For the second time in less than six months federal regulatory agencies have added new avenues under which banks can meet their obligations under the Community Reinvestment Act (CRA.)  The Federal Deposit Insurance Corporation (FDIC) the Board of Governors of the Federal Reserve System, Office of Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) issued a joint Final Rule on Tuesday which will require regulators to consider two additional services when assessing a banks record of meeting community credit needs.   

Beginning November 3 regulators must consider a bank's record of making low-cost education loans to low-income borrowers, i.e. borrowers and co-borrowers with income below 50 percent of the area median income.  A low cost loan is one that meets that definition for rates and fees under Department of Education (DOE) lending programs and includes loans for higher education at DOE listed accredited institutions.  CRA assessments can take into account loans that are made outside of the bank's assessment area as long as needs within the area are being met.  The new regulation does not require the bank to make education loans nor does it change how consumer loans are otherwise considered during CRA evaluations.  

Also going into effect on November 3 will be a provision that allows the agencies to consider various activities undertaken by majority-owned institutions in conjunction with minority and women-owned financial institutions (MWLIs) and low-income credit unions.  These changes which were originally announced in March, will allow CRA regulators to ventures taken in cooperation with the MWLIs and credit unions even if those institutions are located outside of the subject bank's assessment area.  The key determinant it whether the assistance will enable the MWLIs and credit unions to better meet the credit needs in those institutions own communities. 

Examples of activities undertaken by a majority-owned financial institution in cooperation with MWLIs that would receive CRA consideration may include making a deposit or capital investment; purchasing a participation in a loan, loaning an officer or providing technical assistance to the MWLI or providing free or discounted data processing systems or office facilities to aid an MWLI in serving its customers.

In June regulators proposed a program to encourage banks covered by CRA to support the Neighborhood Stabilization Program (NSP) even where those programs are outside of the bank's assessment area, thus increasing bank incentives to invest in or facilitate NSP-eligible activities in approved target areas.