Online Event Archive Recorded December 6, 2023
Breaking down the rule and digging into how it will impact the fight for economic justice and racial equity is an ongoing process and you can expect to see more content and conversations from NCRC as we analyze the rule and gather feedback from our members and allies.
Join us as we discuss:
- Community Reinvestment Act issues most important to you
- Aspects of the rule that will have the biggest impact on the communities you serve
- Parts of the rule that you want clarified
- How the rule will affect your work
Webinar Slides
Speakers:
Catherine Crosby, Chief of Community Engagement & Institutional Accountability, NCRC
Kevin Hill, Senior Policy Advisor, NCRC
Vernice Miller-Travis, Executive Vice President, Metropolitan Group
Caitie Rountree, Director of Membership & Events, NCRC
Transcript:
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
Rountree 1 0:03
All right, we’re gonna go ahead and get started. I’m Caitie Rountree, the director of membership and events here at NCRC. As we’re getting started today, I want to remind you that our Code of Conduct applies to all NCRC events, you can see a link to that here. We want to answer as many of your questions as we can. So make sure that you submit them through the q&a module at the bottom of your screen. Some of those we may be able to answer during the presentation, we’ll also be holding some time at the end. And make sure you’re following NCRC on social media and posting your thoughts there and tagging us in them. This call is for NCRC members, over 700 organizations dedicated to making a just economy a national priority and a local reality. NCRC worked with our members to close the racial and socio-economic wealth and opportunity divides. We do that by organizing agreements between financial institutions and our members to increase lending investments in philanthropy in neighborhoods that need it by advocating for policies that encourage the just use of capital by holding institutions accountable for discrimination in financial services and housing, by empowering entrepreneurs and community organizations with grants, loans, technical assistance and training. By investing in and around low- and moderate-income neighborhoods to increase homeownership, in partnership with community organizations and municipalities, as well as lenders, investors and developers. We do it by producing agenda-setting research and stories and by convening events that bring together stakeholders to advance equitable solutions. Over the last few weeks, NCRC has been working hard to digest the 1,500-page CRA rule release at the end of October. But even before that, we’ve been working with our members for years to identify what matters most to our communities, and what could feasibly be accomplished in an update to this important legislation. Thank you to each of you for your work with us to strengthen CRA and to leverage it to build a just economy. As we’ve been reading and summarizing, we’ve been flagging the updates that we think our members will care most about the areas you flagged for us via surveys and months of conversations and questions. Today, we’re gonna go a little deeper into some of those key updates. You’re in great hands with our speakers today. I’m going to introduce them and then hand it off. We have Kevin Hill, our Senior Policy Advisor here at NCRC. His work focuses on the Community Reinvestment Act and similar state laws, section 1071 and climate change. As such, he’s been leading the charge for NCRC and reading and annotating the new rule. Katy Crosby is NCRC’s chief of community engagement and institutional accountability. Before joining NCRC staff in 2023, Katy was town manager for the town of APEX North Carolina, where she led a staff of approximately 600 employees and a budget that exceeded $200 million and served as the NCRC board chairperson. She’s been involved as a member and board member at NCRC for about 15 years. And finally, our third speaker today is Vernice Miller-Travis, one of the nation’s pioneering and most respected thought leaders on environmental justice and the interplay of civil rights and environmental policy. Vernice has vast experience as a civil rights and environmental policy analyst and advocate, consulting for federal and state agencies, foundations and nonprofits Environmental Program Manager and foundation program officer. And so with that, I’m going to hand it over to Kevin to get us started.
Hill 3:31
Thanks, Caitie, and glad to be speaking with all of you today. I’m just going to talk for a minute here just to give you an outline of what we’re going to cover today. In today’s presentation, we’re going to start with a summary of the new rule think that’s why you’re all here today, we’re going to kick it off with kind of like a high-level major, major takeaways, then I’m going to do a bit of a deeper dive. You know, as promised, we’re gonna go deep in the weeds on some of these things. And then we’re going to, you know, hit on some really important topics for community organizations. A quick discussion of some of the issues we’ll be tracking going forward. And then we’re hopeful that we’ll have about 15 to 20 minutes of questions and answers at the end. So please do use the q&a tool that Caitie Rountree just described. And with that, I’m going to turn it over to Katy Crosby.
Crosby 4:29
I cannot take myself off video, or I cannot cut my video on I need the host to do it. Thank you. All right. Good afternoon, everyone. My name is Katy Crosby as mentioned earlier, and I am the chief of community engagement and institutional accountability for NCRC. And I’ll be giving a high-level overview of the new CRA regulations some positive changes that we’ve seen As it relates to the retail lending test, this test is much more objective and transparent, and also summarizes large banks must lend at either 80% of total lending to borrowers with low and moderate incomes or small businesses, small farms, or at 60% of local demographics, or in 60% of their assessment areas in order to pass the retail lending tests that accounts for 40% of their CRA rating. The analysis with small business small farm lending has been improved by looking at lending to businesses and farms under $250,000 in revenue, instead of only under 1 million. In addition, much more of the bank’s total mortgage and small business small farm lending will be will be included in CRA exams due to new assessment areas. Under the community development test. New categories of CRA-eligible Community Development encourage banks to pursue loans investments and grants on native lands, support weather resiliency, and financing that contributes to the health and well-being of individuals with low to moderate incomes. CRA exams will now include much of the bank’s community development activities that fit under 12 different categories of impact and responsiveness. These activities include serving persistent poverty counties, and census tracts with rates of poverty over 40%. Persistent poverty counties tend to be communities that are Rural Assistance census tracts with poverty rates over 40% tend to be urban areas. This will help local organizations position their communities for community development financing that banks might not have previously pursued since banks will want to avoid having nothing to report for the various categories. Special Purpose credit programs will now be counted for large banks as a positive consideration on the retail services and products test, intermediate and small banks do not have the retail services and products tests but can also receive positive consideration for developing Special Purpose credit programs. major takeaways for banks special credit credit, special purpose credit programs will help you pass CRA exams. Some unhelpful changes from the proposed rule include thresholds for retail lending assessment areas were increased. This means that less lending will be covered and they now only apply to large blank banks that do more than 20% of their lending outside of branch networks. auto lending will only be evaluated if accounts if it accounts for 50% of a bank’s total retail lending, and evaluation of credit and deposit products can now only contribute positively to a bank CRA performance. This means that banks will now not be downgraded for any for only offering expensive deposit accounts or unaffordable loan products. They will not be downgraded graded for this. So the new investment metric for banks above $10 billion can only contribute positively as well. Some missed opportunities include little progress on incorporating race into the CRA process. Given the purpose of the CRA to address redlining by evaluating banks on how well they meet the financial services needs of entire communities. It’s disappointing that the CRA continues to leave race out of that process. NCRC offers several recommendations for doing so including creating a disparity study that would identify racial groups and communities with significant gaps in loans and investments and to factor in a bank’s performance at serving these identified groups. Instead, the agencies will start publishing data on lending performance of large banks by raising race and ethnicity in all of their assessment areas or regulatory websites using Home Mortgage Disclosure Act data, but this will not affect the bank’s CRA ratings. No changes to how the CRA performance affects marginal and branch applications was included, which is the main penalty for failing theory exams. No improvements have been made to the process to the process for submitting comments, and no evaluation of the climate impacts of bank financing. So those are some high-level updates. I’ll turn it over. Back over to Kevin for our next presenter. Thank you.
