The annual adjustments are required by the CRA rules. 14. 230 0 obj Banks of all sizes would retain the option to request approval to be evaluated under an approved strategic plan. The proposal is intended to standardize retail lending evaluations through the use of retail lending metrics and establish performance standards based on local and tailored benchmarks as follows: Retail Services and Products Test. The census tract designations reflected on the "List of 2021 Distressed and Underserved Census Tracts" attached to this bulletin apply to activities conducted in calendar year 2021. Infrastructures, Payments System Policy Advisory Committee, Finance and Economics Discussion Series (FEDS), International Finance Discussion Papers (IFDP), Estimated Dynamic Optimization (EDO) Model, Aggregate Reserves of Depository Institutions and the 2 For more information, refer to OCC Bulletin 2019-40, "Community Reinvestment Act: Guidelines for Requesting Designation as a Wholesale, Limited Purpose, or Special Purpose Bank." Intermediate banks (less than $2 billion but at least $600 million in assets) would be evaluated under the Retail Lending Test and the current community development test. An agency would evaluate a banks performance in lending to low-and moderate income (LMI) individuals and communities separately for each major product line. Jul. In 2020, nonbank mortgage companies originated over 60% of all reported mortgages in the country. Farming and Farm Income. USDA Economic Research Service. Data Point: 2020 Mortgage Market Activity and Trends. CFPB. For example, Native families who depend on farming for both subsistence and commercial gain face increasing threats from drought, flood, and rising temperatures, with limited resources at their disposal to invest in climate mitigation solutions.14. by the Consumer Financial Services Group at Ballard Spahr LLP. endobj system. Review of Monetary Policy Strategy, Tools, and An agency would assign a banks recommended Retail Lending Test performance score based on the application of the metrics and benchmarks in an assessment area in conjunction with a review of a targeted set of additional factors to reach a final performance score. Aug. 2021. https://www.consumerfinance.gov/about-us/newsroom/mortgage-refinance-loans-drove-an-increase-in-closed-end-originations-in-2020-new-cfpb-report-finds/. 6. In the retail assessment areas, large banks would be evaluated only under the Retail Lending Test, and not under other performance tests. Annual adjustments to these asset-size thresholds are based on the change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million. U.S. Supreme Courts invokes major questions doctrine to invalidate EPA regulation: what are the potential implications for the consumer finance industry? Quality Control executives can improve audit throughput and accuracy while controlling costs. The proposal also better effectuates Congressional directives intended to ensure that the needs of historically underserved individuals and communities are adequately met. Perspectives from Main Street: Bank Branch Access in Rural Communities. Board of Governors of the Federal Reserve System. The proposal solicits feedback as to whether Special Purpose Credit Programs should be explicitly listed as an example of a responsive credit product or program that facilitates mortgage and consumer lending targeted to low- or moderate-income borrowers. The action follows the OCCs rescission in December 2021 of its 2020 CRA final rule and replacement of that rule with one that is largely based on the OCCs 1995 CRA rule adopted jointly with the Federal Reserve and FDIC. For large banks, the heaviest weight would be given to the Retail Lending Test (45%), with different weights attributed to the Retail Services and Products /test (15%), Community Development Financing Test (30%), and the Community Development Service Test (10%). For large banks that do not pass this screen, examiners would review performance context information that is specific to a banks level of retail lending in a facility-based assessment area to determine if there is an acceptable basis for the bank not meeting the retail lending volume screen. Banks would continue to delineate facility-based assessment areas where they have their main offices, branches, and deposit-taking remote service facilities. Subscribe to our RSS feed to get the latest content in your reader. Explore guides to help you plan for big financial goals, https://www.usda.gov/media/blog/2020/03/05/look-agricultural-productivity-growth-united-states-1948-2017, https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/farming-and-farm-income/, https://ers.usda.gov/data-products/food-dollar-series/, https://www.stlouisfed.org/publications/regional-economist/second-quarter-2017/banking-deserts-become-a-concern-as-branches-dry-up, https://www.federalreserve.gov/publications/files/bank-branch-access-in-rural-communities.pdf, https://nca2018.globalchange.gov/chapter/15/, https://www.consumerfinance.gov/about-us/newsroom/mortgage-refinance-loans-drove-an-increase-in-closed-end-originations-in-2020-new-cfpb-report-finds/. 