THE COMMUNITY REINVESTMENT ACT

1. THE COMMUNITY REINVESTMENT ACT Tools for Improving Community Development Lending, Services and Investments

2. PURPOSE OF CRA AND CRA ADVOCACY Redlining – the refusal to loan money secured by a property because of its location in a specific area. Under CRA, banks have a continuing and affirmative responsibility to provides loans and services in areas from which they accept deposits. Source: www.syracusethenandnow.org

3. grants Local Financial Institutions loans and services equity CBOs Consumers Banks as Community Partners CRA Provides a Valuable Mandate CRA Government CDFIs

4. Fair Lending and CRA HOW THEY WORK TOGETHER • Community Reinvestment Act • Banks have a continuing and affirmative obligation to serve all communities in their chartered service area – including low income areas • Income • Geography • Fair Lending • It is unlawful to refuse credit or impose restrictive conditions to credit on the basis of • Race • Gender • Disability, or other protected status

5. Home Mortgage Disclosure Act(HMDA) 1975 1977 Community Reinvestment Act (CRA) Limited adherence to CRA requirements 1977-87 1989 “The Color of Money” story printed 1989 CRA Exams made public New data added to HMDA 1990 1992-96 Boston Fed analyses of CRA reports COMMUNITY REINVESTMENT ACT HISTORY 1995 Lending, Investments, Services test added 2005 “ISB” regulations

6. The Impact of the CRA BILLIONS OF DOLLARS IN REINVESTMENT Areas with high levels of CRA activism see increased levels of lending CRA related home mortgage and small business lending is profitable Banks across US make CRA pledges to communities to increase lending, investments and services

7. ENFORCEMENT OF CRA WHO IS RESPONSIBLE FOR BANK REGULATION? Federal Financial Institutions Examination Council Interagency regulatory body Office of the Comptroller of the Currency regulates national banks Office of Thrift Supervision regulates thrifts and S&Ls Federal Deposit Insurance Corp. regulates non-federal reserve member state banks Federal Reserve Board regulates member banks and holding companies

8. Bank Performance and Evaluation HOW TO READ A CRA EXAM Description of Institution Institution Assessment Area(s) Type of Exam Large Bank Small Bank Bank Performance Rating Outstanding Satisfactory Needs to Improve Substantial Non-Compliance

9. Searching for CRA Exams Online HOW DOES YOUR BANK STACK UP? FFIEC Interagency CRA Rating Search www.ffiec.gov/cracf/crarating/main.cfm

10. The Large Bank Exam HOW THE LENDING TEST WORKS Borrower characteristics Geographic distribution of loans Number and dollar amount of loans Community development lending Innovative or flexible lending practices

11. The Large Bank Exam HOW THE INVESTMENT TEST WORKS Equity Investments, and EQ2s Operating and program grants CRA targeted mortgage-backed securities Affordable housing, economic development, technical assistance

12. The Large Bank Exam HOW THE SERVICE TEST WORKS Branch distribution, opening and closing Affordable bank accounts Relationships with fringe finance companies? Financial literacy curriculum

13. The Small Bank Exam STREAMLINED EXAMS FOR SMALLER BANKS Lending test only, not examined for services, investments Percent of loans in assessment area, loan to deposit ratios Action taken on written complaints No small business data “Wink and Nod” test, neither rigorous nor comprehensive

14. The Intermediate Small Bank Exam NEW CRA REGULATIONS FOR MIDSIZED BANKS Lending test examines the distribution of loans in banks assessment area Community development test examines bank branch distribution, community development investments and loans Examination focuses on the bank’s opportunity and capacity and the need for community development funding No longer required to disclose small business lending

15. Data Analysis Publicly available data and data from banks HMDA and small business data is available online at FFIEC website Collect newspaper articles Look up financial and branch information on FDIC website Review community development loans Investigate features and requirements for checking and savings accounts

16. Technical Assistance WHAT IS AVAILABLE? Works with banks to develop policies and programs to promote community development Woodstock Institute provides quarterly listings of upcoming CRA exams – when is your bank examined? Organizes to influence local, regional and national banking policy

17. Community Needs Analysis REINVESTMENT GOALS FOR YOUR AREA Bank Branches Residential Lending Small Business Lending Grants and Investments Affordable Bank Products Financial Literacy Training

18. Making Your “Ask” Confrontation and follow-through Identify appropriate bank staff such as CRA Officer or community development specialist Review investment goals or grant making guidelines Submit and discuss your analysis Discuss your organization’s program areas and how they can fill gaps in CRA lending, grants and investments, or services

19. Critical Issues PRESERVING AND STRENGTHENING CRA Key issues for community based organizations: Grade Inflation CRA Sunshine requirements Regulatory erosion of CRA

20. Attacks on CRA CAN BANKS REALLY FAIL THE CRA EXAM? Since 1990, few banks have failed a CRA exam Satisfactory Outstanding Needs to Improve Substantial Non-Compliance

21. ATTACKS ON CRA GRAMM-LEACH-BLILEY ADDS SUNSHINE PROVISION Nonprofits must disclose CRA related loans and grants Regulation is burdensome and vague Woodstock Institute published Reinvestment Alert 17: CRA Sunshine Rules and You to clarify regulation

22. Attacks on CRA FDIC AND OTS WATER DOWN CRA Large Bank Exam “Intermediate” Small Bank Exam Small Bank Exam Greater than $1 billion Greater than $250 million OCC FDIC OTS Federal Reserve

23. Chicago CRA Coalition and Woodstock Institute Provides technical assistance for community needs analysis Works to strengthen CRA and improve reinvestment activities in member service areas through Steering committee and task forces meet regularly to discuss best practices, funding opportunities and relevant policy decisions effecting reinvestment in the Chicago region