Hill 9:26
Thanks, Katy. So now, those are kind of the major bullet points, the big takeaways. But you know, as promised, we wanted to go deeper on some of these things, get kind of more, more in the weeds. So that’s, that’s what I plan to do now. So starting off with the increased asset thresholds, we have seen that there are new assets thresholds, banks are being defined differently now. Large banks are those with $2 billion in assets and up, they previously used to be 1.5 billion, as you can see on your screen, intermediate banks have also been increased. And so have small banks. This is something we are concerned about. And this was an unchanged proposal. From the final rule, the regulators proposed that this is how they were going to do it. And then we and many of our members submitted comments, you know, asking them to reconsider. And the reason we’re asking them to reconsider is because, you know, there’s different, there’s different obligations and responsibilities built into these different assets thresholds. So, you know, we’ll get into the specific testiness in a second. But, you know, intermediate banks don’t have a service tests, they don’t have an evaluation of their branch network. And small banks don’t have a community development test or a service test. And as a result of these these changes, thresholds, over 700, banks will now no longer have that community development test, because they’ll move from intermediate to small, and over 200, banks will no longer have a service test, because they’ll move they’ll move from large to intermediate. And we know that those banks, banks to those sizes tend to be clustered in rural areas and kind of smaller metros. So we are concerned that, you know, by increasing these asset thresholds this way, you could see a no, you know, a drop in community development and branches in those areas. Because, you know, if some things if banks aren’t being tested on certain things, they have less of an incentive to then do them. And, you know, the regulators, you know, they didn’t just do that for any reason, they said they did it, because they wanted to, you know, reflect differences in capacity amongst the different wants to different banks. And, you know, we’ve kind of put in our comments that, you know, you’re already doing a lot to reflect the different capacity as we’ll get into, there’s modifications to the tests, intermediate banks actually only have the new retail lending test, they can continue their old committee development test if they like. And small banks have the least difference of any of the banks in this, they can, they can keep their old lending test, and they don’t have those other tests. So we do think that that was an area, we were a bit disappointed, we would have liked to at least see, you know, less of an increase in the threshold, so less banks would be affected. But the regulators didn’t move forward with this as their proposal. I’m moving now into assessment areas, one second, there we go, moving now into assessment areas, there are still or I’m trying to figure out what I should call the old CRA now like CRA classic CRA vintage. It hasn’t I haven’t found it yet. But let’s use CRA classic for now. So we still have the CRA classic assessment areas, which are now called, you know, facility-based assessment areas. And these are the assessment areas that where there’s where the bank has branches, where they have ATMs where they take deposits, and we have to call them facility-based assessment areas now, because now there’s these new assessment areas because previously, that was the only game in town. But now we call them facility-based assessment areas, because now there’s these two new ones. There’s retail lending assessment areas now. And now there’s outside retail lending assessment areas. So retail lending assessment areas, these will kick in for large banks that do more than 20% of their retail lending outside their branch network or facility-based centers. So if you if you’re a large bank, and you do more than 20% of your lending outside, or you have branches, and then there’s an there’s another caveat, and then an NMR. In a county, if you’ve done either 150 closed in mortgages, last two years, or 400 small business loans, you will now have a new assessment area in that area. It’s the retail lending assessment area, regardless of whether your branch is there. If you’re if you’re if you hit those thresholds, and you do more than 20%, you will now have that new assessment area. And those were, as Katy indicated in the intro. This was originally these thresholds were originally I believe it was 102 50 before, so they have raised the thresholds a bit here in response to industry feedback, which will now mean that less lending is covered. But even with that, regulators estimate that 310 large banks about 83% of them will not be required to create any additional assessment areas because of these thresholds. 50 banks about 13% of large banks will be required to create one to 10 and there will be five banks out there that will be required to create about 50 Because they’re you know, they’re lending in lots of areas in a significant way where they don’t have branches And you know, the regulars estimate that large banks would have received failing ratings in about a quarter of these new retail any assessment areas, and that this would have resulted in about 7% of those large banks failing their retail lending test. So this is pretty interesting. And I think, in my personal opinion, this is one of the most positive changes we’re seeing in the Community Investment Act, because it’s really going to put banks on notice that if if you are going outside of your branch networks to lend a lot, and you know, that was previously a blind spot, and CRA, you better be making sure that you’re lending to, you know, borrowers low to moderate incomes, or small businesses or small farms alike, you can no longer just, you know, do what you have to do in your branch network, and then go outside it and do whatever you want. Now, there’s really going to be more of an evaluation of what’s going on outside your branch network. And are you in Are you really, you know, going outside your branch network to make credit available to people that need it most? Or are you going out there to cherry-pick and find the wealthiest people and lend to them. So that there will be now much more accountability. There’ll be much more accountability now to what banks are doing both inside and outside, which and that that outside accountability was really previously absent for the most part from CRA. So that’s, that is something that is a big improvement. There’s also outside retail lending assessment areas, all large banks will now evaluate and their lending and outside retailing, sorry, outside retail lending areas, which is a nationwide assessment area, that excludes basically their other assessment areas. And it also doesn’t include any rural counties where the bank didn’t make any loans. So it’s one kind of big nationwide assessment area that doesn’t include the other ones. In addition, intermediate banks will also have these outside retail lending areas, if 50% or more of their, their loans and purchases are outside of their branch network. In addition, intermediate banks as well, small banks could choose to opt in to having an outside retail lending area, which, you know, there is this one does vary a little more discussion, because there’s kind of pros and cons here. On the on the pro side, you know, or let me start with the concept. You know, if you’re an intermediate bank, and you do more than 50% of your loans outside your branch network, that’s almost like a community bank that refuses to lend in its community. And a lot of times before, it would just that bank would have largely just found it very hard to pass the CPA exam. So it is there is kind of opening this up, there is a bit of a change from how this would have been evaluated previously. But on the pro side, though, if there was a bank, let’s say, you know, there’s like some of the FinTech banks like square and stuff that are out there. And they they put one branch in usually a low tax state, like like Utah, or Utah, or like Delaware, and they were just, you know, they would do their best to land in that little area. But they would land also all throughout the country. But they would only really focus on lending to American borrowers or small businesses in like Salt Lake City, or somewhere in Delaware. And so now, that bank will, they won’t be able to get away with that anymore of just, you know, finding one little area where they lend a little Moroccan borrowers, but across the country not doing much, they’ll now have to, you know, since most of their lending will be 50% or more, there will be this outside retail lending area. So I think it is still a net positive, I think we’re really capturing much more lending than we were before. So moving through just quickly. Now, this is what tests the weights, because there has been some changes here from CRA classic, which I’m going to try to trademark someday, I think. So, in here, you can see here that this is a large banks are now being evaluated. They have a retail lending test that counts for 40% of their grade use account for 50%. There’s a community development financing test that now accounts for 40%. And don’t worry, folks, I’m gonna go over all these tests in a second. And then retail services and products tests that counts for 10%. And then a Community Development Service test that counts for the final 10%.
