Revitalize and Stabilize Revisions

to Include: Distressed or Underserved non-MSA

middle income rural areas Disaster areas to be eligible

FFIEC to publish eligible areas Expanded definition is responsive

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Discriminatory or Illegal Credit Practices Could Adversely Impact CRA

Rating Evidence of Discrimination Illegal Referral Violating Section 8

RESPA TIL Concerning Right of Rescission Unfair or Deceptive Practices violating

Section 5 of FTC

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Discriminatory or Illegal Credit Practices (continued) Compliance Management System

may be impacted Bank’s policies/practices Consumers being harmed Management’s corrective actions Historical performance

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Performance Context Opportunities in assessment area

for lending, investments & services Bank’s product offerings and

business strategy Bank’s capacity & constraints

Size Financial condition Economic climate Safety & Soundness limitations

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Performance Context (cont.) Past performance Performance of similarly situated

lenders Written comments in bank’s Public

File Demographic Data

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Achieving Optimal CRA Performance Only 15% are rated

Outstanding Review your assessment

area boundaries New branches or office Changes in product mix Review in light of 2000

census tract designations

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Achieving Optimal CRA Performance (continued)

Review your lending distribution Make sure majority of lending is

within assessment area Review those areas outside the

assessment area

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Achieving Optimal CRA Performance (continued)

Establish and communicate goals for CRA performance Are we striving for an Outstanding?

Help examiners understand your area and “performance context” You know your market better than

examiners Explain anomalies and unique

characteristics of your assessment area

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Achieving Optimal CRA Performance (continued) Ensure your organization understands the

definition of community development Remember – activities must meet definition

and primary purpose Develop a mechanism to identify & track

community development activities Don’t get credit if you don’t provide for

examiners to review Missed or forgotten

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Achieving Optimal CRA Performance (continued) Promote strong HMDA & CRA (if

applicable) loan data integrity Potential civil money penalties Affect compliance management system Strong controls and audit

Determine how much community development activity is enough? Every institution is different Compare to performance context Compare to similarly situated banks in

your market

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Achieving Optimal CRA Performance (continued)

Measure your bank against similarly situated banks and the market Review banks w/Outstanding CRA rating

Ensure that your fair lending program and credit practices are in order

Consider CRA implications for opening and closing offices

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Achieving Optimal CRA Performance (continued) Partnership with Community

Groups Be proactive

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Achieving Optimal CRA Performance (continued)

Serving your community Expansion Plans Reputation Opportunities Increase profits

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Resources Joint Final Rule:

http://www.fdic.gov/news/news/financial/2005/fil7905.html CRA Exam Procedures

http://www.ffiec.gov/cra/exam_overview.htm Need Help?

Jimmy Nguyen ([email protected]) or (415) 808-8071

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