Community Reinvestment Act
What additional elements of the lending test are large banks evaluated on?
1. CD loans 2. Innovative or flexible lending practices
What date must the public file be current as of?
April 1 of each year end
Which came first: CRA or HMDA?
HMDA- enacted in 1975. CRA was enacted in 1977
What are the thresholds for moderate income?
Individual income at least 50% and less than 80% of the area median income or a median family income at least 50% and less than 80% in a census tract
What are the elements of the service test?
1. Distribution of branches and record of opening and closing branches, especially in low or moderate income geographies 2. Availability and effectiveness of alternative systems for delivering bank service to low to moderate income people and geographies (special programs promoting banking to lower income consumers) 3. Range of service provided 4. Extent of CD services provided (does the bank provide financially related assistance to community groups or organizations that assist lower income consumers or geographies) 5. Innovativeness and responsiveness of CD services
What are the elements of the investment test?
1. Dollar amount of qualified investments 2. Innovativeness and complexity of qualified investments 3. Responsiveness to credit and CD needs 4. Degree to which investments are not provided by private investors (is the investment one that most private investors do not make?) 5. Benefits to AA
What are the 5 elements of the lending test for small banks?
1.LTD ratio 2. In/out ratio 3. Borrower distribution 4. Geographic distribution 5. Action taken in response to CRA complaints
Banks have the option of creating their own strategic plan for Community Reinvestment Act (CRA) evaluation. Which statement best describes the strategic plan development process? A. A plan developed by the bank with input from the community and approval by the primary federal regulator B. A plan developed by a committee made up of federal regulators and bank employees C. A plan developed by the bank's Board of Directors and approved by the federal regulators D. A plan developed by the community with approval by the bank and the federal regulators
A
Which statement provides the most accurate description of the primary purpose of the CRA? a) Encourages financial institutions to help meet the credit needs of the AA they serve b) Encourages financial institutions to approve loans to low and moderate income individuals C) Encourages financial institutions to make certain types of loans available to low and moderate income individuals D) Encourages financial institutions to approve a required number of loans based on the population of the assessment area they serve
A
What determines whether a bank is evaluated using small, ISB, or large bank criteria?
Asset size as of December 31 of either of the two prior calendar years
Certain information must be made available to the public upon request. The information is found in the Community Reinvestment Act (CRA) Public File. What information is found in this file? A. An assessment area map and the number of employees required to monitor CRA activity B. Comment letters from individuals or businesses on the bank's CRA performance in the community and an assessment area map C. The number of employees required to monitor CRA activity and the lending services available D. Only the lending services available and comment letters from individuals or businesses in the community on the bank's CRA performance
B
Everywhere Bank has received its Community Reinvestment Act (CRA) rating. The rating reflects how Everywhere Bank is meeting its responsibilities to whom? A. The Home Mortgage Disclosure Act (HMDA) B. The community it serves C. The Federal Reserve D. The Federal Financial Institutions Examination Council (FFIEC)
B
Information contained in the Community Reinvestment Act (CRA) Public File must be current as of what date? A. December 31 of each calendar year B. April 1 of each calendar year C. March 1 of each calendar year D. September 30 of each calendar year
B
What performance standards do the agencies generally use to determine an intermediate small bank's Community Reinvestment Act (CRA) rating? A. Community development test B. Small bank lending and community development tests C. Lending, investment, and service tests D. Service test
B
What statement is true when institutions choose to develop their own CRA strategic plan and be evaluated for CRA performance based on how well they meet the goals of the plan? a) If an institution does not receive at least a satisfactory rating in a CRA examination using its strategic plan, it will be rated again using its strategic plan b) If an institution chooses the strategic plan option, they are not evaluated under the small or large bank tests c) The strategic plan option must address the deposit and service criteria that would have been part of the usual evaluation d) The strategic plan must cover the entire institution's performance
B
Which of the following bases in the most acceptable method of delineating a bank's CRA assessment area(s)? a) Existing boundaries such as MSAs or counties in which the bank's office is located b) The bank's effective lending territory (where it makes a substantial portion of its loans) c) The zip codes that are included within a radius of the bank's office d) The area assigned by the bank's primary regulator
B
Which statement is true when banks choose to develop their own Community Reinvestment Act (CRA) strategic plan and be evaluated for CRA performance based on how well they meet the plan goals? A. If a bank does not receive at least a ''satisfactory'' rating in a CRA examination using its strategic plan, it will be rated again using its strategic plan B. If a bank chooses the strategic plan option, it is not evaluated under the small or large bank tests C. The strategic plan option must address the deposit and service criteria that would have been part of the usual evaluation D. The strategic plan must cover the entire bank's performance
B
What is a wholesale bank?
Bank that is not in the business of extending mortgages, small business, small farm, or consumer loans to retail consumers
What is a limited purpose bank?