Hill 19:26
I’m gonna pick up some a little quicker right now to get through to the q&a. But as Katy mentioned at the top, all large banks now that have 10 or more facility-based and retail-based assessment areas will not pass their theory exams or sorry, will not pass the lending test unless they receive a passing rating, and at least 60% of their facility and retail-based assessment areas. There previously was no kind of, you know, rule around you had to pass in a certain percentage of assessment areas, you know, 64 Send, you know, does still open up for 40%, you’re not doing that great of a job. And so we did you know, in our comment letters, and many of our members comment letters, we asked for 70% At least, no more importantly, we also asked to break it out. So we wanted to see, you know, you know, yeah, to hit, you know, 60% in your urban areas, 60% in your rural areas, and then 60%, in your kind of, like smaller metros, and stuff like that. The Raiders did not take our recommendation, they’re citing issues with like how to, you know, categorize the different types of assessment areas. I think, though, that if they could figure out to do, like the retail lending test that we’re about to get into, I think they could have figured out a way to categorize the different census tracts. But that’s where we are now. And it’s still, there’s still more, this is still, you can still argue this is more progress than before, because previously, there was no rule about a certain number of assessment areas you had to pass in, in order to pass your retail lending test. Moving on to intermediate banks. Moving on to intermediate banks. Yeah, so the intermediate banks, there’s not really much of a change here, they have two tests 50% Each, it’s the retail lending test with some modifications, that it’s like that they don’t have the retail lending assessment areas, they only have the outside if they do 50% or more, so it’s an easier test for them. And then they have, they can have, they can opt to continue to have their previous community development test. They don’t have to take the new community development financing test unless they want to small banks, small banks, there’s really no change here unless they want there to be, which they would want there to be if they would, is in some way advantageous for their CRA performance. So it’s the previous test. And so now let’s get into the tests. And you all want to deep dive, remember so that you all clicked on deep dive, so So it’s about to get pretty deep. So this is the retail lending test, I’m gonna do my best to categorize one thing, which I think might have already been in the chat, we are putting out a guide, a guide and a summary on t the community, the Community Investment Act Rule. So if you’re like me, and you learn better by reading, we got you covered. It should be up on our website shortly if it’s not right now. And I think there’s there’s links in the chat. So but uh, let’s get into it deep dive, indeed, four-step process. And so it’s yeah, it’s easily these four steps. It’s determining how much lending is, quote unquote, good enough. Like there’s the term sheer amount of loans. Like, have you done enough lending, regardless of who you’re lending to, per se? Just have you done enough? That’s the that’s the first step. It’s the retail lending volume screen. And then it’s figuring out, you know, what is your major product lines in this area, like what are, you know, what is what is there enough of your loans to really to really fairly compare you to, to the rest of the the rest of the lending industry, and, and to local demographics. And then it’s the distribution now, so actually doing that comparison to the rest of the industry and global demographics. And then finally, we need to have some way to combine the different product line scores, because remember, there’s moderate low-income census tracts, moderate-income census tracts, and low-income borrowers and moderate-income borrowers, they’re all going to be analyzed separately. But there does need to be some way to combine them in order to say this is the total rating for the specific assessment area, or the specific, this or the institution’s total rating. So let’s get into it. So in each facility, so the first step here is this retail lending volume screen, which is basically a fancy loan to deposit ratio. So they’re going to take you in each, you know, each place for each market where a bank has branches, they’re going to look at, they’re going to calculate your loan, a bank’s loan to deposit ratio, and it needs to be within 30% of the aggregate of all banks loan to deposit ratio specific to that assessment area. And if it fails, that 30% screen, a bank cannot pass in that assessment area, unless it has quote unquote, the acceptable basis for not reaching the 3% threshold and the acceptable basis. You know, we highly Katie highlighted the game we like the retail lending test because it’s it’s much more objective. It really helps us you know, more definitively evaluate Is this a bank that’s done, you know, satisfactory lending performance, outstanding lending performance or needs to improve lighting performance, you know, community, a lot of senior community a lot of Syria exam comments previously, were largely trying to, you know, make an argument to a regulator that no this isn’t good. up, but now now we really have a much stronger set of metrics that are determining what is good enough what is outstanding, what is satisfactory, and what needs to improve. But things like acceptable basis do, you know, keep discretion in there which, you know, could lead to, you know, variations between exam cycles, if there’s turnover, the agencies, and also, you know, potentially, you know, administration’s may come in, that are more friendly to industry and direct examiner’s to be that way as well. So, this does create, you know, this does add a little more objectivity into it, or subjectivity into a into a more objective process. Moving on. So now the second step, how do we where will we, what specific types of lending will be evaluated. So, all major product lines will be evaluated on the extent of loans made to borrowers with low incomes, moderate incomes, businesses, farms, low to around 50,000, between 20,000 and a million, and as well as a geographic analysis in low and moderate-income census tracts and determine what is a major product line. Any closed in mortgage lending, small business or small farm lending, and auto lending, it’s considered a major product line, it accounts for 15% or more of the bank’s total lending and assessment area. So if you have if a bank is 16%, of their lending, in an area is is small business lending, then they’re going to evaluate small business, if only 13% of their lending and assessment area is mortgage lending, that’s not going to get evaluated. And in the retail lending assessment areas, it’s a little different, the product lines or whatever trips that threshold. So if you did 160, mortgages, you know, you’re over 150, and now you’re gonna be evaluated on mortgages. And then after they determine these, after they determine the, what are the major, major product lines, each product line will be compared to two benchmarks, they’re going to, you know, take your percentage of lending. Like, specifically, if we’re talking about low-income borrowers and mortgage lending, they’re going to take your percentage of banks percentage of lending to low- to moderate-income borrowers, and they’re going to compare it to both a market benchmark. That’s, that’s basically what is the aggregate what are all lenders doing in an area, and then they’re going to compare it that to a commute. So there’s, that’s one of the benchmarks. And then a second benchmark is the community benchmark, which is they look at, they’re going to compare your percent of loans to low-income borrowers, to the percent of like the percent of the population that is low-income borrowers. And they’re going to tie this to these, these benchmarks here. So they’re going to say, in order to get and you heard from Katie in the summary, in order to pass, you either need to be at 80% of the market benchmark, or 60% of the market, or sorry, a your selling market benchmark or 60%, of the community benchmark. And you can see the various ranges of performance here for the various ratings. And they’re going to take in a in another issue where we wish they would kind of reconsidered, they’re gonna select the lesser of these two benchmarks. So say, for example, 80% of a market benchmark is 30%. And 60% of the community benchmark is 40%. In that example, they would then use the 30% market benchmark slower. So I mean, just to sum this up, and I think it is a little easier to see this in writing. But so to sum this up, you basically need to get a banks will need to be at either 80% of their market benchmark. So 80%, of what aggregate is doing, or 60%, in order to pass, and they have to do this and 60% of their assessment areas. So after, after they’ve done all that. So they’re gonna do that each time for each