Request for Comments on Reforming the Community Reinvestment Act

On August 28, the Office of the Comptroller of the Currency (OCC) released an Advanced Notice of Proposed Rulemaking (ANPR) for the Community Reinvestment Act (CRA). This is the first step in what is likely at least a yearlong process.

The CRA was enacted in 1977 as response to “redlining,” a discriminatory practice in which banks would deny loans to residents living in certain neighborhoods, often those with large minority populations. The CRA requires banks to lend money in the communities where they are chartered to do business or receive deposits. Banks can also receive credit for investing in certain affordable housing and community development programs, including in the Low-Income Housing Tax Credit, the New Markets tax Credit, and the Historic Rehabilitation Tax Credit.

According to an analysis conducted by the  National Community Reinvestment Coalition, banks have made nearly $2 trillion in small-business and community development loans since 1996. Yet, this same analysis found that three out of four neighborhoods that were “redlined” 80 years ago are still lower-income today, caused in part by unequal access to banking and credit.

The notice seeks comments on:

1. Increasing lending and services to low and moderate income communities;
2. Making CRA evaluation more transparent;
3. Clarifying and expanding the types of CRA-eligible activities;
4. Defining assessment areas;
5. Improving the timeliness of CRA regulations;
6. Reducing the regulatory burden of CRA performance evaluations.

The last significant reform of the CRA regulations was in 1995, before Internet baking and interstate banking became widespread ways of doing business. This was also before the passage of major financial regulation legislation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Any changes to the CRA will be monitored closely to ensure that the law continues to benefit low and moderate income communities and the people currently living in those communities. This means ensuring that there is increased investment in these communities and that such investment does not lead to displacement. Additionally, changes to what is considered an assessment area, and what is considered an eligible investment, could affect LIHTC and New Markets Tax Credit demand and pricing.

While the OCC has initiated the regulatory review process, it is important to note that the CRA is regulated by two other entities, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC). The three regulators typically coordinate regulatory reform efforts.

Comments on the OCC ANPR are due by November 19, 2018. CHAPA is reviewing the ANPR and welcomes comments from members.