CRA Alert: Banking Regulators Release Joint Notice of Proposed Rulemaking on CRA Reform

Banking Regulators Release Joint Notice of Proposed Rulemaking on CRA Reform

Last week the Federal Reserve Board of Governors, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) released a joint Notice of Proposed Rulemaking (NPR) to modernize the Community Reinvestment Act (CRA). The NPR had been expected after all three regulators announced intentions to develop a joint proposal building on the Federal Reserve’s 2020 Advance Notice of Proposed Rulemaking (ANPR). Comments on the proposal must be submitted on or before August 5, 2022.

An estimated 73 percent of Housing Credit investment stems from banks motivated by CRA requirements. Therefore, any changes to CRA could significantly affect banks’ appetites to invest in the Housing Credit – and ultimately impact the ability to build and preserve affordable housing. Industry participants should analyze the NPR and develop comments to urge that any changes to CRA continue to incentivize robust investment in affordable housing through the Housing Credit.

The Federal Reserve, OCC, and FDIC will host an interagency webinar on May 11 at 3:00 p.m. ET to provide an outline of the new proposal. Topics will include assessment areas, qualified activities, the evaluation framework, ratings, data collection, and reporting. The webinar is open to the public, and registration is available here.

Additional Resources on the CRA Proposal

· One-Page Fact Sheet

· Summary of Key Objectives

· Notice of Proposed Rulemaking Text

· Federal Reserve Board of Governors Memo

Statements from Agency Leadership

· Statement by Federal Reserve Board Governor Lael Brainard

· Statement by Federal Reserve Board Governor Michelle W. Bowman

· Statement by Acting Comptroller of the Currency Michael J. Hsu

· Statement by FDIC Acting Chairman Martin J. Gruenberg

CRA Reform Background

The Community Reinvestment Act (CRA) was enacted in 1977 to ensure banks meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods. Though banking has changed significantly over time, the CRA’s implementing regulations have not been significantly revised since 1995. In recent years, the federal banking regulators – the Federal Reserve, OCC, and FDIC – have engaged to modernize CRA.

In 2018, the OCC independently released an Advanced Notice of Proposed Rulemaking, which was a significant departure from the prior practice of all three regulators issuing joint regulations. The FDIC joined the OCC in issuing a Notice of Proposed Rulemaking in 2019 but notably did not join the OCC in issuing a final rule in 2020. Months later, the Federal Reserve released its own Advance Notice of Proposed Rulemaking. In May 2021, after the change from the Trump to the Biden Administration, the new OCC leadership announced that it would rescind the 2020 final rule, which was officially rescinded at the end of 2021. Now, all three regulators are once again working together.

Many affordable housing participants have engaged with the regulators on all of the CRA frameworks proposed throughout the modernization efforts to urge that any changes to CRA do not reduce the incentive to invest in the Housing Credit. It is imperative that we continue to weigh in directly with agency officials and engaging officials.

We will once again be developing comments on the new CRA proposal, drawing from an extensive feedback process with our members.

See more about the CRA reform process here: Regulatory Issues Resource Center.

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