product line, and each of those various categories, underserved borrower, so they need to have some way to combine those. So you can get the total, the total product line score for each of these various categories. And so each product line score we weighed based on the base percentage of loan dollars and total loans from that product line. So it’s a combined average here. So let’s say let’s say 50% of your let’s say mortgage lending accounted for 50% of your banks loans by dollar volume and accounted for 30% of their loans by by by loan by loan amount like the number of loans you made. So 50 plus 30, is 80 and then divide that by to be 40. So you would get a 40% weight on your mortgage lending to low-income borrowers in that example. And then, you know, and then the combine this all to get to, you know, a specific assessment area, or a specific you know, In total rating, the weight of each assessment area for state and the overall retail lending test score is based on the average is based on the average of two factors, the bank share of deposits from the assessment area, and the bank share of loans and loan dollars using loan counts. So it’s a weighted average. Joe, I’m sure if I don’t think many of us use weighted averages, but they’re not as complicated as it sounds. It’s basically just you apply that weight to all the various, the various retail lending test scores. And then after you apply that weight, you then just, you know, you average it like you would, it’s just, you’re not taking the figures and you’re, you’re not directly averaging them, you’re applying these weights first. And the reason for that is, is they do want to, they want to weigh where the bank does most of their business the most. That’s the whole purpose of this, this kind of weighted average of thing. Alright, so I’m gonna move on. I’m sure there’s questions about that. But let’s move on so we can get to the question and answer portions as soon as possible. So there’s also some moving on to the community on financing test. This test analyzes committee development by comparing a bank’s ratio of combined loans and investments compared to deposits to state and nationwide benchmarks. Banks will be analyzed on activities nationwide. In addition to where they have their facility-based scenarios, they’ll be looking for things like impact and responsiveness. And it does not include threat. But this difference between this test and all the other tests on the test site is just the retail lending test we just went through is there is that some of them do have metrics and benchmarks, which I don’t spend as much time on. On the other tests, maybe some of you will appreciate that. But I don’t they don’t they do have metrics and benchmarks in these tests. But what they don’t have is they don’t have like a specific range of performance. But if you remember this, there is no equivalent of this in the other tests. It’s there’s metrics and benchmarks that will guide examiner’s, but it’s still left up to their discretion at the end of the day. This one is and there, the Raiders could still make changes here. But it’d be much harder for them to make changes to lending tests, because it’s set out like these are the performance ranges. This is what outstanding and satisfactory looks like that you will not find that equivalent in these other tests. So there is some concerns about you know, the combining of loans and investments for large banks. NCRC, and several of our members requested a separate metric for investments, because that’s how large banks are currently evaluated. They currently have lending tests that includes committee developed loans and investment tests that includes qualified investments. And you know, it so a lot of us commented, concern that, you know, you could see investments decrease from large banks if they weren’t, you know, continue to be separately evaluated. And so in response, the agencies added an additional metric and benchmark for banks above 10 billion in assets. This metric will analyze the bank’s investments compared to deposits and compare it to the national benchmark of all other banks above 10 billion assets with investments and mortgage-backed securities excluded. However, this can only contribute positively to a bank’s exam. And this is a change from currency or a previously all large banks would have had that separate evaluation. And if banks messed it up, they didn’t do a lot of good investments, they wouldn’t be having it would be downgrade their score, it would draw down their score. Now it can only contribute to it positively. The regulars do note that they will look for in their words, appreciable declines in investments or loans, that are caused by combining these on these separate tests. But the regulator’s have one thing I think we all need to truly, you know, encourage the regulator’s is that don’t do that analysis on a national level. You know, housing prices are not are not equal across our country. There are states where the housing costs are much higher, and where, you know, investments are much more needed to provide affordable housing opportunities states like California, like New York. And so they really need to be careful to to do that analysis for further declines and investments to do that at the state level, and not to do that at a national level. And also, we don’t know how much is an appreciable decline. We we hope that they don’t they don’t have to see much of a decline before they’re interested in and springing into action to address that. One other note, I’ll say on this issue, it would have been helpful for the agencies to do a comparison of the composition of loans and investments of banks of different asset sizes, because intermediate banks already had loans and investments combined in their company development test. And so if we see that, you know, large banks that have similar assets sizes like Ramtha, right over the intermediate bank threshold that we’re doing, you know, significantly more in investments than loans, that would support the intuitive theory that evaluating loans and investments separately, results in more loans and investments. So, there’s so that’s a that’s a research kind of analysis that it would have been helpful, the regulators to do and it’s something that you know, NCRC may be doing in the near future. New moving on to the two other tests. So retail services and products, I’m sorry, just doing a quick time check what retail services and products we are. So retail services, branch branches with assets above 10 billion will be evaluated on branch build and services, ATMs, and then their digital delivery, I think like their online banking, banks with 2 billion to 10 billion in assets will not be evaluated on online making unless they requested or if the bank has no branches. The branch and analysis will look at census tracts the income level, low, moderate, middle and upper. And they’ll compare it to three separate benchmarks. One is, you know percentage, how many, you know how many low-income census tracts are in this community. Compare that to where the branches are, that households total businesses and farms a second benchmark, and third is full-service branches at each incentives track income level. They will also evaluate services or Yeah, evaluate services provided at branches that improve access or decrease costs for customers specifically, bilingual and translation services free or low-cost checking, reasonably priced remittance services and electric benefit transfers. Then onto the credit and deposit product aspect of the retail services and products test. Remember, though, this can only contribute positively to CRA exams. So banks will not be downgraded if they’re they only offer you know, expensive dependent for expensive deposit products or credit products that do not that are very accessible and stuff like that. So you know, just quickly, all large banks will be evaluated on credit for credit products, large banks of $10 billion and assets will also have deposit products analyzed. You can see on the slides here with the bill be it’s relatively straightforward quantity features, such as ability and affordability, deposit products, walls to be evaluated on things like usage, like, you know, how many accounts are being opened and things like that.
Hill 37:46
The final test, the community volunteer service test, these are services, services are evaluated based on so this is things like think about, like how many of you, you may have, you know, banks on your board, you may have banks that, you know, volunteer your housing counseling workshops, or maybe you run Volunteer Income Tax Assistance, things like that. Those are community development services. And so the last, the last test for large banks will look at, you know, the number of services they’re doing the capacities like are they serving on boards, like what capacity are they doing with you? So, so that’s the that’s the committee of armed services. And this used to be a part of the old service task. Finally, on the implementation timeline, they already have the effective date.
