Joint Proposal to Strengthen and Modernize Community Reinvestment Act Regulations

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 25

[Docket ID OCC–2022–0002]

RIN 1557–AF15

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R–1769]

RIN 7100–AG29

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 345

RIN 3064–AF81

Community Reinvestment Act

AGENCY: Board of Governors of the

Federal Reserve System; Federal Deposit

Insurance Corporation; and Office of the

Comptroller of the Currency, Treasury

ACTION: Joint notice of proposed

rulemaking; request for comment.

SUMMARY: The Board of Governors of the

Federal Reserve System (Board), the

Federal Deposit Insurance Corporation

(FDIC), and the Office of the

Comptroller of the Currency (OCC)

propose to amend their regulations

implementing the Community

Reinvestment Act of 1977 (CRA) to

update how CRA activities qualify for

consideration, where CRA activities are

considered, and how CRA activities are

evaluated.

DATES: Comments must be received on

or before August 5, 2022.

ADDRESSES: Comments should be

directed to:

OCC: Commenters are encouraged to

submit comments through the Federal

eRulemaking Portal. Please use the title

‘‘Community Reinvestment Act’’ to

facilitate the organization and

distribution of the comments. You may

submit comments by any of the

following methods:

• Federal eRulemaking Portal—

Regulations.gov: Go to https://

regulations.gov/. Enter ‘‘Docket ID OCC–

2022–0002’’ in the Search Box and click

‘‘Search.’’ Public comments can be

submitted via the ‘‘Comment’’ box

below the displayed document

information or by clicking on the

document title and then clicking the

‘‘Comment’’ box on the top-left side of

the screen. For help with submitting

effective comments please click on

‘‘Commenter’s Checklist.’’ For

assistance with the Regulations.gov site,

please call (877) 378–5457 (toll free) or

ch.’’ Public comments can be

submitted via the ‘‘Comment’’ box

below the displayed document

information or by clicking on the

document title and then clicking the

‘‘Comment’’ box on the top-left side of

the screen. For help with submitting

effective comments please click on

‘‘Commenter’s Checklist.’’ For

assistance with the Regulations.gov site,

please call (877) 378–5457 (toll free) or

(703) 454–9859 Monday–Friday, 9 a.m.–

5 p.m. EST or email regulations@

erulemakinghelpdesk.com.

• Mail: Chief Counsel’s Office,

Attention: Comment Processing, Office

of the Comptroller of the Currency, 400

7th Street SW, Suite 3E–218,

Washington, DC 20219.

• Hand Delivery/Courier: 400 7th

Street SW, Suite 3E–218, Washington,

DC 20219.

Instructions: You must include

‘‘OCC’’ as the agency name and ‘‘Docket

ID OCC–2022–0002’’ in your comment.

In general, the OCC will enter all

comments received into the docket and

publish the comments on the

Regulations.gov website without

change, including any business or

personal information provided such as

name and address information, email

addresses, or phone numbers.

Comments received, including

attachments and other supporting

materials, are part of the public record

and subject to public disclosure. Do not

include any information in your

comment or supporting materials that

you consider confidential or

inappropriate for public disclosure.

You may review comments and other

related materials that pertain to this

action by the following method:

• Viewing Comments Electronically—

Regulations.gov: Go to https://

regulations.gov/. Enter ‘‘Docket ID OCC–

2022–0002’’ in the Search Box and click

‘‘Search.’’ Click on the ‘‘Documents’’ tab

and then the document’s title. After

clicking the document’s title, click the

‘‘Browse Comments’’ tab. Comments can

be viewed and filtered by clicking on

the ‘‘Sort By’’ drop-down on the right

side of the screen or the ‘‘Refine

Results’’ options on the left side of the

screen

s.gov/. Enter ‘‘Docket ID OCC–

2022–0002’’ in the Search Box and click

‘‘Search.’’ Click on the ‘‘Documents’’ tab

and then the document’s title. After

clicking the document’s title, click the

‘‘Browse Comments’’ tab. Comments can

be viewed and filtered by clicking on

the ‘‘Sort By’’ drop-down on the right

side of the screen or the ‘‘Refine

Results’’ options on the left side of the

screen. Supporting materials can be

viewed by clicking on the ‘‘Documents’’

tab and filtered by clicking on the ‘‘Sort

By’’ drop-down on the right side of the

screen or the ‘‘Refine Documents

Results’’ options on the left side of the

screen.’’ For assistance with the

Regulations.gov site, please call (877)

378–5457 (toll free) or (703) 454–9859

Monday–Friday, 9 a.m.–5 p.m. EST or

email regulations@

erulemakinghelpdesk.com.

The docket may be viewed after the

close of the comment period in the same

manner as during the comment period.

Board: You may submit comments,

identified by Docket No. R–1769 and

RIN 7100–AG29, by any of the following

methods:

• Agency Website: http://

www.federalreserve.gov. Follow the

instructions for submitting comments at

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm.

• Email: regs.comments@

federalreserve.gov. Include docket and

RIN numbers in the subject line of the

message.

• Fax: (202) 452–3819 or (202) 452–

3102.

• Mail: Ann E. Misback, Secretary,

Board of Governors of the Federal

Reserve System, 20th Street and

Constitution Avenue NW, Washington,

DC 20551.

Instructions: All public comments are

available from the Board’s website at

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm as

submitted. Accordingly, comments will

not be edited to remove any identifying

or contact information. Public

comments may also be viewed

electronically or in paper in Room M–

4365A, 2001 C Street NW, Washington,

DC 20551, between 9:00 a.m. and 5:00

p.m. during Federal business weekdays

ailable from the Board’s website at

http://www.federalreserve.gov/

generalinfo/foia/ProposedRegs.cfm as

submitted. Accordingly, comments will

not be edited to remove any identifying

or contact information. Public

comments may also be viewed

electronically or in paper in Room M–

4365A, 2001 C Street NW, Washington,

DC 20551, between 9:00 a.m. and 5:00

p.m. during Federal business weekdays.

For security reasons, the Board requires

that visitors make an appointment to

inspect comments. You may do so by

calling (202) 452–3684. Upon arrival,

visitors will be required to present valid

government-issued photo identification

and to submit to security screening in

order to inspect and photocopy

comments. For users of TTY–TRS,

please call 711 from any telephone,

anywhere in the United States.

FDIC: You may submit comments,

identified by RIN 3064–AF81, by any of

the following methods:

• Agency Website: https://

www.fdic.gov/resources/regulations/

federal-register-publications/. Follow

instructions for submitting comments

on the Agency website.

• Email: comments@fdic.gov. Include

RIN 3064–AF81 on the subject line of

the message.

• Mail: James P. Sheesley, Assistant

Executive Secretary, Attention:

Comments RIN 3064–AF81, Federal

Deposit Insurance Corporation, 550 17th

Street NW, Washington, DC 20429.

• Hand Delivery/Courier: Comments

may be hand delivered to the guard

station at the rear of the 550 17th Street

NW building (located on F Street NW)

on business days between 7:00 a.m. and

5:00 p.m.

Public Inspection: Comments

received, including any personal

information provided, may be posted

without change to https://www.fdic.gov/

resources/regulations/federal-register-

publications/. Commenters should

submit only information that the

commenter wishes to make available

publicly

550 17th Street

NW building (located on F Street NW)

on business days between 7:00 a.m. and

5:00 p.m.

Public Inspection: Comments

received, including any personal

information provided, may be posted

without change to https://www.fdic.gov/

resources/regulations/federal-register-

publications/. Commenters should

submit only information that the

commenter wishes to make available

publicly. The FDIC may review, redact,

or refrain from posting all or any portion

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

1 12 U.S.C. 2901 et seq.

2 For purposes of this SUPPLEMENTARY

INFORMATION, the term ‘‘bank’’ includes insured

national and state banks, Federal and state savings

associations, Federal branches as defined in 12 CFR

part 28, insured State branches as defined in 12

CFR 345.11(c), and state member banks as defined

in 12 CFR part 208, except as provided in 12 CFR

__.11(c).

3 See 12 CFR part 25 (OCC), 12 CFR part 228

(Regulation BB) (Board), and 12 CFR part 345

(FDIC). For clarity and to streamline references,

citations to the agencies’ existing common CRA

regulations are provided in the following format: 12

CFR __.xx; for example, references to 12 CFR 25.12

(OCC), 12 CFR 228.12 (Board), and 12 CFR 345.12

(FDIC) would be streamlined as follows: ‘‘12 CFR

__.12.’’ Likewise, references to the agencies’

proposed common CRA regulations are provided in

the following format: ‘‘proposed § __.xx.’’

of any comment that it may deem to be

inappropriate for publication, such as

irrelevant or obscene material. The FDIC

may post only a single representative

example of identical or substantially

identical comments, and in such cases

will generally identify the number of

identical or substantially identical

comments represented by the posted

example

following format: ‘‘proposed § __.xx.’’

of any comment that it may deem to be

inappropriate for publication, such as

irrelevant or obscene material. The FDIC

may post only a single representative

example of identical or substantially

identical comments, and in such cases

will generally identify the number of

identical or substantially identical

comments represented by the posted

example. All comments that have been

redacted, as well as those that have not

been posted, that contain comments on

the merits of this notice will be retained

in the public comment file and will be

considered as required under all

applicable laws. All comments may be

accessible under the Freedom of

Information Act.

FOR FURTHER INFORMATION CONTACT:

OCC: Heidi Thomas, Special Counsel,

or Emily Boyes, Counsel, Chief

Counsel’s Office, (202) 649–5490; or

Vonda Eanes, Director for CRA and Fair

Lending Policy, or Karen Bellesi,

Director for Community Development,

Bank Supervision Policy, (202) 649–

5470, Office of the Comptroller of the

Currency, 400 7th Street SW,

Washington, DC 20219. If you are deaf,

hard of hearing, or have a speech

disability, please dial 7–1–1 to access

telecommunications relay services.

Board: S. Caroline (Carrie) Johnson,

Manager, Division of Consumer and

Community Affairs, (202) 452–2762;

Amal S. Patel, Counsel, Division of

Consumer and Community Affairs, (202)

912–7879, Board of Governors of the

Federal Reserve System, 20th Street and

Constitution Avenue NW, Washington,

DC 20551. For users of TTY–TRS, please

call 711 from any telephone, anywhere

in the United States.

