CRA 101

What is CRA?

The Community Reinvestment Act or CRA is a United States Federal law that obligates banks to meet the credit needs of low- and moderate-income (“LMI”) people and areas in each community where the bank has a branch or conducts business. Large banks (with assets over $1.2 billion) must also provide community development investments and services…

Why is CRA important to banks?

The CRA promotes activities in which banks have a vested interest. By providing access to credit and other financial products and services for ALL parts of their communities (including low- and moderate-income areas as well as middle- and upper-income areas), banks can drive economic growth that fuels their institutions. These initiatives help banks create a…

Where can I learn more about the CRA regulation?

The Community Reinvestment Act is implemented and managed based on your Federal banking regulator. You can find it at the following locations: The Federal Act The OCC Regulation The FDIC Regulation The Federal Reserve Regulation In addition the the Act and implementing Regulations, the federal regulators have published Interagency Q&As that provide official guidance on how to…

Who holds banks accountable?

The Federal agency that provides a bank’s charter to operate will also monitor and regulate the bank’s overall performance.  This Federal agency could be the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) or the Federal Reserve.  Depending on a how a bank is structured, they may have one…

What is considered low- or moderate-income or LMI?

Assisting low- or moderate-income geographies and individuals is a primary focus of CRA.  The collective income group is often abbreviated “LMI” when describing both the individuals and areas together. LMI Individuals An individual’s income is considered to be LMI based on how it measures up to the area median family income. Overall, to be classified…

What is a bank’s assessment area?

An assessment area is one or more geographical areas within which a bank is evaluated on its record of helping to meet community credit needs, including areas designated as low- or moderate-income. The assessment area generally consists of one or more Metropolitan Statistical Areas (MSAs) or one or more contiguous political subdivisions, such as counties,…

What is affordable housing?

Affordable housing is housing where the occupant is paying no more than 30% of his or her income for gross housing costs including utilities.  This includes programs for individual homeownership, rental assistance, and multi-family development.

What is considered community development?

Community development is a general term used to characterize the various types of activities that may qualify for positive consideration under the requirements of the Community Reinvestment Act.  These activities at the highest level include: Affordable Housing for low- and moderate-income individuals and families or in low- and moderate-income geographies Community Services targeted to low-…

What is community development lending?

Community development lending includes loans to: Construct or rehab of affordable housing including multifamily development or retail units Support nonprofit organizations serving low- and moderate-income people or areas Support community development needs or community facilities in low- and moderate-income geographies Local, state or tribal government community development activities Finance environmental clean-up or redevelopment of industrial…

What is a community service under CRA?

Examples of community services that benefit low- and moderate-income individuals and area include: Providing technical assistance on financial matters to nonprofit, tribal, or government organizations serving low- and moderate-income housing or economic revitalization and development needs Providing technical assistance on financial matters to small businesses or community development organizations, including organizations and individuals who apply…

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