The effective date and the final rule is April 1, 2024. The majority of this rule does not take effect until January 1, 2026. Specifically, the things that take longer is they give banks a little longer to comply with some of the reporting requirements related to assessment area data operating subsidiaries and affiliates. And community developed loans and investments with a third party. But other than that, everything else, you know, kicks in January 1, 2026. I’m Caitie Roundtree Are you? I have that we are checking on one of our speakers, was Vernice able to join us? Yes, come here. Oh, all right. Great. Glad you’re here. Nice. So now I’m going to turn it over to Vernice for a second. We’re just to kick off this slide. You know what it is? We are very disappointed on the lack of progress that the agencies have made on on race. Their series exams will continue to not incorporate race in the series. Yes, your exams will continue to incorporate race into their evaluation of lending you Investing are serving communities, what they will do is they’ll start publishing info on the lending performance of large banks varied this by race and ethnicity, using Home Mortgage Disclosure Act data. This is stuff NCRC could have already given you. This isn’t a lot new here. And this will not affect CRA exams. So you know, this is something that we were pretty disappointed in. And I’m gonna kick it over to Vernice. Now to talk a little bit more about that.
Miller-Travis 40:29
I’m also going to talk a little bit later in the presentation about some specific climate and weather-related and environmental-related dimensions that have been added to the new CRA guidance, but just wanted to weigh in about where the administration is on including issues of race, as part of the indicators for decision making. And so we find I work almost exclusively at the intersection of civil rights and environmental rights, environmental justice. And we have found that while there have been significant advances by the Biden, Harris administration, and addressing issues of environmental justice, with unprecedented levels of financing, at across the agencies, in different kinds of programs, different kinds of grants, different kinds of loans, etc, in the billions of dollars. And so that is a significant step forward in terms of the kinds of programmatic resources that are now available via the federal government to address climate and environmental justice-related issues. But where we find has been a real challenge is that the Biden Harris administration in 2021, and 2022, put out a new metric for measuring the impacts of environmental justice and criteria to define disadvantaged communities. So disadvantaged community is a term of art that they’re using, as opposed to calling out the specific race or ethnicity of a particular community. They’re using disadvantaged community. And they identified a number of variables that would help define what is a disadvantaged community and therefore, who is eligible to access different levels of federal financial assistance, but the one metric that they consistently left out, and they have a very robust discussion for why they left it out, is race. And those of us in the environmental justice community pushed back really hard against the administration that you can come up with all kinds of other metrics, but nothing defines the impact or the intersection of race as a driver of adverse policy outcomes or adverse investment outcomes than race itself and looking at race itself. But the the administration has has definitely pulled that out of their analysis in terms of the definition of disadvantaged community. And their rationale for that is something that we’ve all seen happen. When they made that decision, the Supreme Court case around affirmative action at the University of North Carolina and Harvard University was moving through the courts. It has since been decided, you all know where the courts landed on that. And the agents of the agencies and the administration are trying to avoid a direct on confrontation with, with Congress, as well as with many red states and red state leaders, around driving resources, specifically to different racial and ethnic communities. And so instead of fighting that fight in the courts, they felt they would lose that fight. And there’s certainly ample evidence that they that they might lose that fight, and they have lost that fight on some levels. They’ve decided to take race off the table. And so I thought it was helpful for folks to know, we thought it was helpful for folks to know that this is a consistent practice across this administration, as a tactical step, to try not to drive programs into deeper analysis or deeper dissection or pulling back from the commitment that Congress has made to a variety of programs, including CRA investments, that they not take that fight head on around race, or using race as a defining characteristic for what would be an eligible criteria for federal financial assistance. Back to you, Kevin.
Hill 44:23
Thanks, Vernice, we will be going back to you in just a quick second. But yeah, I just wanted to add a little bit more on that, you know, it CRA has, you know, been in place since 1977. And it was really not addressed. It’s, it’s not such huge its core purpose. The reason for CRA was to address redlining. And yet, you know, over 40 years later, we see a persistent racial wealth gap in our country and we’ve seen little progress on increasing homeownership for many communities of color, so this is why, you know, we, Katy mentioned some of our suggested solutions for incorporating race that that, you know, will meet, we worked with our legal allies that will meet legal requirements, we’re going to continue to raise this issue to the regulators are going to continue to raise this issue to our allies in Congress to seek fine congressional fixes, we’re also going to continue to look for ways to address this at the state level, for states that are willing to lead on this issue. So it is an area where there is there’s a lot of positives in this news here, roles we’ve gone over, and we’re gonna go over some more of them in a second. But you know, there is this is an area of there’s, there’s really a very strong lack of progress. We already have Home Mortgage Disclosure Act data, NCRC, will gladly give you a Home Mortgage Disclosure Act table that shows you what banks are doing in your community, we need regulators to actually turn that into something real, we need regulators to use that data to then, you know, hold banks accountable to it. That’s the purpose of this whole exercise. All right, so moving on, um, the so now we’re gonna get into some of the important topics for community organizations. These following categories have been added to the definition of community development. And Vernice is going to talk a bit more about the climate components. But just to kick it off, these are some of the new categories have been added for community development, community supportive services, disaster preparedness and weather resiliency, which I’m going to turn it back over to her niece and EVITTS talked talk about and then Rarey very important, we just yesterday put out a great report on this issue of red light called redlining the reservation. Now, there will be because of the the definition can be development, banks can get credit now for a vitalization or stabilization, Central Community Facilities, Central Committee infrastructure, and Zastrow. Parents weather resiliency, pretty much any of the place-based committee development definitions now apply in native land areas. And this was kind of this is dealing with the unintended consequence of CRA previously, No sirree, previously, being largely focused on where banks put branches, creates a big blind spot, and the areas where banks refuse to put branches, which is native land areas. Unfortunately, most native land areas do not have a bank branch on them. And so banks would, you know, cite that as a reason for not pursuing activities, there is a being unaware of their ability to get serious credit for it. Well, that has now been cleared up. And so now, you know, please do and please do start entering into conversations with your your tribal allies, your tribal partners and banks about how are you going to be taking advantage of this new this new definition created all and how are you and we know what’s your strategy now for you know, community development and native land areas. And then also the last thing I’ll say before turning it back to a nice activities with minority depository institutions, women, depository institutions, low-income credit unions, and good old CDFIs will now also get CRA credit as they’ve been added to the definition so it’s, there’s no question now if you do an activity with a those organizations CRA credit. So now I’m gonna turn it back to Vernice, who’s gonna talk a little bit more about this new weather resiliency component.