FDIC: Patience R. Singleton, Senior

Policy Analyst, Supervisory Policy

Branch, Division of Depositor and

Consumer Protection, (202) 898–6859;

Pamela Freeman, Chief Fair Lending

and CRA Examination Section, Division

of Depositor and Consumer Protection,

Constitution Avenue NW, Washington,

DC 20551. For users of TTY–TRS, please

call 711 from any telephone, anywhere

in the United States.

FDIC: Patience R. Singleton, Senior

Policy Analyst, Supervisory Policy

Branch, Division of Depositor and

Consumer Protection, (202) 898–6859;

Pamela Freeman, Chief Fair Lending

and CRA Examination Section, Division

of Depositor and Consumer Protection,

(202) 898–3656; Richard M. Schwartz,

Counsel, Legal Division, (202) 898–

7424; or Sherry Ann Betancourt,

Counsel, Legal Division, (202) 898–

6560, Federal Deposit Insurance

Corporation, 550 17th Street NW,

Washington, DC 20429.

SUPPLEMENTARY INFORMATION: In this

Notice of Proposed Rulemaking (NPR or

proposal), the OCC, Board, and the

FDIC, (together referred to as ‘‘the

agencies’’) seek feedback on changes to

update and clarify the regulations to

implement the CRA.1 The CRA

encourages banks 2 to help meet the

credit needs of the local communities in

which they are chartered, consistent

with a bank’s safe and sound operations,

by requiring the Federal banking

regulatory agencies to examine banks’

records of meeting the credit needs of

their entire community, including low-

and moderate-income neighborhoods.

The agencies implement the CRA

through their CRA regulations.3 The

CRA regulations establish the

framework and criteria by which the

agencies assess a bank’s record of

helping to meet the credit needs of its

community, including low- and

moderate-income neighborhoods,

consistent with safe and sound

operations. Under the CRA regulations,

the agencies apply different evaluation

standards for banks of different asset

sizes and types

CRA regulations.3 The

CRA regulations establish the

framework and criteria by which the

agencies assess a bank’s record of

helping to meet the credit needs of its

community, including low- and

moderate-income neighborhoods,

consistent with safe and sound

operations. Under the CRA regulations,

the agencies apply different evaluation

standards for banks of different asset

sizes and types.

This NPR seeks to update the CRA

regulations in adherence with objectives

that include the following:

• Update CRA regulations to

strengthen the achievement of the core

purpose of the statute;

• Adapt to changes in the banking

industry, including the expanded role of

mobile and online banking;

• Provide greater clarity and

consistency in the application of the

regulations;

• Tailor performance standards to

account for differences in bank size and

business models and local conditions;

• Tailor data collection and reporting

requirements and use existing data

whenever possible;

• Promote transparency and public

engagement;

• Confirm that CRA and fair lending

responsibilities are mutually

reinforcing; and

• Create a consistent regulatory

approach that applies to banks regulated

by all three agencies.

A key part of the proposal is a new

evaluation framework for evaluating

CRA performance for banks. The

agencies propose an evaluation

framework that would establish the

following four tests for large banks:

Retail Lending Test; Retail Services and

Products Test; Community Development

Financing Test; and Community

Development Services Test.

Intermediate banks would be evaluated

under the Retail Lending Test and the

status quo community development

test, unless they choose to opt into the

Community Development Financing

Test. Small banks would be evaluated

under the status quo small bank lending

test, unless they choose to opt into the

Retail Lending Test. Wholesale and

limited purpose banks would be

evaluated under a tailored version of the

Community Development Financing

Test

Lending Test and the

status quo community development

test, unless they choose to opt into the

Community Development Financing

Test. Small banks would be evaluated

under the status quo small bank lending

test, unless they choose to opt into the

Retail Lending Test. Wholesale and

limited purpose banks would be

evaluated under a tailored version of the

Community Development Financing

Test.

The agencies request feedback on all

aspects of the proposal, including but

not limited to the specific questions

outlined in the SUPPLEMENTARY

INFORMATION. The agencies are setting

forth in this SUPPLEMENTARY

INFORMATION the proposed rule using

common regulation text for ease of

commenter review. The agencies are

proposing agency-specific amendatory

text where necessary to account for

differing agency authority and

terminology.

Table of Contents

I. Introduction

II. Overview of Proposed Rule

III. Community Development Definitions

IV. Qualifying Activities Confirmation and

Illustrative List of Activities

V. Impact Review of Community

Development Activities

VI. Assessment Areas and Areas for Eligible

Community Development Activity

VII. Performance Tests, Standards, and

Ratings in General

VIII. Retail Lending Test Product Categories

and Major Product Lines

IX. Retail Lending Test Evaluation

Framework for Facility-Based

Assessment Areas and Retail Lending

Assessment Areas

X. Retail Lending Test Evaluation Framework

for Retail Lending Test Conclusions at

the State, Multistate MSAs, and

Institution Level

XI. Retail Services and Products Test

XII. Community Development Financing Test

XIII. Community Development Services Test

XIV. Wholesale and Limited Purpose Banks

XV. Strategic Plans

XVI. Assigned Conclusions and Ratings

XVII. Performance Standards for Small Banks

and Intermediate Banks

XVIII. Effect of CRA Performance on

Applications

XIX. Data Collection, Reporting, and

Disclosure

XX

XI. Retail Services and Products Test

XII. Community Development Financing Test

XIII. Community Development Services Test

XIV. Wholesale and Limited Purpose Banks

XV. Strategic Plans

XVI. Assigned Conclusions and Ratings

XVII. Performance Standards for Small Banks

and Intermediate Banks

XVIII. Effect of CRA Performance on

Applications

XIX. Data Collection, Reporting, and

Disclosure

XX. Content and Availability of Public File,

Public Notice by Banks, Publication of

Planned Examination Schedule, and

Public Engagement

XXI. Transition

XXII. Regulatory Analysis

XXIII. Text of Common Proposed Rule (All

Agencies)

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

4 12 U.S.C. 2901(a).

5 12 U.S.C. 2903(a)(1).

6 12 U.S.C. 2906(a).

7 12 U.S.C. 2906(b).

8 12 U.S.C. 2903(a)(2).

9 Public Law 101–73, 103 Stat. 183 (Aug. 9, 1989).

10 Public Law 102–242, 105 Stat. 2236 (Dec. 19,

1991).

11 Public Law 102–550, 106 Stat. 3874 (Oct. 28,

1992).

12 Public Law 103–328, 108 Stat. 2338 (Sept. 29,

1994).

13 Public Law 106–102, 113 Stat. 1338 (Nov. 12,

1999).

14 12 U.S.C. 2905.

15 43 FR 47144 (Oct. 12, 1978). Congress also

charged, in addition to the agencies, the Office of

Thrift Supervision (OTS) and its predecessor

agency, the Federal Home Loan Bank Board, with

implementing the CRA. The OTS had CRA

rulemaking and supervisory authority for all

savings associations. Pursuant to Title III of the

Dodd-Frank Wall Street Reform and Consumer

Protection Act, Public Law 111–203, 124 Stat. 1376,

1522 (2010), the OTS’s CRA rulemaking authority

for all savings associations transferred to the OCC

and the OTS’s CRA supervisory authority for State

savings associations transferred to the FDIC

ad CRA

rulemaking and supervisory authority for all

savings associations. Pursuant to Title III of the

Dodd-Frank Wall Street Reform and Consumer

Protection Act, Public Law 111–203, 124 Stat. 1376,

1522 (2010), the OTS’s CRA rulemaking authority

for all savings associations transferred to the OCC

and the OTS’s CRA supervisory authority for State

savings associations transferred to the FDIC. As a

result, the OCC’s CRA regulation applies to both

State and Federal savings associations, in addition

to national banks, and the FDIC enforces the OCC’s

CRA regulations with respect to State savings

associations.

16 See 81 FR 48506 (July 25, 2016). ‘‘Interagency

Questions and Answers’’ refers to the ‘‘Interagency

Questions and Answers Regarding Community

Reinvestment’’ guidance in its entirety. ‘‘Q&A’’

refers to an individual question and answer within

the Interagency Questions and Answers.

17 See generally 12 CFR l.21 through l.27. The

agencies annually adjust the CRA asset-size

thresholds based on the annual percentage change

in a measure of the Consumer Price Index.

I. Introduction

A. Background

The CRA is designed to encourage

regulated banks to help meet the credit

needs of the local communities in

which they are chartered. Specifically,

Congress found that ‘‘(1) regulated

financial institutions are required by

law to demonstrate that their deposit

facilities serve the convenience and

needs of the communities in which they

are chartered to do business; (2) the

convenience and needs of communities

include the need for credit as well as

deposit services; and (3) regulated

financial institutions have continuing

and affirmative obligation to help meet

the credit needs of the local

communities in which they are

chartered.’’ 4

The CRA statute requires the agencies

to ‘‘assess the institution’s record of

meeting the credit needs of its entire

community, including low- and

moderate-income neighborhoods,

consistent with the safe and sound

operation of such institution.’’ 5 Upon

tions have continuing

and affirmative obligation to help meet

the credit needs of the local

communities in which they are

chartered.’’ 4

The CRA statute requires the agencies

to ‘‘assess the institution’s record of

meeting the credit needs of its entire

community, including low- and

moderate-income neighborhoods,

consistent with the safe and sound

operation of such institution.’’ 5 Upon

completing this assessment, the statute

requires the agencies to ‘‘prepare a

written evaluation of the institution’s

record of meeting the credit needs of its

entire community, including low- and

moderate-income neighborhoods.’’ 6 In

addition, the statute requires making

portions of these written evaluations,

referred to by the agencies as

performance evaluations, available to

the public.7 The statute further provides

that each agency must consider a bank’s

CRA performance ‘‘in its evaluation of

an application for a deposit facility by

such institution.’’ 8

Since its enactment, Congress has

amended the CRA several times,

including through: the Financial

Institutions Reform, Recovery, and

Enforcement Act of 1989 9 (which

required public disclosure of a bank’s

CRA written evaluation and rating); the

Federal Deposit Insurance Corporation

Improvement Act of 1991 10 (which

required the inclusion of a bank’s CRA

examination data in the determination

of its CRA rating); the Housing and

Community Development Act of 1992 11

(which included assessment of the

record of nonminority-owned and

nonwomen-owned banks in cooperating

with minority-owned and women-

owned banks and low-income credit

unions); the Riegle-Neal Interstate

Banking and Branching Efficiency Act

of 1994 12 (which (i) required an agency

to consider an out-of-state national

bank’s or state bank’s CRA rating when

determining whether to allow interstate

branches, and (ii) prescribed certain

requirements for the contents of the

written CRA evaluation for banks with

interstate branches); and the Gramm-

Leach-Bliley Act of 1999

egle-Neal Interstate

Banking and Branching Efficiency Act

of 1994 12 (which (i) required an agency

to consider an out-of-state national

bank’s or state bank’s CRA rating when

determining whether to allow interstate

branches, and (ii) prescribed certain

requirements for the contents of the

written CRA evaluation for banks with

interstate branches); and the Gramm-

Leach-Bliley Act of 1999 13 (which,

among other things, provided regulatory

relief for smaller banks by reducing the

frequency of their CRA examinations).

