Agencies Issue Joint Proposal to Modernize Community Reinvestment Act Regulations

Federal bank regulatory agencies today jointly issued a proposal to strengthen and modernize regulations implementing the Community Reinvestment Act (CRA).

CRA is a landmark law enacted 45 years ago to encourage banks to help meet the credit needs of their local communities, including low- and moderate-income (LMI) neighborhoods, in a safe and sound manner.

Building on feedback from stakeholders and research, the agencies invite public comment on their joint proposal, which has the following key elements:

• Expand access to credit, investment, and basic banking services in low- and moderate-income communities. Under the proposal, the agencies would evaluate bank performance across the varied activities they conduct and communities in which they operate so that CRA is a strong and effective tool to address inequities in access to credit. The proposal would promote community engagement and financial inclusion. It would also emphasize smaller-value loans and investments that can have high impact and be more responsive to the needs of LMI communities.
• Adapt to changes in the banking industry, including Internet and mobile banking. The proposal would update CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models.
• Provide greater clarity, consistency, and transparency. The proposal would adopt a metrics-based approach to CRA evaluations of retail lending and community development financing, which includes public benchmarks, for greater clarity and consistency. It also would clarify eligible CRA activities, such as affordable housing, that are focused on LMI, underserved, and rural communities.
• Tailor CRA evaluations and data collection to bank size and type. The proposal recognizes differences in bank size and business models. It provides that smaller banks would continue to be evaluated under the existing CRA regulatory framework with the option to be evaluated under aspects of the new proposed framework.
• Maintain a unified approach. The proposal reflects a unified approach from the bank regulatory agencies and incorporates extensive feedback from stakeholders.

NAHB has responded to requests for comments on previously issued proposals to modernize CRA. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a joint notice of proposed rulemaking on CRA regulations in January 2020 and the Board of Governors of the Federal Reserve System (Federal Reserve) issued an advance notice of proposed rulemaking with its suggested approach to amending CRA in September 2020.

In our response to both notices, NAHB encouraged OCC, FDIC and the Federal Reserve to work together to modernize CRA in a manner supported by all three federal banking agencies.

Comments on the joint proposal will be accepted on or before Aug. 5. NAHB plans to weigh in on the plan.