Miller-Travis 48:41
So as you can imagine, weather resiliency in the nomenclature of today would normally be called climate resiliency in this proposal, but they are determined to use weather resiliency, and those are activities that must benefit or serve targeted census tracts and their residents be done in conjunction with a government plan, program or initiative or mission-driven nonprofit organization, and not directly resulted in the forced or involuntary relocation of individuals with low and moderate-income. So they are now looking at disaster recovery and disaster preparedness as categories that would qualify for CRA funding and CRA district-designated activities. This is a new addition to CRA in response to what is happening in communities across the country. They’re declining to call it climate resiliency or disaster, from climate impacts, but that’s what it is. But then there’ll be a range of activities that can qualify. Next slide. Examples of next slide examples of what would be provided or what would qualify on In these categories would be construction of flood control systems. So that’s disaster preparedness, right, promoting green space in order to mitigate the effects of extreme heat, community solar projects, micro grid and battery projects that could help ensure access to power to an affordable housing project in the event of severe storm. So those are the issues that make the power grid more durable and more resilient, that those are issues that could qualify for funding under CRA now. Next slide. In addition, the agencies note that low and moderate-income communities are more affected by weather-related risks, but largely avoided discussion of how climate change is increasing the frequency and severity of these risks. So they really tried to split the baby and the bathwater here, and didn’t always do a great job. But nonetheless, this is still a major addition, that CRA, they’re specifically declined to consider financing related to decarbonisation, and transition to clean energy in general as eligible, citing the difficulties with determining how it would benefit residents of low- and moderate-income census tracts and other targeted census tracts. We couldn’t help them with that. But nonetheless, however, financing that increases energy efficiency should qualify if it meets the designated criteria. Next slide.
Hill 51:31
That’s the last slide for this topic. I think you have additional notes, but that’s the last slide.
Miller-Travis 51:37
Okay. So while it did some specifically say, climate and climate change and climate change-related disaster, they are nonetheless trying to give banks and localities the ability to be able to address these areas both at a preparedness level, and then as after a disaster has happened, and disasters have been designated. But they do require a few things that are really important for folks to know that in order to to be determined to be eligible for that financing, you need to be a part of a state program that’s looking at disaster designation, and then rebuilding and resiliency. And you have to be working with a federal program. And please note that there are many federal agencies that are also making funds available for this work, particularly the Environmental Protection Agency, the USDA Forest Service, and a number of the Department of Health and Human Services. A number of other agencies are really providing separate streams of funding that you may also be able to qualify for to address some of these issues. But in order to qualify for CRA support, you have to be working through a state program through a federal program and or a local nonprofit that is designated to work on these issues. So you can’t just individually apply, you have to apply under the umbrella of these programs that are already in place. So these government plans, programs or initiatives, or mission-driven nonprofit organization. But this is a major step forward. There’s lots of things that we can critique there lots of things that we think if they had let us write it, it would have been stronger. But nonetheless, this is a major step forward. In terms of CRA eligibility for weather, weather resiliency. Back to you, Kevin,
Hill 53:31
Thank you very much, Vernice, just a couple more slides, folks, and then we’re gonna break down the rest of the time we’re going to spend on q&a. Probably just about five more minutes. And then we’ll do q&a. Um, so yeah, so one other thing I wanted to pull out that I think is, you know, particularly important for community organizations, it is this impact and responsiveness review. So series exams will now include how much of a bank’s commitment community development activities fits into the 12 different categories of impact and responsiveness. And the regulars even said that they would, you know, consider other categories of impact and responsiveness, but these are the 12 they’ve kind of identified for now. And I really think Katie touched on this earlier, but I think it’s, it’s worth repeating. I do think this will help local organizations position their Communities for Recovery development that banks may not have otherwise done. Because you know, bank stocks don’t want to see your exam is to say like, what did you do, you know, for Census Tracts above 40% and the series ends gonna show nothing. So I do think this will be an opening to get banks to get banks to really kind of at least take a second look at things I mean, you’re still gonna have to do your regular work of you know, you’re pitching your organizations and stuff like that and, and showing the need but I do think this will help get banks to come similar things and give a second look for things that they would not otherwise, if they can be shown to get them into one of these impacting responsiveness factors, particularly if there’s if they can’t really show a lot of, you know, other things they’re doing and these categories. So I thought it’d be helpful just to quickly just, you know, show you what these 12 categories are. So we’ve already mentioned the persistent poverty counties, the census tracts part of your 40% or higher, you know, persistent poverty tends to be rural areas, and the poverty rate of 40% of our census tracts poverty rate of 40% or higher tends to be urban. Also areas of low levels of, you know, on financing. You know, supports emptyeyes minority depository institutions, women, depository institutions, low-income credit unions, CDFIs, excluding certificates of deposit with a term of less than one year, they’re not considering that to be particularly impactful. Things that benefit, you know, low income, specifically, are small businesses or small farms at the new lowest definition to earn $50,000 or less, remember, previously, see your exams was all 1 million or less. Now we have more granularity directly facilitates acquisition, construction, development, preservation, or improvement of affordable housing and high-opportunity areas, which is the FHA, F, H, F, A definition there. And the thing there is, if you’re trying to address, you know, you’re trying to avoid concentrated poverty, you’re trying to get people housing in areas that, you know, has that has a little more opportunities and resources in those areas. And usually, it’s harder for affordable housing and a lot of those areas because the higher cost. Finally, the last, last five benefits of Scherzer isn’t some native land areas. So this is a category of human development, and an impact and responsiveness factor. grants and donations, as long as you’re eligible investments or projects financed with low-income housing tax credits for new market tax credits. And then the last two are pretty similar reflects plank leadership. So that’s kind of things like, you know, if a banks like doing multiple services for something like, you know, like a loan with along with technical assistance. And then if there’s things that like, like new committee developed financing products, or services like that, those would also qualify and these impact and responsiveness factors. Alright, so this is the last slide folks, before we get to q&a. I hope this hasn’t been too deep. And for some of you, I hope it’s been deep enough. So welcome, these are this kind of the some of the issues we’ll be tracking. These are things that you know, will be you looking forward going forward, we will continue to monitor trends in home lending, like we always do. Our research department puts out, you know, annual reports from the new 100 data comes out, of course, we’ll be doing continue to do that, to really kind of see, you know, when these new exams kick in? What is the effect of the new retail lending test? And are we seeing increases? For bars, the LMI? And are we seeing any impact for people of color? Because of the new retail lending tests, even though they’re not? You know, you’re they’re not incorporated? You know, I don’t believe that you can, you can use income as a proxy. So I that’s why it’s very crucial that we have series of these exams. But we want to know, what’s been the impact? What will there be little impact will there be no impact? Because that, you know, that’s an argument for why they need to be why race needs to be incorporated into your exams. We’ll also be tracking you know, for new special purpose credit programs, which again, all banks can now special requires special purpose credit programs, help banks pass your exams, that should be the new takeaway line about special powers, credit programs, what do they do? They help banks pass your exams? Because we need more banks to do them? We they also have will we also monitoring for loss of branches and Community Development caused by the new asset thresholds? Particularly in rural areas and smaller metros? We looking for declines and investments. Hopefully, there, we don’t get those appreciable decline. So hopefully, there is no declines and if there is any sort of appreciable decline, hopefully we they, we know will spring into action and get the regulator’s to correct this. And then also, of course, we’ll be looking for examiner guidance and implementation documents. One thing that one item I didn’t get to in this presentation is the regulators said in their proposed rule that they were going to do a statistical model that would kind of basically determine if all the lenders were underperforming in a market like if all the aggregate is bad They that’s just them all was in the proposed rule did not make it into the final rule, though. But they did say that they are going to, there is language in the preamble to the final rule about there being a comment period and are seeking public feedback, I think was the exact words. So we’re definitely going to be monitoring for that and letting you all know, in common periods like that go up. We’ll also be little encouraging, you know, common periods on things like examiner guidance, implementation documents. So you know, what are at our ledger edge calls that are emails, make sure you’re all connected to the our email system, because, you know, there’s gonna be a lot about this coming out. We also just released a guide, that, you know, if you still have questions, if, hopefully, the CRA has turned you off, you know, there’s a guide you can look at, and that goes through all this stuff. And more, we also will be giving out a series of blogs, you know, over the next couple of months on specific issues related to this. So, you know, there’s, there’s gonna be a lot from on this issue, as I’m sure you’d expect. And, you know, this is our second webinar, and there’s a lot more to come. Um, so I think with that, I’m going to turn it back to Caitie Rountree for some q&a.
