WOODSTOCK INSTITUTE
CONVENOR OF THE CHICAGO CRA COALITION
THE COMMUNITY
REINVESTMENT ACT
Tools for Improving Community
Development Lending, Services and
Investments
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
Banks as Community Partners
CRA Provides a Valuable Mandate
CBOs
Consumers
Local Financial
Institutions
CDFIs
Government
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
1975 Home Mortgage Disclosure Act (HMDA)
1977 Community Reinvestment Act (CRA)
1977-87 Limited adherence to CRA requirements
1989 “The Color of Money” story printed
1989
CRA Exams made public
1990
New data added to HMDA
1992-96
COMMUNITY
REINVESTMENT
ACT HISTORY
Boston Fed analyses of
CRA reports
1995
Lending, Investments,
Services test added
2005
“ISB” regulations
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
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
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
Searching for CRA Exams Online
HOW DOES YOUR BANK STACK UP?
FFIEC Interagency CRA Rating Search
www.ffiec.gov/cracf/crarating/main.cfm
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
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
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
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
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
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
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
Community Needs Analysis
REINVESTMENT GOALS FOR YOUR AREA
Bank Branches
Residential Lending
Small Business Lending
Grants and Investments
Affordable Bank Products
Financial Literacy Training
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
Critical Issues
PRESERVING AND STRENGTHENING CRA
Key issues for community based organizations:
Grade Inflation
CRA Sunshine requirements
Regulatory erosion of CRA
Attacks on CRA
CAN BANKS REALLY FAIL THE CRA EXAM?
Since 1990, few banks have
failed a CRA exam
500
Satisfactory
400
Outstanding
300
200
Needs to Improve
100
Substantial
Non-Compliance
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
19
90
0
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
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
Federal
Reserve
FDIC
OTS
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
Steering
Committee
Economic
Development
Housing
Financial
Services
Grants and
Investments