Congress directed the agencies to

publish regulations to carry out the

CRA’s purposes,14 and in 1978 the

agencies promulgated the first CRA

regulations, which included evidence of

prohibited discriminatory or other

illegal credit practices as a performance

factor.15 Since then, the agencies have

together significantly revised and sought

to clarify their CRA regulations twice, in

1995 and 2005—with the most

substantive interagency update

occurring in 1995. In addition, the

agencies have periodically jointly

published the Interagency Questions

and Answers Regarding Community

Reinvestment (Interagency Questions

and Answers) 16 to provide guidance on

the CRA regulations.

B. The Current CRA Regulations and

Guidance for Performance Evaluations

1. CRA Performance Evaluations

The agencies’ CRA regulations

provide different methods to evaluate a

bank’s CRA performance depending on

its asset size and business strategy.17

Under the current framework:

• Small banks—currently, those with

assets of less than $346 million as of

December 31 of either of the prior two

calendar years—are evaluated under a

lending test and may receive an

‘‘Outstanding’’ rating based only on

their retail lending performance

different methods to evaluate a

bank’s CRA performance depending on

its asset size and business strategy.17

Under the current framework:

• Small banks—currently, those with

assets of less than $346 million as of

December 31 of either of the prior two

calendar years—are evaluated under a

lending test and may receive an

‘‘Outstanding’’ rating based only on

their retail lending performance.

Qualified investments, services, and

delivery systems that enhance credit

availability in a bank’s assessment areas

may be considered for an ‘‘Outstanding’’

rating, but only if the bank meets or

exceeds the lending test criteria in the

small bank performance standards.

• Intermediate small banks—

currently, those with assets of at least

$346 million as of December 31 of both

of the prior two calendar years and less

than $1.384 billion as of December 31 of

either of the prior two calendar years—

are evaluated under the lending test for

small banks and a community

development test. The intermediate

small bank community development

test evaluates all community

development activities together.

• Large banks—currently, those with

assets of more than $1.384 billion as of

December 31 of both of the prior two

calendar years—are evaluated under

separate lending, investment, and

service tests. The lending and service

tests consider both retail and

community development activities, and

the investment test focuses on qualified

community development investments.

To facilitate the agencies’ CRA analysis,

large banks are required to report

annually certain data on community

development loans, small business

loans, and small farm loans (small banks

and intermediate small banks are not

required to report these data unless they

opt into being evaluated under the large

bank lending test)

ent test focuses on qualified

community development investments.

To facilitate the agencies’ CRA analysis,

large banks are required to report

annually certain data on community

development loans, small business

loans, and small farm loans (small banks

and intermediate small banks are not

required to report these data unless they

opt into being evaluated under the large

bank lending test).

• Designated wholesale banks (those

engaged in only incidental retail

lending) and limited purpose banks

(those offering a narrow product line to

a regional or broader market) are

evaluated under a standalone

community development test.

• Banks of any size may elect to be

evaluated under a strategic plan that

sets out measurable, annual goals for

lending, investment, and service

activities in order to achieve a

‘‘Satisfactory’’ or an ‘‘Outstanding’’

rating. A strategic plan must be

developed with community input and

approved by the appropriate Federal

banking agency.

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18 12 CFR l.41.

19 Political subdivisions include cities, counties,

towns, townships, and Indian reservations. See

Q&A § l.41(c)(1)–1.

20 12 CFR l.12(k).

21 12 U.S.C. 2903(a).

22 12 CFRl.12(j), (l), (v), and (w).

23 See generally 12 CFR l.21 through l.27 and

l.24(d).

24 See generally 12 CFR l.12(g), (h), (i), and (t)

and 12 CFR l.21 through l.27.

25 See, e.g., https://apps.occ.gov/crasearch/

default.aspx (OCC); https://www.federalreserve.gov/

apps/CRAPubWeb/CRA/BankRating (Board);

https://crapes.fdic.gov/ (FDIC).

26 See, e.g., Federal Financial Institutions

Examination Council (FFIEC), ‘‘Community

Reinvestment Act: CRA Examinations,’’ https://

www.ffiec.gov/cra/examinations.htm.

27 Id.

28 See, e.g., 80 FR 7980 (Feb. 13, 2015)

.27.

25 See, e.g., https://apps.occ.gov/crasearch/

default.aspx (OCC); https://www.federalreserve.gov/

apps/CRAPubWeb/CRA/BankRating (Board);

https://crapes.fdic.gov/ (FDIC).

26 See, e.g., Federal Financial Institutions

Examination Council (FFIEC), ‘‘Community

Reinvestment Act: CRA Examinations,’’ https://

www.ffiec.gov/cra/examinations.htm.

27 Id.

28 See, e.g., 80 FR 7980 (Feb. 13, 2015).

29 See FFIEC, Joint Report to Congress: Economic

Growth and Regulatory Paperwork Reduction Act,

82 FR 15900 (Mar. 30, 2017), https://www.ffiec.gov/

pdf/2017_FFIEC_EGRPRA_Joint-Report_to_

Congress.pdf.

30 83 FR 45053 (Sept. 5, 2018).

31 For a summary of the Federal Reserve outreach

session feedback, see ‘‘Perspectives from Main

Street: Stakeholder Feedback on Modernizing the

Community Reinvestment Act’’ (June 2019), https://

www.federalreserve.gov/publications/files/

stakeholder-feedback-on-modernizing-the-

community-reinvestment-act-201906.pdf.

32 85 FR 1204 (Jan. 9, 2020).

33 85 FR 34734 (June 5, 2020).

34 See OCC, News Release 2020–63, ‘‘OCC

Finalizes Rule to Strengthen and Modernize

Community Reinvestment Act Regulations’’ (May

Continued

The agencies also consider applicable

performance context information to

inform their analysis and conclusions

when conducting CRA examinations.

Performance context comprises a broad

range of economic, demographic, and

bank- and community-specific

information that examiners review to

calibrate a bank’s CRA evaluation to its

local communities.

2

vestment Act Regulations’’ (May

Continued

The agencies also consider applicable

performance context information to

inform their analysis and conclusions

when conducting CRA examinations.

Performance context comprises a broad

range of economic, demographic, and

bank- and community-specific

information that examiners review to

calibrate a bank’s CRA evaluation to its

local communities.

2. Assessment Areas

The existing CRA regulations require

a bank to delineate one or more

assessment areas in which its record of

meeting its CRA obligations will be

evaluated.18 The regulations require a

bank to delineate assessment areas

consisting of geographic areas

(metropolitan statistical areas (MSAs) or

metropolitan divisions) or political

subdivisions 19 in which its main office,

branches, and deposit-taking automated

teller machines (ATMs) are located, as

well as the surrounding geographies

(i.e., census tracts) 20 where a substantial

portion of its loans are originated or

purchased.

The assessment area requirements and

emphasis on branches reflects the

prevailing business model for financial

service delivery when the CRA was

enacted. The statute instructs the

agencies to assess a bank’s record of

meeting the credit needs of its ‘‘entire

community, including low- and

moderate-income neighborhoods,

consistent with the safe and sound

operation of such institution, and to

take such record into account in its

evaluation of an application for a

deposit facility by such institution.’’ 21

The statute does not prescribe the

delineation of assessment areas, but

they are an important aspect of the

regulation because they define

‘‘community’’ for purposes of the

evaluation of a bank’s CRA

performance.

3

h the safe and sound

operation of such institution, and to

take such record into account in its

evaluation of an application for a

deposit facility by such institution.’’ 21

The statute does not prescribe the

delineation of assessment areas, but

they are an important aspect of the

regulation because they define

‘‘community’’ for purposes of the

evaluation of a bank’s CRA

performance.

3. Qualifying Activities

The CRA regulations and the

Interagency Questions and Answers

provide detailed information, including

applicable definitions and descriptions,

respectively, regarding activities that are

eligible for CRA consideration in the

evaluation of a bank’s CRA

performance. Banks that are evaluated

under a performance test that includes

a review of their retail activities are

assessed in connection with retail

lending activity (as applicable, home

mortgage loans, small business loans,

small farm loans, and consumer

loans) 22 and, where applicable, retail

banking service activities (e.g., the

current distribution of a bank’s branches

in geographies of different income

levels, and the availability and

effectiveness of the bank’s alternative

systems for delivering banking services

to low- and moderate-income

geographies and individuals).23

Banks evaluated under a performance

test that includes a review of their

community development activities are

assessed with respect to community

development lending, qualified

investments, and community

development services, which by

definition must have a primary purpose

of community development.24

4

livering banking services

to low- and moderate-income

geographies and individuals).23

Banks evaluated under a performance

test that includes a review of their

community development activities are

assessed with respect to community

development lending, qualified

investments, and community

development services, which by

definition must have a primary purpose

of community development.24

4. Guidance for Performance

Evaluations

In addition to information included in

their CRA regulations, the agencies also

provide information to the public

regarding how CRA performance tests

are applied, where CRA activities are

considered, and what activities are

eligible through publicly available CRA

performance evaluations,25 the

Interagency Questions and Answers,

interagency CRA examination

procedures,26 and interagency

instructions for writing performance

evaluations.27

C. Stakeholder Feedback and Recent

Rulemaking

The financial services industry has

undergone transformative changes since

the CRA statute was enacted, including

the removal of national bank interstate

branching restrictions and the expanded

role of mobile and online banking. To

better understand how these

developments impact both consumer

access to banking products and services

and a bank’s CRA performance, the

agencies have reviewed feedback from

the banking industry, community

groups, academics, and other

stakeholders on several occasions.