Rountree 1:01:21
Yeah, so thank you. And thank you all for tracking with us. This is a lot. I’m still digesting some things, and I think I’m gonna have to relearn some things that I thought I knew about CRA. So it’s exciting. To start out, and I’m going to ask these generally and Kevin, Vernice, Katy, if one of you wants to jump in on one of these first just jump in? My first question is about CRA tests. And then I’ve got a couple others that I’m going to share group around community development. So I think I’ve seen some questions around how frequently CRA audits and tests are done. And a little bit about differentiating between different size banks, smaller banks that aren’t tested on community development, are they assessed on how they engage with community leaders and nonprofits, etc, to meet the community needs? So yeah, I’ll stop there.
Hill 1:02:25
So I think that’s an that’s an instance I think, were so just doing due to glare there, they do not have their own small banks 600 million in assets and below do not have the the community development test. However, I think that’s an instance where, you know, they often will give them sorry, pull it up. Yeah, I think that’s an instance where you will, you’ll see, like, they could, if the bank of a small bank was doing something particularly impactful in a community, they could probably still raise it for some sort of positive consideration. I don’t, that wouldn’t totally excuse them. Like, if they were, you know, if their lending performance was was was really low, then then they’re, you know, it’s not gonna get them off the hook. But if maybe if they were like, right near some sort of threshold, or right near, you know, like, like, on the cusp of like, you know, low satisfactory or high satisfactory, like, particularly, like, particularly good community services and stuff like that might be able to push them, push them over. But But yeah, but it would not be able to get them like from, like, I need to improve to a low satisfactory or anything like that. And I don’t think many of us here would would want that anyways.
Rountree 1:03:50
Right. And then, regarding community development investments, can bank structure those as either loans or grants or is it just financing? And then I another question that was around whether a bank would get downgraded or a lower score, if they’re committed development activity was concentrated in only a few of the 12 categories.
Hill 1:04:13
Um, so the for community, so it’s commuter woman loans and investments. And then there also will be, there also will be grants. However, grants are going to be much smaller dollar volume on loans and investments. So that’s why one of those impact and responsiveness factors one of the 12 was, is it a serious eligible grant? And then the regular is no, like, there could be grants that are, you know, very impactful even though they’re they’re smaller dollar volume. Does that answer the question?
Rountree 1:04:46
So it’s two separate questions. One is, I think, you know, the I what you’re answering the is it? Loans, investments, brands, how do those all get graded? And the second question is, does it matter whether a financial institution spreads that activity across those 12 categories or, or only meets, you know, a handful of those.
Hill 1:05:12
So yeah, thanks for so I think I answered the first part of that already. But that’s the second part. The second part is, so they they are going to the preamble to notes that, you know, the exams will include a summary of each, how much their activities falls into these 12 categories, which is why I said, you know, they’re not going to want to avoid a negative category. It, you know, I think some banks will probably choose to prioritize some over others, but they’ll probably want a certain baseline and each, because I think it’ll look bad if they have nothing to report for certain categories. Which is why I think it’ll it’ll be that opening. Part of this question, though, is still still a little team to be determined, because they didn’t know that they’re planning on sending additional guidance to examiner’s on how exactly to do the impact and responsiveness aspect of it. And they said things like, you know, things they are considering encouraging examiner’s to look at is like percentages of activity per category. And they’re even, they even kind of said, like, you know, how to consider like lowering or heightening the impact of things. So I think that that, to me, is a bit of an opening. For, you know, if there was if say, there was like, say there was affordable housing going on and you’re in a bank was wearing affordable housing. And unfortunately, let’s say that the affordable housing the bank was supporting was with landlords that you know, didn’t have the greatest record, I think that that would be then an opening to say, the impact of this should be lessened. Like, meaning they should get less credit for this, because it’s it’s not really you know, solving. It’s not really, you know, it’s giving people substandard, you know, affordable housing, which is not that’s not right, we want quality, affordable housing.
Rountree 1:07:03
Yeah, right. Um, so the next question I’ve got for you, I think there’s two different ways to interpret it. So the question is, what impact will the new rules have on credit unions? And I’m not sure whether to interpret that question. And so if this is your question, feel free to clarify, as whether the update to CRA brings credit unions under the regulation of CRA if there’s any new institutions? Or if the question is more about because of the changes to how banks are being regulated, if that’s going to have any trickle down impacts in the market. And some of that might be crystal ball, we have to wait and see. But I don’t know if there’s anything that you would, you know, say oh, you know, credit unions might see more or less of this because of changes to CRA and how that influences banks.
Hill 1:07:53
Let me answer part of that. And then I’m curious or nice, if you think I’m sorry. But I think I’m curious if you think that there might be any any impact on credit unions based on the climate kind of considerations, like, do you think we might get more competitive or something like that, but first, let me say the rules do not apply to credit unions. That would that’s kind of beyond the ability of the regulators to do here. The statute has, you know, depository, like is defined defines it as banks. And so you probably would need some sort of, you know, legislative fix to be able to accomplish that. And states are, you know, moving forward with doing that, you know, Illinois is, is working to finalize right now this year, a law that would apply to two credit unions and mortgage companies. Massachusetts has one that buys for mortgage companies. But But yeah, we would need a legislative fix for that. But But Vernice I’m curious. And I hope that I’m not leading you into the question. There’s not much to say. But yeah, go ahead. Well,
Miller-Travis 1:08:55
I think that one, credit unions usually can move capital more quickly, and are going to be right there on the ground where these disaster designations may be happening. So you may see states move to to give them more flexibility to respond, particularly if there are credit unions that are operating within disaster designated areas, either by FEMA or by the States or by or by the feds, but I think they’re going to have to be create some flexibility, because we’re seeing that the need to move money quickly, particularly for disaster response. And preparedness is going to require a lot shorter timeframes than what it normally takes to get to get that designation from the feds or from the state to then go to a traditional financial institution to apply for those resources. And then to qualify for those resources. I meant to get the loan or grant approved that timeline unusually is is way longer than the timeline that people have on the ground to be able to respond. And so I think you’re going to see states move to give credit unions some flexibility in in those moments of, you know, a real disaster and the need for responsiveness.
