Reminder: Deadline to Submit Comments on CRA Reform is Tomorrow, Friday, August 5

Deadline: 11:59 pm ET tomorrow, Friday, August 5

Providing the banking agencies with unified recommendations will reaffirm the critical message that CRA must continue to strongly incentivize investment in the Housing Credit, so we encourage you to include the AHTCC’s recommendations in your comment letter. These recommendations, summarized below, were developed in conjunction with our CRA Working Group comprised of representatives from over 50 AHTCC member organizations. We also encourage you to share an endorsement of the AHTCC’s comments in your own letters.

In addition to highlighting our key concerns and recommendations below, we have also developed a comment letter template, accessible through the button below, that you can use in writing your own letters. The AHTCC’s full comment letter, also accessible below, includes topics in addition to the key recommendations in our comment template, as well as a more thorough review of the impact of the Housing Credit and the interaction between the Housing Credit and CRA. Please feel free to also use any content from the AHTCC’s letter in your own.

If you have any questions, please contact Megan John, AHTCC Director of Advocacy and Engagement.

· Office of the Comptroller of the Currency:

· Make sure to include "Community Reinvestment Act” in your document title and include “Docket ID OCC-2022-0002” in your comment letter.

· Address your letter to Chief Counsel’s Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.

· Click here to access the appropriate regulations.gov webpage.

· Click the blue "Comment" button and upload your comments.

· Federal Reserve Board of Governors:

· Address your letter to Ann E. Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551.

· Email your comment letter to regs.comments. Make sure to include "Docket No. R-1769 and RIN 7100-AG29" in the subject line of your email.

See our alert from May 2022 for a list of recent CRA proposals from the banking agencies and the AHTCC’s past comment letters.

CRA must be strengthened to create a stronger incentive to invest in Housing Credit properties across the country, especially in light of the growing affordable housing crisis.

We expect combining investments and loans under one test with only a 30% weight will reduce the incentive to make equity investments because banks will be more incentivized to fulfill their CRA requirements through other eligible activities, such as loans, that are easier and less capital-intensive to administer.

To provide an estimate of the possible impact of removing the separate Investment Test, the AHTCC, Affordable Housing Investors Council, and National Association of Affordable Housing Lenders conducted a survey of 24 large banks. Nearly 42% of respondents – representing $2.4 billion in yearly Housing Credit investment – believed the removal of the separate Investment Test would have a negative impact on their bank’s appetite to invest in the Housing Credit, potentially resulting in decreased Housing Credit investments in favor of eligible community development loans.

NPR Proposals that Will Strengthen the Housing Credit

The NPR includes two key aspects that we believe will benefit Housing Credit investment and help to even pricing disparities:

· Allowing consideration for the full amount of Housing Credit investments, regardless of the share of affordable units.

· Allowing consideration of community development activities outside of assessment areas, which could have the effect of evening pricing differentials between areas with the highest and least CRA demand if there is sufficient motivation for banks to invest in the Housing Credit.

Key Recommendations to Prioritize Community Development

The NPR proposes a disproportionate focus on retail activities over community development activities, which may not provide enough incentive for banks to focus on community development activities. To better motivate community development in general, we recommend:

· Evenly weighting the Retail and Community Development Test:

· The NPR proposes weighting the Retail Test at 60% and the Community Development Test at 40%. We urge that the Retail and Community Development Tests instead be weighted evenly to provide banks with more incentive to aim for an Outstanding conclusion on the Community Development Test.

· Require a Low Satisfactory Community Development Test conclusion for a Satisfactory rating:

· Under the NPR, a bank could receive a Satisfactory rating overall with only a Needs to Improve conclusion on the Community Development Test. We urge that banks be required to achieve at least a Low Satisfactory on the Community Development Test to receive a Satisfactory rating overall.

Key Recommendations to Mitigate the Negative Impact of Removing the Separate Investment Test

If the separate Investment Test is not retained (see above for more information), we recommend the following changes to help ensure that CRA modernization does not diminish the incentive to invest in the Housing Credit:

· In addition to weighting the Community Development Test at 50%, modify the community development subtests, for which we propose two alternatives:

· Include an Investment Subtest weighted at 20% of the total score: Instead of combining investments and loans in a single Community Development Financing Test, we propose creating two tests to account for investment and lending separately. An Investment Subtest would ensure that community development equity investments continue to play a distinct and important role in the CRA evaluation. We propose weighting the Investment Subtest at 20% (slightly lower than the current 25% Investment Test because it would not include Mortgage-Backed Securities), the Lending Subtest at 25% and Service Subtest at 5%.

· Modify the Community Development Services Subtest to include a responsiveness assessment: As an alternative, we proposed keeping the general structure of the proposed Community Development Test , but changing the services test to a Community Development Services and Products Subtest, weighting it at 15%, and modifying it to include an evaluation of the responsiveness of all community development products. The responsiveness factors would necessarily include our mitigating factors listed below, which will help to ensure equity investments receive proper attention. We propose that Community Development Financing Subtest be weighted at 35%.

· Measure banks’ new equity investments over time:

· A bank’s annual originations of equity investments should be measured from one CRA examination to the next to identify any sudden drop-offs in new equity investing, particularly in the early years of new CRA regulations. If there is significant reduction in new equity investment volume, examiners should be able to request an explanation.

· Include an institution-level Equity Metric and Benchmark:

· If an Investment Subtest is not created, we believe it will be important to ensure that equity investments are prioritized in another way by instituting an equity-specific metric and benchmark. An Equity Metric would measure a bank’s equity levels compared to deposits, and an Equity Benchmark would be used to compare this metric to peer institutions. We suggest that the Equity Metric and Benchmark are integrated into the institution-level community development test or subtest conclusion, much like the current proposal integrates the Community Development Financing Metric and Benchmark.

· Include the Housing Credit as an impact review factor.

· Under the proposal, a bank’s Community Development Financing Test conclusion would be determined by the Community Development Financing Metric, Benchmarks, and Impact Review, which is meant to encourage activities that are particularly impactful or responsive. The NPR names several broad impact review factors to be included in the review (e.g., activities that serve persistent poverty counties or benefit Native communities). Considering the responsiveness of the Housing Credit in addressing community needs, we strongly urge that the Housing Credit be added as an impact review factor.

In addition to our recommendations above, we urge the Federal Reserve, OCC, and FDIC to evaluate any final CRA regulations to ensure they will not have a negative impact on Housing Credit investment.

As the affordable housing crisis continues to worsen, we cannot risk reducing the incentive to invest in the Housing Credit, which would dramatically impact the nation’s ability to produce and preserve affordable housing.