1. Economic Growth and Regulatory

Paperwork Reduction Act of 1996

(EGRPRA)

From 2013 to 2016, the agencies

solicited feedback on the CRA as part of

the EGRPRA review process.28

Stakeholders raised issues related to

assessment area definitions; incentives

for banks to serve low- and moderate-

income, unbanked, underbanked, and

rural individuals and communities;

recordkeeping and reporting

requirements; the need for clarity

regarding performance measures and

better examiner training to ensure

consistency in examinations; and

refinement of CRA ratings.29

2

ss.28

Stakeholders raised issues related to

assessment area definitions; incentives

for banks to serve low- and moderate-

income, unbanked, underbanked, and

rural individuals and communities;

recordkeeping and reporting

requirements; the need for clarity

regarding performance measures and

better examiner training to ensure

consistency in examinations; and

refinement of CRA ratings.29

2. OCC CRA Advance Notice of

Proposed Rulemaking and Federal

Reserve Outreach Sessions

On September 5, 2018, the OCC

published an Advance Notice of

Proposed Rulemaking (ANPR) to solicit

ideas for a new CRA regulatory

framework.30 More than 1,500 comment

letters were submitted in response. To

augment that input, the Federal Reserve

System (the Board and the Federal

Reserve Banks) held about 30 outreach

meetings with representatives of banks,

community organizations, and the other

agencies.31

3. OCC–FDIC CRA Notice of Proposed

Rulemaking and OCC CRA Final Rule

On December 12, 2019, the FDIC and

the OCC issued a joint NPR to revise

and update their CRA regulations.32 In

response, the FDIC and the OCC

received over 7,500 comment letters.

On May 20, 2020, the OCC issued a

CRA final rule (OCC 2020 CRA final

rule), retaining the most fundamental

elements of the proposal but also

making adjustments to reflect

stakeholder input.33 The OCC deferred

establishing the metrics-framework for

evaluating banks’ CRA performance

until it was able to assess additional

data,34 with the final rule having an

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roposal but also

making adjustments to reflect

stakeholder input.33 The OCC deferred

establishing the metrics-framework for

evaluating banks’ CRA performance

until it was able to assess additional

data,34 with the final rule having an

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33888

Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

20, 2020), https://www.occ.gov/news-issuances/

news-releases/2020/nr-occ-2020-63.html; see also

85 FR at 34736.

35 85 FR at 34784.

36 85 FR 66410 (Oct. 19, 2020).

37 See Interagency Statement on Community

Reinvestment Act, Joint Agency Action (July 20,

2021), https://www.occ.gov/news-issuances/news-

releases/2021/nr-ia-2021-77.html (OCC); https://

www.federalreserve.gov/newsevents/pressreleases/

bcreg20210720a.htm (Board); https://www.fdic.gov/

news/press-releases/2021/pr21067.html (FDIC).

38 See OCC, News Release 2021–76, Statement on

Rescinding its 2020 Community Reinvestment Act

Rule (July 20, 2021), https://www.occ.gov/news-

issuances/news-releases/2021/nr-occ-2021-76.html.

39 86 FR 52026 (Sept. 17, 2021).

40 86 FR 71328 (Dec. 15, 2021).

41 42 U.S.C. 3601 et seq.

42 42 U.S.C. 3604 through 3606.

43 15 U.S.C. 1691 et seq.

44 See Interagency Fair Lending Examination

Procedures (Aug. 2009), available at https://

www.ffiec.gov/pdf/fairlend.pdf.

45 See University of Richmond’s Digital

Scholarship Lab, ‘‘Mapping Inequality: Redlining in

New Deal America,’’ https://dsl.richmond.edu/

panorama/redlining/#loc=5/39.1/-94.58 (archive of

HOLC maps).

46 See, e.g., Daniel Aaronson, Daniel Hartley, and

Bhashkar Mazumder, Federal Reserve Bank of

Chicago, ‘‘The Effects of the 1930s HOLC

‘Redlining’ Map’’ (Revised Aug

iec.gov/pdf/fairlend.pdf.

45 See University of Richmond’s Digital

Scholarship Lab, ‘‘Mapping Inequality: Redlining in

New Deal America,’’ https://dsl.richmond.edu/

panorama/redlining/#loc=5/39.1/-94.58 (archive of

HOLC maps).

46 See, e.g., Daniel Aaronson, Daniel Hartley, and

Bhashkar Mazumder, Federal Reserve Bank of

Chicago, ‘‘The Effects of the 1930s HOLC

‘Redlining’ Map’’ (Revised Aug. 2020), https://

www.chicagofed.org/publications/working-papers/

2017/wp2017-12, p.1 (‘‘Neighborhoods were

classified based on detailed risk-based

characteristics, including housing age, quality,

occupancy, and prices. However, non-housing

attributes such as race, ethnicity, and immigration

status were influential factors as well. Since the

lowest rated neighborhoods were drawn in red and

often had the vast majority of African American

residents, these maps have been associated with the

so-called practice of ‘redlining’ in which borrowers

are denied access to credit due to the demographic

composition of their neighborhood.’’).

47 123 Cong. Rec. 17630 (June 6, 1977).

48 Neil Bhutta et al., ‘‘Disparities in Wealth by

Race and Ethnicity in the 2019 Survey of Consumer

Finances’’ (Sept. 28, 2020), https://

www.federalreserve.gov/econres/notes/feds-notes/

disparities-in-wealth-by-race-and-ethnicity-in-the-

2019-survey-of-consumer-finances-20200928.htm.

49 85 FR at 66413.

October 1, 2020 effective date and

January 1, 2023 and January 1, 2024

compliance dates for certain

provisions.35

4. Board CRA Advance Notice of

Proposed Rulemaking

On September 21, 2020, the Board

issued a CRA ANPR (Board CRA ANPR)

requesting public comment on an

approach to modernize the CRA

regulations by strengthening, clarifying,

and tailoring them to reflect the current

banking landscape and better meet the

core purpose of the CRA.36 The Board

CRA ANPR sought feedback on ways to

evaluate how banks meet the needs of

low- and moderate-income communities

and address inequities in credit access

PR (Board CRA ANPR)

requesting public comment on an

approach to modernize the CRA

regulations by strengthening, clarifying,

and tailoring them to reflect the current

banking landscape and better meet the

core purpose of the CRA.36 The Board

CRA ANPR sought feedback on ways to

evaluate how banks meet the needs of

low- and moderate-income communities

and address inequities in credit access.

The Board received over 600 comment

letters on this ANPR.

5. Recent Developments

On July 20, 2021, the agencies issued

an interagency statement indicating

their commitment to working

collectively to, in a consistent manner,

strengthen and modernize their CRA

regulations.37 On the same day, the OCC

stated its intention to rescind the OCC

2020 CRA final rule.38 Subsequently, on

September 8, 2021, the OCC issued a

notice of proposed rulemaking to

rescind the OCC 2020 CRA final rule

and replace it with CRA regulations

based on those that the agencies jointly

issued in 1995, as amended.39 On

December 15, 2021, the OCC issued a

final rule completing the rescission and

replacement effective January 1, 2022.

The final rule also integrated the OCC’s

CRA regulation for savings associations

into its national bank CRA regulation at

12 CFR part 25.40

D. CRA, Illegal Discrimination, and Fair

Lending

The CRA was one of several laws

enacted in the 1960s and 1970s to

address fairness and financial inclusion

in access to housing and credit. During

this period, Congress passed the Fair

Housing Act (FHA) in 1968,41 to

prohibit discrimination in renting or

buying a home,42 and the Equal Credit

Opportunity Act (ECOA) in 1974 43

(amended in 1976), to prohibit creditors

from discriminating against an applicant

in any aspect of a credit transaction on

the basis of race, color, religion, national

origin, sex, marital status, or age

During

this period, Congress passed the Fair

Housing Act (FHA) in 1968,41 to

prohibit discrimination in renting or

buying a home,42 and the Equal Credit

Opportunity Act (ECOA) in 1974 43

(amended in 1976), to prohibit creditors

from discriminating against an applicant

in any aspect of a credit transaction on

the basis of race, color, religion, national

origin, sex, marital status, or age. These

fair lending laws provide the legal basis

for prohibiting discriminatory lending

practices based on race and ethnicity.44

Prior to passage of these laws,

inequitable access to credit and other

financial services—due in large part to

a practice known as ‘‘redlining’’—along

with a lack of public and private

investment, greatly contributed to the

economic distress experienced by

lower-income and minority

communities. The former Federal Home

Owners’ Loan Corporation (HOLC),

established in 1933, employed color-

coded maps 45 to designate its

perception of the relative risk of lending

in a range of neighborhoods, with

‘‘hazardous’’ (the highest risk) areas

coded in red often with reference to the

racial makeup of the neighborhood.46 In

addition to referring to HOLC maps, the

term redlining has also been used to

more broadly describe excluding

neighborhoods or areas from provision

of credit or other financial services on

account of the race or ethnicity of

residents in those areas. As Senator

William Proxmire, who authored the

CRA legislation, testified when

discussing its purpose:

By redlining let me make it clear what I am

talking about

g to HOLC maps, the

term redlining has also been used to

more broadly describe excluding

neighborhoods or areas from provision

of credit or other financial services on

account of the race or ethnicity of

residents in those areas. As Senator

William Proxmire, who authored the

CRA legislation, testified when

discussing its purpose:

By redlining let me make it clear what I am

talking about. I am talking about the fact that

banks and savings and loans will take their

deposits from a community and instead of

reinvesting them in that community, they

will actually or figuratively draw a red line

on a map around the areas of their city,

sometimes in the inner city, sometimes in the

older neighborhoods, sometimes ethnic and

sometimes black, but often encompassing a

great area of their neighborhood.47

Even with the implementation of the

CRA and the other complementary laws,

the wealth gap and disparities in other

financial outcomes remain persistent.

