December 19, 2017 | Posted by Kinsey Sullivan
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The regulatory agencies have released amendments to the Community Reinvestment Act that will more closely align that regulation's requirements with the new HMDA rule. Here are the basics of what you need to know.

On November 20, 2017, the OCC, FRB, and FDIC released information about amendments to the existing Community Reinvestment Act (CRA) regulation. According to the agencies, their respective amendments are designed "primarily to conform to changes made by the Consumer Financial Protection Bureau (CFPB) to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA)."

In non-regulator speak, that means that they're making CRA requirements more closely align with the new HMDA Final Rule.

Back on September 20, 2017, the regulators proposed the CRA amendments as described above, and opened a month-long comment period. During this comment period, they recieved two comments that supported the proposed changes.

In addition, they've noted that they believe these amendments will result in less burdensome CRA performance evaluations (sometimes, we refer to these as CRA compliance exams).

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Here are some of the most important changes:

  • "Home Mortgage Loan" has been redefined.
  • "Consumer Loan" has been redefined.
  • Requirements about content that needs to be in your Public File have been changed.

In addition, the amendments remove some now-obsolete cross-references and definitions from the CRA.

The amendments to the CRA also become effective January 1, 2018, just as the HMDA Final Rule goes into effect.

Background about the Community Reinvestment Act

The CRA helps encourage federally regulated financial institutions to meet the credit needs of the communities they serve. These regulations define the way the regulatory agencies assess the financial institution's record of meeting the credit needs of those communities, which include low- and moderate-income (LMI) neighborhoods, consistent with safe and sound operations.

Different sizes and types of financial institutions are evaluted using different standards. To learn more about those standards, you might be interested in our Guide to CRA Compliance Exams.

An Outline of the Changing CRA and HMDA Definitions

As mentioned above, the terms "home mortgage loan" and "consumer loan" have been redefined. According to the agencies, here is how those definitions are changing:

"Home Mortgage" Loan Definition

cra-compliance-best-practicesCurrently, the CRA defines "home mortgage loan" as a “home improvement loan,” “home purchase loan,” or a “refinancing."

According to the regulators, the new definition of “home mortgage loan” for CRA regulations will mean a "closed-end mortgage loan" or an "open-end line of credit" as defined under the updated HMDA guidelines.

As you'd expect, these definitions do not include transactions that are excluded by the new HMDA rule.

  • The Final HMDA Rule revised the scope of loans covered under Reg. C, so that some of those categories are broader, and others more limited.
    • Effective January 1, 2018, financial institutions will be required to report applications, originations, and purchases of “covered loans” that are secured by a dwelling.
      • A “covered loan” is defined as a closed-end mortgage loan, or an open-end line of credit that is not excluded under 12 CFR 1003.3(c).
  • For CRA, home improvement loans that are not secured by a dwelling may be considered at the financial institution's discretion.
    • If you choose to have your home improvement loans considered, you'll need to collect and maintain this lending data in machine-readable form as “other secured consumer loan” or “other unsecured consumer loan,” as applicable.
    • Home improvement loans that aren't secured by a dwelling may still be evaluated under the lending test when consumer lending is such a significant portion of lending (by activity and dollar amount) that the lending evaluation wouldn't meaningfully reflect lending performance if they were excluded. 
  • Closed-end mortgage loans or HELOCs will be considered "home mortgage loans" for CRA purposes.
    • HELOCs that are secured by a dwelling will now be considered covered loans. Financial institutions that are covered by the Final HMDA Rule will now be required to collect, maintain, and report data on home equity lines of credit secured by a dwelling.
    • The effect of this revision to the home mortgage loan definition will vary depending upon the amount and characteristics of the financial institution’s mortgage loan portfolio.
    • Also, the performance context of the institution will affect how regulators will consider home equity lines of credit.
    • Examiners may review the relevant files of financial institutions that aren't required to report these transactions under Reg. C, and "consider those loans for CRA performance on a sampling basis under the home mortgage loan category."
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"Consumer Loan" Definition

“Consumer Loan” defines a category of loans that examiners should evaluate to determine a financial institution’s performance under the retail lending test apart from home mortgage, small business, or small farm loans.

It's also classified as a loan to one or more individuals for household, family, or other personal expenditures and that is not a home mortgage, small business, or small farm loan. 

  • Under the new "Consumer Loan" definition, a "home equity loan" will now be considered as a "home mortgage loan." (In the past, it was considered a "consumer loan secured by a residence of the borrower.")
    • The Agencies received one comment about this particular revision. The commenter recommended that examiners evaluate consumer lending, including unsecured home improvement lending, during CRA exams when such lending constitutes a “significant amount” of the bank’s business rather than a “substantial majority,” as is currently required.
      • The Agencies didn't address in the proposal how consumer lending should be evaluated under the retail lending test and think that discussing those recommendations are outside the scope of this final rule. As a result, the Agencies are finalizing the definition of “consumer lending” as proposed.

The regulators regularly review the examination policies, procedures, and guidance to better serve the goals of the CRA.

Changes to the Content of the Public File

According to CRA, financial institutions must maintain a public file of certain information and specify the information to be maintained and made available to the public upon request. This public file should also include a copy of the HMDA disclosure statement in its public file for each of the prior two calendar years, if that financial institution is required to report HMDA data.

  • As of January 1, 2018, financial institutions that have to comply with HMDA are no longer required to provide this HMDA disclosure statement directly to the public.
    • Now, Reg. C will only require financial institutions to provide a notice that clearly explains that the public can obtain a copy of the disclosure statement on the Bureau’s website.
  • As a result, financial institutions that have to comply with both CRA and HMDA will not have to provide that HMDA disclosure statement directly to the public in the CRA Public File. Instead, they would only maintain the notice referenced above in their CRA public file, rather than a copy of the HMDA disclosure statement.
  • A financial institution still must maintain in its public file the HMDA disclosure statements required by the CRA regulations that are not available on the Bureau’s website and, therefore, should not remove HMDA disclosure statements from their CRA public files if that information is not available on the Bureau’s website.

For more information, we recommend reading the OCC's press statement here

TRUPOINT Viewpoint: If you have to comply with CRA and/or HMDA, you'll need to keep these changes in mind and even modify your CRA policies, procedures, and data collection.

In addition, remember that TRUPOINT Partners can help with CRA and HMDA compliance, particularly geocoding and analysis. If you'd like to learn more, please take a moment to request a demo and speak with an expert.

In the meantime, check out this CRA compliance exam info kit! We will be continuing to update it, given these CRA amendments. 

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Kinsey Sullivan

Kinsey Sullivan

After studying Journalism at the University of North Carolina at Chapel Hill, I switched to the other side of content: Marketing, Advertising and PR. At TRUPOINT, I love turning complex data and ideas into high-impact content and campaigns. In my free time, I make art, read, and listen to a lot of podcasts on long walks with my dog, Charlie "Bird" Barker.