The Office of Comptroller of the Currency (OCC) is seeking comments on ways to update the longstanding Community Reinvestment Act (CRA).

The CRA was enacted in 1977 to encourage banks to meet the needs and invest in the communities where they do business, including low-income neighborhoods. The legislation has played a significant role in financing affordable housing, including serving as a motivator for banks to invest in low-income housing tax credits.

In an Advanced Notice of Proposed Rulemaking, the OCC is inviting comments on ways to revise CRA regulations related to:

  • increasing lending and services to people and in areas that need it most, including in low- or moderate-income areas;
  • clarifying and expanding the types of activities eligible for CRA consideration;
  • revisiting how assessment areas are defined and used;
  • establishing metric-based thresholds for CRA ratings;
  • making bank CRA performance more transparent;
  • improving the timeliness of regulatory decisions related to CRA; and
  • reducing the cost and burden related to evaluating performance under the CRA.

Comments must be received on or before Nov. 19.

“Among the opportunities for strengthening CRA is to clarify the geography of what counts, particularly how investments beyond a bank’s local assessment areas would count,” Buzz Roberts, president and CEO of the National Association of Affordable Housing Lenders, told Affordable Housing Finance. “We would also like to see more clarification on how unsubsidized affordable rental housing is treated.”

The CRA has done a good job with respect to subsidized affordable housing, but 80% of the housing in the country that is affordable to low- and moderate-income renters is not subsidized, he said.

The CRA has not seen significant changes in more than 20 years, according to Roberts, noting that the last major change was in 1995 when new performance tests were established.

As federal officials look at possible changes, several concerns could emerge, including unanswered questions around the concept of establishing a new system to determine CRA ratings.

“In a metric-based framework designed to bring clarity to the determination of CRA ratings, the benchmarks representing the dollar value of CRA-qualified activity could be compared to readily available and objective criteria, such as a percentage of domestic assets, deposits, or capital from the bank’s balance sheet, to calculate a ratio that could correspond to the benchmark established for each rating category,” stated the advanced notice. “For example, a bank with $1 billion in total assets that conducted $100 million of CRA-qualifying activities in the aggregate would achieve a 10% ratio, if total assets were used for the denominator.”

This approach can be challenging for several reasons because it could favor certain types of activities and doesn’t take into account the differences among banks and their products, said Roberts, an affordable housing industry veteran.

A coalition of civil rights and consumer advocacy organizations is also keeping a close eye on the CRA. It has signaled to the OCC that any changes must strengthen—not weaken—banks’ obligations to meet the needs of low-income communities and communities of color and that changes must result in expanded access to credit in historically redlined areas.

"For 40 years, the Community Reinvestment Act has helped credit starved communities gain access to safe and responsible financial products. It is a critical tool in efforts to build economic parity for communities of color and is one of the most important laws for building wealth and revitalizing neighborhoods. The National Urban League calls on the OCC to enhance, expand, and fully enforce the CRA,” said Marc Morial, president and CEO of the National Urban League, in a statement.

The OCC must actively engage the civil rights community in this process to ensure no harm will be done to the people that need the CRA the most, added Lisa Rice, president and CEO at the National Fair Housing Alliance.

"The Community Reinvestment Act is an important fair lending law created in response to redlining practices that are still too common in low- to moderate-income communities and neighborhoods of color. It will be a detriment to families and our nation if changes to the CRA fail to guarantee that banks are meeting the credit needs of people in the communities where they are located,” she said.