For example, ‘‘data from the 2019

Survey of Consumer Finances (SCF)

show that long-standing and substantial

wealth disparities between families in

different racial and ethnic groups were

little changed since the last survey in

2016; the typical White family has eight

times the wealth of the typical Black

family and five times the wealth of the

typical Hispanic family.’’ 48

The Board CRA ANPR discussed this

history of redlining and racial

discrimination prior to the enactment of

these laws and asked for feedback on

the following question: ‘‘In considering

how the CRA’s history and purpose

relate to the nation’s current challenges,

what modifications and approaches

would strengthen CRA regulatory

implementation in addressing ongoing

systemic inequity in credit access for

minority individuals and

communities?’’ 49 The Board received

comments from a number of

stakeholders on this question, providing

feedback across different topics

sidering

how the CRA’s history and purpose

relate to the nation’s current challenges,

what modifications and approaches

would strengthen CRA regulatory

implementation in addressing ongoing

systemic inequity in credit access for

minority individuals and

communities?’’ 49 The Board received

comments from a number of

stakeholders on this question, providing

feedback across different topics.

As has been the case since the first

regulations were issued by the agencies,

the agencies continue to recognize that

CRA and fair lending are mutually

reinforcing. In this NPR, the agencies

propose to retain the conditions that

bank assessment areas are prohibited

from reflecting illegal discrimination or

arbitrarily excluding low- or moderate-

income census tracts. The agencies also

propose to retain the regulatory

provision that CRA ratings can be

downgraded as a result of

discriminatory practices, among other

practices. The agencies are committed to

upholding their regulatory

responsibilities for both fair lending and

CRA examinations, and the agencies

seek to coordinate those examinations

where feasible to do so.

In furtherance of the agencies’

objective to promote transparency, the

agencies propose providing additional

information to the public in CRA

performance evaluations for large banks

related to the distribution by borrower

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le to do so.

In furtherance of the agencies’

objective to promote transparency, the

agencies propose providing additional

information to the public in CRA

performance evaluations for large banks

related to the distribution by borrower

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33889

Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

50 87 FR 18627, 18830 (Mar. 31, 2022). Of

particular relevance to the Agencies’ CRA

regulations, the SBA revised the size standards

applicable to small commercial banks and savings

institutions, respectively, from $600 million to $750

million, based upon the average assets reported on

such a financial institution’s four quarterly

financial statements for the preceding year. The

final rule has a May 2, 2022 effective date.

race and ethnicity of the bank’s home

mortgage loan originations and

applications in each of the bank’s

assessment areas. This disclosure would

leverage existing data available under

the Home Mortgage Disclosure Act

(HMDA). As discussed in Section XIX of

this SUPPLEMENTARY INFORMATION,

providing the data in this disclosure

would have no independent impact on

the conclusions or ratings of the bank

and would not on its own reflect any

fair lending finding or violation.

Instead, this proposal is intended to

provide transparent information to the

public.

II. Overview of Proposed Rule

This SUPPLEMENTARY INFORMATION

includes a detailed discussion of the

proposed rule, including on the

following topics:

Community Development Definitions

impact on

the conclusions or ratings of the bank

and would not on its own reflect any

fair lending finding or violation.

Instead, this proposal is intended to

provide transparent information to the

public.

II. Overview of Proposed Rule

This SUPPLEMENTARY INFORMATION

includes a detailed discussion of the

proposed rule, including on the

following topics:

Community Development Definitions.

Section III discusses the following

proposed definitions for community

development activities: Affordable

housing; economic development that

supports small businesses and small

farms; community supportive services;

revitalization activities; essential

community facilities; essential

community infrastructure; recovery

activities in designated disaster areas;

disaster preparedness and climate

resiliency activities; activities with

minority depository institutions (MDIs),

women’s depository-institutions (WDIs),

low-income credit unions (LICUs), and

Community Development Financial

Institutions (CDFIs) certified by the U.S.

Department of the Treasury (Treasury

Department), referred to as Treasury

Department-certified CDFIs; financial

literacy; and qualifying activities in

Native Land Areas. The agencies

propose using a primary purpose

standard for determining eligibility of

the above activities, with pro rata

consideration for certain affordable

housing activities.

Qualifying Activities Confirmation

and Illustrative List of Activities.

Section IV describes the agencies’

proposal to maintain a publicly

available illustrative, non-exhaustive

list of activities eligible for CRA

consideration. In addition, the agencies

propose a process, open to banks, for

confirming eligibility of community

development activities in advance.

Impact Review of Community

Development Activities

nfirmation

and Illustrative List of Activities.

Section IV describes the agencies’

proposal to maintain a publicly

available illustrative, non-exhaustive

list of activities eligible for CRA

consideration. In addition, the agencies

propose a process, open to banks, for

confirming eligibility of community

development activities in advance.

Impact Review of Community

Development Activities. Section V

describes the agencies’ proposal for

specific impact review factors to inform

the impact and responsiveness

evaluation of a bank’s activities under

the Community Development Financing

Test, the Community Development

Services Test, and the Community

Development Financing Test for

Wholesale or Limited Purpose Banks.

Assessment Areas and Areas for

Eligible Community Development

Activity. Section VI describes proposals

on delineating facility-based assessment

areas for main offices, branches, and

deposit-taking remote service facilities

(to include ATMs). Under the proposal,

large banks would delineate assessment

areas comprised of full counties,

metropolitan divisions, or MSAs.

Intermediate and small banks could

continue to delineate partial county

facility-based assessment areas,

consistent with current practice.

The section also describes the

proposal for large banks to delineate

retail lending assessment areas where a

bank has concentrations of home

mortgage and/or small business lending

outside of its facility-based assessment

areas. Under this proposal, a large bank

would delineate retail lending

assessment areas where it has an annual

lending volume of at least 100 home

mortgage loan originations or at least

250 small business loan originations in

an MSA or nonmetropolitan area of a

state for two consecutive years.

The section also discusses the

proposal to allow banks to receive CRA

credit for any qualified community

development activity, regardless of

location, although performance within

facility-based assessment areas would

be emphasized

t 100 home

mortgage loan originations or at least

250 small business loan originations in

an MSA or nonmetropolitan area of a

state for two consecutive years.

The section also discusses the

proposal to allow banks to receive CRA

credit for any qualified community

development activity, regardless of

location, although performance within

facility-based assessment areas would

be emphasized.

Performance Tests, Standards, and

Ratings in General. Section VII

describes the agencies’ proposed

evaluation framework tailored for

differences in bank size and business

model. The agencies propose the

following four tests for large banks:

Retail Lending Test; Retail Services and

Products Test; Community Development

Financing Test; and Community

Development Services Test.

Intermediate banks would be evaluated

under the Retail Lending Test and the

status quo community development

test, unless they choose to opt into the

Community Development Financing

Test. Small banks would be evaluated

under the status quo small bank lending

test, unless they choose to opt into the

Retail Lending Test. Wholesale and

limited purpose banks would be

evaluated under a tailored version of the

Community Development Financing

Test.

Under this framework, large banks

would be banks that had average

quarterly assets, computed annually, of

at least $2 billion in both of the prior

two calendar years; intermediate banks

would be banks that had average

quarterly assets, computed annually, of

at least $600 million in both of the prior

two calendar years and less than $2

billion in either of the prior two

calendar years; and small banks would

be banks that had average quarterly

assets, computed annually, of less than

$600 million in either of the prior two

calendar years. The agencies are in the

process of seeking approval from the

U.S

quarterly assets, computed annually, of

at least $600 million in both of the prior

two calendar years and less than $2

billion in either of the prior two

calendar years; and small banks would

be banks that had average quarterly

assets, computed annually, of less than

$600 million in either of the prior two

calendar years. The agencies are in the

process of seeking approval from the

U.S. Small Business Administration

(SBA) to use the $600 million threshold,

where applicable and adjusted annually

for inflation, rather than the SBA’s

recently updated size standards.50

The agencies propose to further tailor

aspects of the proposal within the large

bank category. The agencies propose

that certain provisions of the Retail

Services and Products Test and

Community Development Services Test

would apply only to large banks that

had average quarterly assets, computed

annually, of over $10 billion in both of

the prior two calendar years. These

banks are referred to in this

SUPPLEMENTARY INFORMATION as large

banks with assets of over $10 billion.

Large banks that had average quarterly

assets, computed annually, of $10

billion or less in either of the prior two

calendar years are referred to in this

SUPPLEMENTARY INFORMATION as large

banks with assets of $10 billion or less.

The section also discusses a new

proposed definition of ‘‘operations

subsidiary’’ to the Board’s CRA

regulation and ‘‘operating subsidiary’’

for the FDIC’s and OCC’s CRA

regulations (referred to collectively in

this SUPPLEMENTARY INFORMATION as

‘‘bank subsidiaries’’) to identify those

bank affiliates whose activities would be

required to be attributed to a bank’s

CRA performance. The agencies propose

to maintain the current flexibilities that

would allow a bank to choose to include

or exclude the activities of other bank

affiliates that are not considered ‘‘bank

subsidiaries.’’ The section also discusses

performance context, and the

requirement for activity in accordance

with safe and sound operations

ould be

required to be attributed to a bank’s

CRA performance. The agencies propose

to maintain the current flexibilities that

would allow a bank to choose to include

or exclude the activities of other bank

affiliates that are not considered ‘‘bank

subsidiaries.’’ The section also discusses

performance context, and the

requirement for activity in accordance

with safe and sound operations.

Retail Lending Test Product

Categories and Major Product Lines.

Section VIII describes the proposed

categories and standards for

determining when a bank’s retail

lending product lines are evaluated

under the Retail Lending Test. The

agencies propose the following retail

lending product line categories: A

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51 See 15 U.S.C. 1691c–2. The CFPB’s Section

1071 Rulemaking would amend Regulation B to

implement changes to ECOA made by section 1071

of the Dodd-Frank Act. This rulemaking would

require covered financial institutions to collect and

report to the CFPB data on applications for credit

for small businesses, including businesses that are

owned by women or minorities. See 86 FR 56356

(Oct. 8, 2021), as corrected by 86 FR 70771 (Dec.

13, 2021).

52 Public Law 111–203, 124 Stat. 1376 (July 21,

2010).

