Last week the Office of the Comptroller of the Currency (OCC) announced an advance notice of proposed rulemaking (ANPR) seeking public comment on reforming the Community Reinvestment Act (CRA). Comptroller of the Currency Joseph Otting wrote in an op-ed that the ANPR seeks stakeholder input on: clarifying and expanding what qualifies for CRA consideration; establishing metrics-based thresholds for CRA performance ratings; making CRA performance evaluation more timely and useful; and revisiting how the regulators define the communities that banks serve. A notable proposal in the ANPR involves creating a ratio test to rate banks’ CRA activity: it would compare a bank’s total CRA-qualified investments against a measure of the bank’s capacity to lend (for example, total assets). This simple ratio proposal could have significant implications on the scope of investment in affordable housing and community development programs. Comments are due 75 days after the ANPR is formally published in the Federal Register. Enterprise is committed to ensuring that any reforms to CRA retain a robust affordable housing and community development system.
CRA was enacted in 1977 largely as a response to "redlining," a discriminatory practice in which banks would deny loans to residents living in neighborhoods, often those with large minority populations, that they deemed hazardous. The law requires that financial institutions lend to creditworthy borrowers in low- and moderate-income communities within their assessment area – the geographic area surrounding an institution’s depository locations. In addition to receiving positive CRA credit for mortgage and small business lending, banks can also receive credit for investing in certain affordable housing and community development programs, including the Low-Income Housing Tax Credit (Housing Credit), the New Markets Tax Credit (NMTC) and the historic rehabilitation tax credit. The CRA is regulated by the three primary banking regulators – the OCC, the Federal Reserve Board and the Federal Deposit Insurance Corporation – that typically all coordinate on plans to reform regulations. The OCC is moving forward alone on the ANPR to seek public feedback, though Comptroller Otting has stated that this does not “restrict or prohibit [them] from partnering” with the other regulators in the future. The OCC supervises roughly 20 percent of banks seeking CRA credit, representing about 70 percent of total bank assets.