Hill 1:10:21
And Josh, over the whole point in the in the chat, that also they also will get, you know, some positive consideration specifically for low income credit union. So, you know, low income credit unions, you know, they’ll they’ll have some benefits from the new zero. Yep.
Rountree 1:10:39
I see a question here, actually, about 1071. And this is the the push for the bit for better data on small business lending. And the question was, whether there’s any developments or notes on on that data related to the new rule?
Hill 1:10:53
Good question. So they will tend to everyone data will be factored in once it’s available, that is part of it. And they will use they will shift to the sense everyone small business data. Tends everyone though is, I believe tends everyone is largely been delayed. We don’t we don’t know exactly what’s going to happen. What happened was what’s what’s going on with tensor? One? There’s there’s a legal front right now. 1071. And then there’s a political front. Politically, the House and Senate have voted to repeal 1071. But Biden has it announces intent to veto which we’re expecting to happen soon. But then regardless, even if that happens, tends to be what is currently blocked by the courts. You know, there’s, there’s pretty there’s there’s conservative friendly judges in our in our country, and conservative activists know where they need to go to find their most receptive audience that will go along with arguments that, you know, the CFPB is funding structures unconstitutional, and basically try to reverse American history. Because no, no regulator of depositories, at least at the federal level American history has ever been a part of the annual appropriations process. And that’s what they’re trying to achieve, which could open a whole Pandora’s box of regulatory uncertainty. So but to wrap all that up, basically, the they were able to get some courts to agree to suspend implementation of 1071 until the Supreme Court weighs in on their funding structure. The early indications, you know, the lawyers that were representing the payday industries and stuff that we’re bringing this lawsuit against the CFPB, they did not have a fun day at the Supreme Court when they went down there and tried to push their their radical agenda. When you hear justice Cavanaugh, you know, pushing it down, you know, you’ve you’ve gone too far on the conservative legal jurisprudence, when Kavanaugh had stood to break in. And so, so yeah, so we won’t, we won’t know until they make that decision. But once that decision happens, and you know, we get back to actually addressing issues and not just putting our heads in the sand, then we should have section 1071 data. And then it just, they will transition to using section 1071 data. But it will not. It will not incorporate race, even though section 1031 data will have race. So it’ll be kind of like home mortgage disclosure act data is now you know, it’s there. We got it. But we’re not using it to incorporate into exams.
Rountree 1:13:42
Yeah. One step at a time. Yes. 3.0, as I think Matt Lee said. Yep. So there’s a there’s a question about the distinction between lending for multifamily and individual homebuyers and how that works in in the assessments. If a bank does majority of commercial or business loans for multifamily housing, rather than lending to individual homebuyers, does that mean the bank may have different benchmarks of low to moderate income lending? Because they mainly lend to business entities where they don’t have to report income?
Hill 1:14:20
Good question. So and I hope you liked the answer. So they’re the multifamily lending is only going to be used for that. Remember that first, that first step of the lending process was the retail lending volume screen, determine if they’re doing enough lending? So that’s that’s where multifamily lending will show up. So you know, if they’re in again, they have to be 30% of the area at loan to deposit ratio. They will not use multifamily lending for like as a major product line. It’s not considered an eligible major product line. So you’re not going to see that sort of distribution analysis, the, you know, comparing those different charts and the ranges, you’re not going to see that for multifamily lending, you only see that for closed in mortgage lending, which is like your base closing marginally is like the most most mortgage line, we’re used to it’s like refinances home purchase loans. It’s not things like home equity lines of credit, that’s, that’s open ended mortgage lending. Small Business Lending is included small farm lending, auto lending, it’s if it’s 50% or more, but, you know, multifamily lending is will not show up in those distribution analyses, and neither will consumer lending, meaning like credit card lending, but the exception of small business credit card that that will that can be used. So So yeah, so multifamily lending will not show up in the distribution analysis, it will only be used to determine if they pass the loan to deposit ratio.
Rountree 1:15:58
Yeah. Awesome. I, I thought I thought we were had come to the end. But um, one more question. And then I think we’re going to shift to closing here. Are banks restricted to using 100 data and census tract data to create and develop new products?
Hill 1:16:19
No, you know, banks can. So we’ll deal with career investment, is it the exception of community development, for large intermediate banks, the career Investment Act doesn’t require, you know, banks to offer any products where, or to defeating lines of business, it basically is like, if you are going to be in these lines of business, we’re going to make sure you do it equitably. And that’s I think, you know, I think that’s why they’ve made that decision on the credit and deposit products, because I think they were concerned that that’d be interpreted as requiring products. I mean, I think the if you’re gonna die based on their products, they need to be showing that they have products that are, you know, responsive to the needs of pupils load of our incomes and stuff like that. But to answer your question, you know, banks can use, you know, the bank’s development of their products is, is not really, you know, factored into Syria, except for like, the cost and features and stuff like that. But, you know, they can they can develop their products any way they want, as long as that the way they develop them is has is equitable and accessible to people with low to moderate incomes.
Rountree 1:17:25
Awesome. Well, thanks, Kevin, thank you for nice, thank you, Katie, just a couple of closing notes. We are just beginning this journey, it feels like we’ve been in the work of the new CRA rule for a couple of years now, because we have but this is a big, huge historic change, we at NCRC are going to continue to be doing education. As Kevin mentioned, we’re also going to be continuing to listen to you our members. You know, one thing that really stood out to me, as we talked to the heads of the regulatory agencies a few weeks ago, there, they really did listen to NCRC members, we didn’t get everything that we wanted. But that there is a dialogue happening there. And as the new rule is implemented, I expect that we are going to be working to make sure that it’s implemented in a way that is responsive to our members. So we need you to stay engaged on this not just to understand what’s been written in the books, but also to keep helping us to push as as it gets rolled out. So stay tuned on that. It’s one of the next steps that you can take with us. We will be sending around a survey after this webinar. That’s not just so you can tell us how we did. And we are looking for for your stories, your questions, your quotes, to help inform our body of work as we move forward and helping make sure that we are responsive. And that is incredibly important to us. So be on the lookout for that. fill, fill that out the questions that resonate with you, we want to hear those and make sure that you are registering for our conference where this will be a major theme in the spring, April 2 through fourth. And yeah, keep keep listening. So thanks again to each and every one of you for the work that you’ve done to get us here and the work that you’ll continue to do with us. Moving forward. Thanks so much.
Hill 1:19:26
Oh, one one quick, really quick point, Katie. And I hope that a novice attendee last question. I just want to say thanks for Josh pointing out he is right. multifamily lending will be considered on the commune development finance test. If it meets the criteria for affordable housing and all that he just won’t be subject to the retail lending distribution analysis. So when you mentioned benchmarks and stuff, it’s not going to be subjected to that, but it is going to be factored in to you know, their community development which which is you know, they’ll look at basically what they’re doing in their branch networks and in their, their nationwide networks. Um, so that’s, uh, just want to make that clarification really quick. But yeah, thanks and feel free to email. Look at our guide. Feel free to email. We want to be in communication with you going forward on this. Yeah. Thanks so thanks everyone.