53 This assumes the CFPB’s section 1071

rulemaking is finalized as proposed with a ‘‘small

business’’ defined as having gross annual revenues

of $5 million or less.

closed-end home mortgage, open-end

home mortgage, multifamily, small

business, and small farm lending. The

agencies also propose including

automobile lending as an eligible retail

lending product line. In addition, the

agencies propose a major product line

standard to determine when a retail

lending product line is evaluated

defined as having gross annual revenues

of $5 million or less.

closed-end home mortgage, open-end

home mortgage, multifamily, small

business, and small farm lending. The

agencies also propose including

automobile lending as an eligible retail

lending product line. In addition, the

agencies propose a major product line

standard to determine when a retail

lending product line is evaluated.

The NPR proposes to define the terms

‘‘small business’’ and ‘‘small farm’’

consistent with the Consumer Financial

Protection Bureau’s (CFPB) proposal

under section 1071 (Section 1071

Rulemaking) 51 of the Dodd-Frank Wall

Street Reform and Consumer Protection

Act (Dodd-Frank Act 52). The CFPB has

proposed to define a ‘‘small business’’

as having gross annual revenues of $5

million or less in the preceding fiscal

year. The agencies are in the process of

seeking approval from the SBA to use

the standard proposed by the CFPB in

its Section 1071 Rulemaking rather than

the SBA’s size standards.53

Retail Lending Test Evaluation

Framework for Facility-Based

Assessment Areas and Retail Lending

Assessment Areas. Section IX discusses

the proposed Retail Lending Test for

standardizing evaluations of retail

lending performance in facility-based

assessment areas and retail lending

assessment areas for large and

intermediate banks. The agencies

propose using a retail lending volume

screen to evaluate a bank’s retail lending

volumes. The agencies also propose to

evaluate a bank’s major product lines

using two distribution metrics that

measure the bank’s record of lending in

low- and moderate-income census tracts

and to borrowers of different income or

revenue levels. Further, the agencies

propose to establish a standardized

methodology for setting performance

expectations for specific product lines.

The methodology defines performance

ranges for each conclusion category for

each product, and this performance is

then averaged together

’s record of lending in

low- and moderate-income census tracts

and to borrowers of different income or

revenue levels. Further, the agencies

propose to establish a standardized

methodology for setting performance

expectations for specific product lines.

The methodology defines performance

ranges for each conclusion category for

each product, and this performance is

then averaged together. Under the

methodology, the amount of lending

needed to achieve a given conclusion

would differ across assessment areas

according to local credit demand and

would calibrate across business cycles.

Retail Lending Test Evaluation

Framework for Retail Lending Test

Conclusions in State, Multistate MSAs,

and at the Institution Level. Section X

describes the agencies’ proposal to

assign conclusions on the Retail

Lending Test for large and intermediate

banks at the state and multistate MSA

levels based on the conclusions reached

at individual facility-based and retail

lending assessment areas, as applicable.

The agencies also propose to assign

conclusions on the Retail Lending Test

at the institution level by similarly

combining conclusions from all of a

bank’s facility-based and retail lending

assessment areas, as applicable, as well

as the bank’s retail lending performance

outside of its assessment areas. The

consideration of outside lending

recognizes that some bank lending may

be geographically diffuse, without

concentrations in particular local

markets that would be captured by the

proposed retail lending assessment

areas.

Retail Services and Products Test.

Section XI describes the agencies’

proposal to evaluate large banks under

the Retail Services and Products Test.

This test would use a predominantly

qualitative approach, incorporating

quantitative measures as guidelines, as

applicable

ut

concentrations in particular local

markets that would be captured by the

proposed retail lending assessment

areas.

Retail Services and Products Test.

Section XI describes the agencies’

proposal to evaluate large banks under

the Retail Services and Products Test.

This test would use a predominantly

qualitative approach, incorporating

quantitative measures as guidelines, as

applicable. First, the delivery systems

part of the proposed test seeks to

achieve a balanced evaluation

framework that considers a bank’s

branch availability and services, remote

service facility availability, and its

digital and other delivery systems. The

agencies propose that the evaluation of

digital and other delivery systems and

deposit products would be required for

large banks with assets of over $10

billion, and not required for large banks

with assets of $10 billion or less.

Second, the credit and deposit

products part of the proposed test aims

to evaluate a bank’s efforts to offer

products that are responsive to the

needs of low- and moderate-income

communities. The agencies propose that

the evaluation of deposit products

responsive to the needs of low- or

moderate-income individuals would be

required for large banks with assets of

over $10 billion, and not required for

large banks with assets of $10 billion or

less.

Community Development Financing

Test. Section XII describes the agencies

proposals for the Community

Development Financing Test, which

would apply to large banks as well as

intermediate banks that choose to opt

into this test. The Community

Development Financing Test would

consist of a community development

financing metric, benchmarks, and an

impact review. These components

would be assessed at the facility-based

assessment area, state, multistate MSA

and institution levels, and would inform

conclusions at each of those levels.

Community Development Services

Test

iate banks that choose to opt

into this test. The Community

Development Financing Test would

consist of a community development

financing metric, benchmarks, and an

impact review. These components

would be assessed at the facility-based

assessment area, state, multistate MSA

and institution levels, and would inform

conclusions at each of those levels.

Community Development Services

Test. Section XIII describes the agencies’

proposal to assess a large bank’s

community development services,

underscoring the importance of these

activities for fostering partnerships

among different stakeholders, building

capacity, and creating the conditions for

effective community development. The

agencies propose that in

nonmetropolitan areas, banks may

receive community development

services consideration for volunteer

activities that meet an identified

community development need, even if

unrelated to the provision of financial

services. The proposed test would

consist of a primarily qualitative

assessment of the bank’s community

development service activities. For large

banks with assets of over $10 billion,

the agencies propose also using a metric

to measure the hours of community

development services activity per full

time employee of a bank.

Wholesale and Limited Purpose

Banks. Section XIV describes the

agencies’ proposed Community

Development Financing Test for

Wholesale and Limited Purpose Banks,

which would include a qualitative

review of a bank’s community

development lending and investments

in each assessment area and an

institution level-metric measuring a

bank’s volume of activities relative to its

capacity. The agencies also propose

giving wholesale and limited purpose

banks the option to have examiners

consider community development

service activities that would qualify

under the Community Development

Services Test.

Strategic Plans. Section XV describes

the agencies’ proposal to maintain a

strategic plan option as an alternative

method for evaluation

f activities relative to its

capacity. The agencies also propose

giving wholesale and limited purpose

banks the option to have examiners

consider community development

service activities that would qualify

under the Community Development

Services Test.

Strategic Plans. Section XV describes

the agencies’ proposal to maintain a

strategic plan option as an alternative

method for evaluation. Banks that elect

to be evaluated under a CRA strategic

plan would continue to request

approval for the plan from their

appropriate Federal banking agency.

The agencies propose more specific

criteria to ensure that all banks are

meeting their CRA obligation to serve

low- and moderate-income individuals

and communities. Banks approved to be

evaluated under a CRA strategic plan

option would have the same assessment

area requirements as other banks and

would submit plans that include the

same performance tests and standards

that would otherwise apply unless the

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bank is substantially engaged in

activities outside the scope of these

tests. In seeking approval for a plan that

does not adhere to requirements and

standards that are applied to other

banks, the plan would be required to

include an explanation of why the

bank’s view is that different standards

would be more appropriate in meeting

the credit needs of its communities.

Assigned Conclusions and Ratings.

Section XVI describes the agencies’

proposal to provide greater transparency

and consistency on assigning ratings for

a bank’s overall performance

hat are applied to other

banks, the plan would be required to

include an explanation of why the

bank’s view is that different standards

would be more appropriate in meeting

the credit needs of its communities.

Assigned Conclusions and Ratings.

Section XVI describes the agencies’

proposal to provide greater transparency

and consistency on assigning ratings for

a bank’s overall performance. The

proposed approach would produce

performance scores for each applicable

test, at the state, multistate MSA, and

institution levels based on a weighted

average of assessment area conclusions,

as well as consideration of additional

test-specific factors at the state,

multistate MSA, or institution level.

These performance scores are mapped

to conclusion categories to provide test-

specific conclusions for the state,

multistate MSA, and at the institution

level. The agencies propose to combine

these performance scores across tests to

produce ratings at the state, multistate

MSA, and the institution level.

The agencies propose to determine a

bank’s overall state, multistate MSA, or

institution rating by taking a weighted

average of the applicable performance

test scores. For large banks the agencies

propose the following weights: 45

percent for Retail Lending Test

performance score; 15 percent for Retail

Services and Products Test performance

score; 30 percent for Community

Development Financing Test

performance score; and 10 percent for

Community Development Services Test

performance score. For intermediate

banks, the agencies propose to weight

the Retail Lending test at 50 percent and

the community development test, or if

the bank chooses to opt into the

Community Development Financing

Test, at 50 percent.

The agencies also propose updating

the criteria to determine how

discriminatory and other illegal

practices would adversely affect a

rating, as well as what rating level (state,

multistate MSA, and institution) would

be affected

etail Lending test at 50 percent and

the community development test, or if

the bank chooses to opt into the

Community Development Financing

Test, at 50 percent.

The agencies also propose updating

the criteria to determine how

discriminatory and other illegal

practices would adversely affect a

rating, as well as what rating level (state,

multistate MSA, and institution) would

be affected.

Performance Standards for Small and

Intermediate Banks. Section XVII

describes the agencies’ proposal to

continue evaluating small banks under

the small bank performance standards

in the current CRA framework and to

apply the proposed metrics-based Retail

Lending Test to intermediate banks.

Under the proposal, small banks could

opt into the Retail Lending Test and

could continue to request additional

consideration for other qualifying CRA

activities. For intermediate banks, in

addition to the proposed Retail Lending

Test, the agencies propose to also

evaluate an intermediate bank’s

community development activity

pursuant to the criteria under the

current intermediate small bank

community development test.

Intermediate banks could also opt to be

evaluated under the proposed

Community Development Financing

Test.

Effect of CRA Performance on

Applications. In Section XVIII, the

agencies propose to maintain the

current regulatory provisions for

considering CRA performance on bank

applications, such as those for mergers

and acquisitions, deposit insurance, and

branch openings and relocations.

