CRA Officer’s Examination Myth Dispelled

MYTH:  “Mortgage loans are all that count towards my CRA lending performance.”

Let’s be honest, regulators will review a bank’s mortgage lending data as a key indicator of CRA lending performance.  But while mortgage data is key to developing and supporting your CRA efforts, it’s not the only way you can get CRA credit.

Regulators are also interested in your innovative and flexible loan products.   It’s important any such products are primarily directed to serve low- to moderate-income individuals or areas.

Evaluate your loan products and think about some of the following options to enhance your lending performance:

  • Develop a qualifying small-dollar loan product to offer to your customers as an alternative to more expensive non-bank products, such as payday loans.  The FDIC has great guidance available on their website about such programs.  Just go to their website and search for “small-dollar loans” or Press Release 52-2007.
  • Explore ways to utilize government mortgage loan programs supported by Veterans Administration (VA), Rural Housing Service (RHS) or Federal Housing Administration (FHA).
  • Look for ways to help low- to moderate-income individuals improve the homes they already own.  An unsecured home improvement loan may help boost lending numbers in markets where home purchases and refinances have slowed down.
  • Implement an unsecured loan program to help individuals establish or rebuild their credit score.  Make sure the underwriting is flexible enough to meet credit needs.
  • Don’t forget about small businesses!  Loans to qualifying small businesses also count in your lending test, especially those supported by the Small Business Administration (SBA).