15 Given that the public subsidizes mortgage lending by these nonbanks, federal policymakers should continue to consider ways to ensure all mortgage lenders are serving all qualified applicants, especially in neighborhoods that have been historically excluded. Credit Unions can leverage a single platform to obtain a holistic view of loan quality. Retail Lending Test. A delivery systems prong that would evaluate three components of a banks performance: (1) branch availability and services, (2) remote service facility availability, and (3) digital and other delivery systems. Banks, New Security Issues, State and Local Governments, Senior Credit Officer Opinion Survey on Dealer Financing This effort to update and modernize the Community Reinvestment Acts framework is also a reminder that policymakers need to consider whether nonbank mortgage lenders should also be required to better meet the needs of the communities they serve. The Office of the Comptroller of the Currency (OCC) today published. Illinois, Massachusetts, and New York all have laws obligating both banks and nonbanks to meet state Community Reinvestment Act requirements. The framework for evaluating banks will continue to rely on the required Home Mortgage Disclosure Act data reporting, and, once a small business lending data collection rule is finalized, the framework will rely on small business lending data reported by financial institutions.12, Third, the proposal better reflects congressional intent by more explicitly acknowledging race and ethnicity and creating greater transparency about retail lending. The OCC designates distressed and underserved areas in accordance with the June 2020 rule. a bank with assets greater than $600 million and equal to or less than $2.5 billion is an intermediate bank. The median hourly compensation value for the banking industry to be applied to qualifying community development activities that are effective October 1, 2020, through December 31, 2021, is $39.03. For large banks, the proposal would disclose mortgage lending data broken out by race and ethnicity. The financing metric would be the ratio of a banks community development financing dollars (numerator) relative to deposits within a facility-based assessment area (denominator). Small banks (less than $600 million in assets) would continue to face the current small bank performance standards that evaluate retail lending. Given their essential role, chartered banks receive substantial public benefits, including access to Federal Reserve System loans, the ability to accept deposits insured by the Federal Deposit Insurance Corporation, and access to other public safety net programs to keep them stable. The evaluation framework would include four tests: a Retail Lending Test, a Retail Services and Products Test, a Community Development Financing Test, and a Community Development Services Test. 1. Banks have obligations under the Community Reinvestment Act because of the significant public benefits they receive. 13. Impact factors would include whether the activities serve persistent poverty counties, serve geographic area with low levels of community development financing, serve low-income individuals and families, or support small businesses or small farms with gross annual revenues of $250,00 or less. For large banks, wholesale or limited purpose banks, such assessment areas would be required to consist of: (1) one or more Metropolitan Statistical Areas (MRAs) or metropolitan divisions; or (2) one or more contiguous counties within an MSA, metropolitan division, or the nonmetropolitan area of a state. WASHINGTONThe Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation today announced the annual adjustment to the asset-size thresholds used to define small bank and intermediate small bank under the Community Reinvestment Act (CRA) regulations. Mar. Read white papers, guides, checklists and more authored by our team of risk and compliance experts. While the agencies have acknowledged concerns about subjectivity in the current proposal, further review of the proposal is needed to determine whether the proposal adequately addresses those concerns. Two of the proposed impact review factors are activities in persistent poverty counties (defined as counties with a poverty rate of at least 20% over each of the last three decades) and areas with low levels of community development financing. or have questions about the content, ACES is the leading provider of enterprise quality management and control software for the lending industry. not having any branch within the census tract. This is a joint effort with the Office of the Comptroller of the Currency and the Federal Reserve Board of Governors, which are proposing the same changes for banks under their respective purviews. Under the proposal, retail loans located outside any facility-based assessment area or retail lending assessment area for a large bank and outside of any facility-based assessment area for intermediate banks with substantial outside assessment area lending, would be evaluated on an aggregate basis at the institution level as part of the Retail Lending Test. Third-party QC providers can ensure quality and compliance throughout their operations while providing the flexibility to scale as needed as volumes change. Gain valuable insights and reduce risk across all consumer lending channels. Kathleen Kassel. The updated thresholds, set at $2 billion (cutoff between a large bank and an intermediate bank) and $600 million in assets (cutoff between an intermediate bank and a small bank), are intended to reflect the differences between banks of varying sizes.11 Picking specific size thresholds is never easy, and I look forward to receiving the publics views as to whether these proposed cutoffs are calibrated appropriately. Responsive support and access to our experts. Today, the Board of Directors of the Federal Deposit Insurance Corporation is voting to seek public comment on a Notice of Proposed Rulemaking to update the Community Reinvestment Act framework for certain state-chartered banks.1.