Data Collection, Reporting, and

Disclosure. In Section XIX, the agencies

propose to revise data collection and

reporting requirements to increase the

clarity, consistency, and transparency of

the evaluation process through the use

of standard metrics and benchmarks.

The proposal recognizes the importance

of using existing data sources where

possible, and tailoring data

requirements, where appropriate

on, Reporting, and

Disclosure. In Section XIX, the agencies

propose to revise data collection and

reporting requirements to increase the

clarity, consistency, and transparency of

the evaluation process through the use

of standard metrics and benchmarks.

The proposal recognizes the importance

of using existing data sources where

possible, and tailoring data

requirements, where appropriate.

In addition to leveraging existing data,

the proposal would require large banks

to collect, maintain, and report

additional data. All large banks would

have the same requirements for certain

categories of data, including community

development financing data, branch

location data, and remote service facility

location data. Some new data

requirements would only apply to large

banks with assets of over $10 billion.

Large banks with assets of over $10

billion would have data requirements

for deposits data, automobile lending

data, retail services data on digital

delivery systems, retail services data on

responsive deposit products, and

community development services data.

The proposal also provides updated

standards for all large banks to report

the delineation of their assessment

areas. Data requirements for

intermediate banks and small banks

would remain the same as the current

requirements.

Content and Availability of Public

File, Public Notice by Banks,

Publication of Planned Examination

Schedule, and Public Engagement.

Section XX describes the agencies’

proposal to provide more transparent

information to the public on CRA

examinations and encourage

communication between members of the

public and banks. The agencies propose

to make a bank’s CRA public file more

accessible to the public by allowing any

bank with a public website to include

its CRA public file on its website. The

agencies also propose publishing a list

of banks scheduled for CRA

examinations for the next two quarters

at least 60 days in advance in order to

provide additional notice to the public

s of the

public and banks. The agencies propose

to make a bank’s CRA public file more

accessible to the public by allowing any

bank with a public website to include

its CRA public file on its website. The

agencies also propose publishing a list

of banks scheduled for CRA

examinations for the next two quarters

at least 60 days in advance in order to

provide additional notice to the public.

Finally, the agencies propose to

establish a way for the public to provide

feedback on community needs and

opportunities in specific geographies.

Transition. Section XXI discusses the

agencies’ proposed timeline for the

transition from the current regulatory

and supervisory framework to the

proposed rule’s CRA regulatory and

supervisory framework.

Regulatory Analysis. Section XXII

discusses the required regulatory

analyses for the proposed rule. This

includes a description of the Board’s

and the FDIC’s Initial Regulatory

Flexibility Analyses, which conclude

that the proposed rule will not have a

significant economic impact on a

substantial number of small entities,

and the OCC’s certification that the

proposed rule will not have a significant

economic impact on a substantial

number of small entities.

Text of Common Proposed Rule.

Section XXIII sets forth the common

regulatory text for the proposed CRA

regulation.

III. Community Development

Definitions

Under the current and proposed CRA

rule, a bank may, depending on its size,

be evaluated for its community

development lending, investments, and/

or services under various tests. These

activities must have community

development as their primary purpose.

Community development activities

currently fall into four broad categories:

Affordable housing; community

services; economic development; and

revitalization and stabilization

e, a bank may, depending on its size,

be evaluated for its community

development lending, investments, and/

or services under various tests. These

activities must have community

development as their primary purpose.

Community development activities

currently fall into four broad categories:

Affordable housing; community

services; economic development; and

revitalization and stabilization. The

agencies propose to revise the

community development definitions in

order to clarify eligibility criteria for

different community development

activities by including eleven categories

that establish specific eligibility

standards for a broad range of

community development activities. The

new definitions incorporate some

aspects of guidance that are currently

provided in the Interagency Questions

and Answers. The proposed definitions

reflect an emphasis on activities that are

responsive to community needs,

especially the needs of low- and

moderate-income individuals and

communities and small businesses and

small farms.

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54 As discussed in the Interagency Questions and

Answers, a loan, investment, or service has as its

primary purpose community development when it

is designed for the express purpose of revitalizing

or stabilizing low- or moderate-income areas,

designated disaster areas, or underserved or

distressed nonmetropolitan middle-income areas,

providing affordable housing for, or community

services targeted to, low- or moderate-income

persons, or promoting economic development by

financing small businesses or small farms that meet

the requirements set forth in 12 CFR l.12(g). See

Q&A § l.12(h)–8.

55 See 75 FR 11642 (Mar. 11, 2010).

A

,

designated disaster areas, or underserved or

distressed nonmetropolitan middle-income areas,

providing affordable housing for, or community

services targeted to, low- or moderate-income

persons, or promoting economic development by

financing small businesses or small farms that meet

the requirements set forth in 12 CFR l.12(g). See

Q&A § l.12(h)–8.

55 See 75 FR 11642 (Mar. 11, 2010).

A. Primary Purpose of Community

Development

In § l.13, the agencies propose to

define in the CRA regulations standards

for determining whether a community

development activity has a ‘‘primary

purpose’’ of community development.

Currently, the approach to

demonstrating that an activity has a

primary purpose of community

development is explained in the

Interagency Questions and Answers.54

Under the proposal, a loan, investment,

or service meets the primary purpose

standard when it is designed for the

express purpose of community

development as set forth in proposed

§ l.13(a)(1). In general, activities with a

primary purpose of community

development, as proposed, would

receive full CRA credit for the

Community Development Financing

Test and Community Development

Services Test, as described below.

To determine whether an activity is

designed for an express community

development purpose, the agencies

propose applying several approaches.

First, if a majority of the dollars,

applicable beneficiaries, or housing

units of the activity are identifiable to

one or more of the community

development activities defined in § l

.13(a)(2), then the activity meets the

requisite primary purpose and would

receive full CRA credit

is

designed for an express community

development purpose, the agencies

propose applying several approaches.

First, if a majority of the dollars,

applicable beneficiaries, or housing

units of the activity are identifiable to

one or more of the community

development activities defined in § l

.13(a)(2), then the activity meets the

requisite primary purpose and would

receive full CRA credit.

Second, and alternatively, where the

measurable portion of any benefit

bestowed or dollars applied to the

community development purpose is less

than a majority of the entire activity’s

benefits or dollar value, then the activity

may still be considered to possess the

requisite primary purpose, and the bank

may receive CRA credit for the entire

activity, if: (i) The express, bona fide

intent of the activity, as stated, for

example, in a prospectus, loan proposal,

or community action plan, is primarily

one or more of the enumerated

community development purposes; (ii)

the activity is specifically structured to

achieve the expressed community

development purpose; and (iii) the

activity accomplishes, or is reasonably

certain to accomplish, the community

development purpose involved.

Pro Rata Credit for Qualified

Affordable Housing. The agencies

propose that affordable housing that is

developed in conjunction with Federal,

state, local, or tribal government

programs that have a stated purpose or

bona fide intent to promote affordable

housing would be considered even if

fewer than the majority of the

beneficiaries of the housing are low- or

moderate-income individuals. In such

cases, the activity would be considered

to have a primary purpose of affordable

housing only for the percentage of total

housing units in the development that

are affordable

ms that have a stated purpose or

bona fide intent to promote affordable

housing would be considered even if

fewer than the majority of the

beneficiaries of the housing are low- or

moderate-income individuals. In such

cases, the activity would be considered

to have a primary purpose of affordable

housing only for the percentage of total

housing units in the development that

are affordable. For example, if a bank

makes a $10 million loan to finance a

mixed-income housing development in

which 10 percent of the units will be set

aside as affordable housing for low- or

moderate-income individuals, the bank

may treat $1 million of such loan as a

community development loan. In other

words, the pro-rata dollar amount of the

total activity would be based on the

percentage of units set aside for

affordable housing for low- or moderate-

income individuals.

The agencies propose a different

approach for an activity that involves

low-income housing tax credits

(LIHTCs). Specifically, a bank would

receive consideration for the full

amount of the loan or investment for a

LIHTC-financed project, regardless of

the share of units that are considered

affordable. This proposal is consistent

with current guidance adopted in 2010

that clarified that projects developed

with LIHTCs had a bona fide intent of

providing affordable housing.55

Pro Rata Consideration for Other

Community Development Activities. The

proposal does not specify any other

application of partial credit for

activities, but the agencies seek

feedback on whether such consideration

is appropriate for this rulemaking in

other specific cases. For example, an

essential infrastructure project may

serve a broad area where low- and

moderate-income census tracts comprise

a minority of total census tracts. In such

cases, the activity could provide benefit

to some low- or moderate-income

individuals, although the overall project

did not focus on low- or moderate-

income census tracts or individuals

ulemaking in

other specific cases. For example, an

essential infrastructure project may

serve a broad area where low- and

moderate-income census tracts comprise

a minority of total census tracts. In such

cases, the activity could provide benefit

to some low- or moderate-income

individuals, although the overall project

did not focus on low- or moderate-

income census tracts or individuals. The

agencies have considered whether banks

should receive partial consideration

more generally for these activities based

on the share of low- or moderate-income

census tracts or low- or moderate-

income individuals that benefit from the

project compared to the number of

census tracts or total population that

benefited from the project overall.

However, partial consideration of

activities could result in a significant

expansion of the activities that could

qualify, and thereby serve to divert

limited resources from projects

specifically targeted to benefit low- or

moderate-income people or

communities. In addition, the agencies

believe that the proposed primary

purpose standard retains appropriate

flexibility to provide consideration for

activities where less than the majority of

the entire activity benefits low- or

moderate-income individuals or

communities, if those activities have the

express, bona fide intent of community

development.

Request for Feedback

Question 1. Should the agencies

consider partial consideration for any

other community development activities

(for example, financing broadband

infrastructure, health care facilities, or

other essential infrastructure and

community facilities), or should partial

consideration be limited to only

affordable housing?

Question 2

na fide intent of community

development.

Request for Feedback

Question 1. Should the agencies

consider partial consideration for any

other community development activities

(for example, financing broadband

infrastructure, health care facilities, or

other essential infrastructure and

community facilities), or should partial

consideration be limited to only

affordable housing?