Bank that offers a narrow product line such as credit cards or motor vehicle loans to a regional or broader market
Which statement best describes the development of a strategic plan? a) Plan developed by a committee made up of federal regulators and employees of the financial institutions b) Plan developed by the board of the financial institution and approved by regulators c) Plan developed by the financial institution with input from the community and approval by the primary federal regulator d) Plan developed by the community with approval by the financial institution and the federal regulators
C
Why was HMDA created?
Congress enacted HMDA is response to lending discrimination and redlining. It requires banks to collect and report data on certain mortgage loans each year
Significant revisions were made to the Community Reinvestment Act's (CRA's) focus in 1995. Which statement best describes that change? A. Greater emphasis was placed on the CRA process and less emphasis on bank CRA performance B. A split occurred between the agencies C. The definition of ''community development'' changed D. Greater emphasis on bank CRA performance and less emphasis on its CRA process
D
Significant revisions were made to the focus of the CRA in 1995. Which statement best describes that change? a) Greater emphasis was placed on the CRA process and less emphasis on the CRA performance of the institution b) A split occurred between the agencies c) The definition of community development was changed d) Greater emphasis on CRA performance of the financial institution and less emphasis on its CRA process
D
The CRA public file must be made available to the public upon request. What information is found in this file? a) Map of the assessment area and number of employees required to monitor CRA activity b) Number of employees required to monitor CRA activity and lending services available c) Only lending services available and comment letters from individuals or businesses in the community on the institution's CRA performance d) comment letters from individuals or businesses on the institutions's CRA performance in the community and map of the assessment area
D
What are the rating categories used to report Community Reinvestment Act (CRA) examination results? A. ''Excellent,'' ''Reasonable,'' ''Needs to Improve,'' ''Probationary Noncompliance'' B. ''Exceptional,'' ''Acceptable,'' ''Needs to Improve,'' ''Substantial Noncompliance'' C. ''Notable,'' ''Satisfactory,'' ''Needs to Advance,'' ''Significant Noncompliance'' D. ''Outstanding,'' ''Satisfactory,'' ''Needs to Improve,'' ''Substantial Noncompliance''
D
What are the thresholds for middle income?
Individual income at least 80% and less than 120% of the area median income or a median family income at least 80% and less than 120% in a census tract
What are the thresholds for low income?
Individual income less than 50% of the area median income or a median family income less than 50% in a census tract
What are the thresholds for upper income?
Individual income more than 120% of the area median income or a median family income more than 120% in a census tract
What is the cutoff date for assessment areas?
Jan 1 of the calendar year the delineation is made
What is contained in the public file?
Most recent CRA evaluation, branch addresses and services available, map of assessment area, loan data info (large banks only), quarterly description of efforts to improve performance (needs to improve only), written comments from the public
What are the required elements of a CRA strategic plan?
Must address the lending, investment, and service test criteria as defined in the large bank criteria
What are the availability requirements for a public file?
Must be available at the main branch, and by request at other branches.
What are the posting requirements for a public notice?
Official notice must be posted in the lobby of main branches, including one branch office in each state. A similar notice is required in all other branches
How are wholesale banks evaluated?
Performance is evaluated using a CD test that involves CD lending, investments, and services (same as LP)
How are limited purpose banks evaluated?
Performance is evaluated using a CD test that involves CD lending, investments, and services (same as wholesale)
How are large banks evaluated?
Performance is evaluated using a large bank lending test, investment test, and service test
How are small banks evaluated?
Performance is evaluated using a lending test. There are fewer recordkeeping requirements and no regulatory reporting
How are intermediate small banks evaluated?
Performance is evaluated using small bank lending test plus a community development test. Banks must receive at least a satisfactory rating in both to receive an overall satisfactory rating
How are banks with an approved CRA strategic plan evaluated?
Performance is evaluated using the large bank performance categories and how the bank meets the established goals in the plan. If the plan is only for a portion of operations, examiners evaluate the remainder of the bank using the appropriate CRA test based on asset size
There was a time when area that were allegedly considered poor credit risk sections of the community were outlined on a map? What is the term used to describe this practice?
Redlining
What are the potential consequences of failing to follow CRA requirements?
Regulators can deny banks with a less than satisfactory rating permission to merge, purchase other banks, and open new branches. Additionally banks are required to document efforts to improve performance on a quarterly basis in the public file
What happens if a bank does not receive at least a satisfactory rating using the strategic plan assessment?
Regulators will examine the bank using the appropriate tests based on asset size
What does the public notice state in general?
Right to review information in the public file, name and address of supervisory agency, location where written comments on CRA performance can be sent, location where announcement of applications covered by the CRA can be obtained
What is the primary purpose of the CRA?
To require appropriate federal regulatory agencies to encourage regulated banks to help meet the credit needs of their local communities where the institution is chartered and to assess each institution's level of performance
What are the four CRA ratings?
outstanding, satisfactory, needs to improve, substantial noncompliance