Question 2. If partial consideration is

extended to other types of community

development activities with a primary

purpose of community development,

should there be a minimum percentage

of the activity that serves low- or

moderate-income individuals or

geographies or small businesses and

small farms, such as 25 percent? If

partial consideration is provided for

certain types of activities considered to

have a primary purpose of community

development, should the agencies

require a minimum percentage standard

greater than 51 percent to receive full

consideration, such as a threshold

between 60 percent and 90 percent?

B. Affordable Housing

The agencies are proposing a

definition for affordable housing that

includes four components: (i)

Affordable rental housing developed in

conjunction with Federal, state, and

local government programs; (ii)

multifamily rental housing with

affordable rents; (iii) activities

supporting affordable low- or moderate-

income homeownership; and (iv)

purchases of mortgage-backed securities

that finance affordable housing. The

proposed definition is intended to

clarify the eligibility of affordable

housing as well as to recognize the

importance of promoting affordable

housing for low- or moderate-income

individuals.

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ies

that finance affordable housing. The

proposed definition is intended to

clarify the eligibility of affordable

housing as well as to recognize the

importance of promoting affordable

housing for low- or moderate-income

individuals.

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56 12 CFR l.12(g)(1).

57 See Q&A § l.12(g)(1)–1.

58 Single-family home mortgage loans may be

included as community development under the

intermediate small bank methodology. See Q&A

§ l.12(h)–3.

59 See Q&A § l.42(b)(2)–2.

60 See Q&A § l.12(t)–2.

61 See Q&A § l.12(g)(1)–2.

62 See Q&A § l.12(g)(1)–1.

63 See Q&A § l.12(g)(1)–1.

64 See HUD, Fair Market Rents, https://

www.hud.gov/program_offices/public_indian_

housing/programs/hcv/landlord/fmr.

65 See Q&A § l.12(h)–3.

66 See Q&A § l.12(t)–2.

1. Background

a. Current Approach to Affordable

Housing

The current CRA regulations define

‘‘community development’’ to include

‘‘affordable housing (including

multifamily rental housing) for low- or

moderate-income individuals.’’ 56 The

agencies have stated in the Interagency

Questions and Answers that low- or

moderate-income individuals must

benefit or be likely to benefit from the

housing in order to qualify and meet the

existing primary purpose standard.57

Currently, the agencies consider

activities that support both single-family

(1–4 family units) and multifamily

(more than 4-family units) affordable

housing

6 The

agencies have stated in the Interagency

Questions and Answers that low- or

moderate-income individuals must

benefit or be likely to benefit from the

housing in order to qualify and meet the

existing primary purpose standard.57

Currently, the agencies consider

activities that support both single-family

(1–4 family units) and multifamily

(more than 4-family units) affordable

housing. Single-family home mortgage

loans are generally considered as part of

the lending test, and other activities that

are not home mortgage loans and that

support single-family affordable housing

may be considered as community

development.58 Multifamily loans are

considered separately and may qualify

for both retail lending and community

development consideration if they meet

the definition of affordable housing.59

Purchases of mortgage-backed securities

that primarily consist of single-family

mortgage loans to low- or moderate-

income individuals, or of multifamily

affordable housing, are also considered

as qualifying community development

activities.60

Multifamily Housing. Multifamily

housing qualifies under two different

categories of affordable housing:

Subsidized or unsubsidized housing.

Housing that is financed or supported

by a government affordable housing

program or a government subsidy is

considered subsidized affordable

housing. Subsidized affordable housing

is generally viewed as qualifying under

affordable housing criteria if the

government program or subsidy has a

stated purpose of providing affordable

housing to low- or moderate-income

individuals, thereby satisfying

Interagency Questions and Answers

guidance that low- or moderate-income

individuals benefit, or are likely to

benefit, from the housing.61 Examples of

subsidized affordable housing include

housing financed with LIHTCs, the

HOME Investment Partnerships

Program, or Project-Based Section 8

Rental Assistance

iding affordable

housing to low- or moderate-income

individuals, thereby satisfying

Interagency Questions and Answers

guidance that low- or moderate-income

individuals benefit, or are likely to

benefit, from the housing.61 Examples of

subsidized affordable housing include

housing financed with LIHTCs, the

HOME Investment Partnerships

Program, or Project-Based Section 8

Rental Assistance.

Multifamily housing with affordable

rents, but that is not financed or

supported by a government affordable

housing program or a government

subsidy, is generally considered

unsubsidized affordable housing, and is

also referred to in this SUPPLEMENTARY

INFORMATION as ‘‘naturally occurring

affordable housing.’’ This housing can

qualify as affordable housing if the rents

are affordable to low- or moderate-

income individuals, and if it is clear

that low- or moderate-income

individuals benefit, or are likely to

benefit, from this housing. However,

there are no standards currently in place

for determining that low- or moderate-

income individuals will benefit, or are

likely to benefit, from the housing.

Guidance indicates that it is not

sufficient to determine that low- or

moderate-income individuals are likely

to benefit from the housing solely

because the rents or housing prices are

set according to a particular formula.62

To assess whether the housing will

benefit low- or moderate-income

individuals, examiners may consider a

range of demographic, economic or

market factors, such as the median rents

of the assessment area and the project

based on project rent rolls; the low- or

moderate-income population in the area

of the project; or the past performance

record of the organization(s)

undertaking the project.63

Under the current framework, there is

not a specified standard for determining

when a property or unit is considered

affordable to low- or moderate-income

individuals

rents

of the assessment area and the project

based on project rent rolls; the low- or

moderate-income population in the area

of the project; or the past performance

record of the organization(s)

undertaking the project.63

Under the current framework, there is

not a specified standard for determining

when a property or unit is considered

affordable to low- or moderate-income

individuals. One approach used by

banks and examiners is to calculate an

affordable rent based on what is

affordable to a moderate-income renter,

assuming that 30 percent of the renter’s

income is spent on rent. Alternatively,

some use the U.S. Department of

Housing and Urban Development’s

(HUD) Fair Market Rents as a standard

for measuring affordability.64

Stakeholders note that lack of a

consistent standard for affordability,

combined with unclear methods for

determining whether low- or moderate-

income individuals are likely to benefit,

leads to inconsistent consideration of

unsubsidized affordable housing.

Single-Family Housing. Certain

activities related to single-family

housing can also qualify as affordable

housing provided that the housing is

affordable and low- or moderate-income

individuals benefit, or are likely to

benefit, from the housing. While single-

family mortgages qualify under the

lending test,65 activities that support the

construction of affordable housing or

other activities to promote affordable

homeownership for low- or moderate-

income individuals are considered as

affordable housing under the

community development definition.

Similar to the issues noted above with

unsubsidized rental housing, there are

no consistent standards in place to

demonstrate that single-family for-sale

housing is affordable and likely to

benefit low- or moderate-income

individuals

promote affordable

homeownership for low- or moderate-

income individuals are considered as

affordable housing under the

community development definition.

Similar to the issues noted above with

unsubsidized rental housing, there are

no consistent standards in place to

demonstrate that single-family for-sale

housing is affordable and likely to

benefit low- or moderate-income

individuals. Therefore, under the

current framework, stakeholders note

that it is difficult for certain single-

family projects to qualify, unless it is a

project developed in partnership with a

government program or non-profit

organization that has a mission of

providing affordable housing to low- or

moderate-income individuals.

Mortgage-Backed Securities.

Mortgage-backed securities qualify as an

affordable housing activity provided

they demonstrate a primary purpose of

community development. Specifically,

the security must primarily address

affordable housing (including

multifamily housing) of low- or

moderate-income individuals.66 Thus, a

mortgage-backed security that contains a

majority of mortgages to low- or

moderate-income borrowers can qualify

as an investment with a primary

purpose of affordable housing.

b. Stakeholder Feedback on Affordable

Housing

Stakeholders have expressed support

for a definition of affordable housing

that includes both subsidized and

unsubsidized housing, and that is

informed by more clear and specific

eligibility standards. Stakeholders

generally support the current approach

of qualifying housing developed,

purchased, rehabilitated, or preserved in

conjunction with a Federal, state, local,

or tribal government program. Many

stakeholders also indicate support for

including naturally occurring affordable

housing in the definition of affordable

housing, but note that more consistent

and practically feasible qualification

standards are needed

he current approach

of qualifying housing developed,

purchased, rehabilitated, or preserved in

conjunction with a Federal, state, local,

or tribal government program. Many

stakeholders also indicate support for

including naturally occurring affordable

housing in the definition of affordable

housing, but note that more consistent

and practically feasible qualification

standards are needed. They also raise

concerns about the types of

requirements or restrictions—if any—

that should be put in place to ensure

that these properties remain affordable.

For example, some stakeholders have

noted that a bank financing a naturally

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67 See Rural Rental Housing Loans (Section 515)

(Sept. 2002), https://www.hud.gov/sites/documents/

19565_515_RURALRENTAL.pdf, and U.S.

Department of Agriculture, Multifamily Guaranteed

Rural Rental Housing (Dec. 2021), https://

www.rd.usda.gov/sites/default/files/fact-sheet/508_

RD_FS_RHS_MFGuarantee.pdf.

68 See, e.g., Federal Housing Financing Agency,

‘‘Overview of the 2020 High Opportunity Areas

File’’ (2020), https://www.fhfa.gov/DataTools/

Downloads/Documents/Enterprise-PUDB/DTS_

Residential-Economic-Diversity-Areas/DTS_

High%20Opportunity_Areas_2020_README.pdf,

and HUD’s Office of Policy Development and

Research (PD&R), Qualified Census Tracts and

Difficult Development Areas, https://

www.huduser.gov/portal/datasets/qct.html.

occurring affordable housing activity

would often not be able to verify and

document the income of tenants at time

of rental and on an ongoing basis

tial-Economic-Diversity-Areas/DTS_

High%20Opportunity_Areas_2020_README.pdf,

and HUD’s Office of Policy Development and

Research (PD&R), Qualified Census Tracts and

Difficult Development Areas, https://

www.huduser.gov/portal/datasets/qct.html.

occurring affordable housing activity

would often not be able to verify and

document the income of tenants at time

of rental and on an ongoing basis.

Regarding the current treatment of

mortgage-backed securities, some

stakeholders have expressed concern

that some banks rely on purchases of

mortgage-backed securities for CRA

purposes in lieu of pursuing other

activities that would have a more direct

impact on the community or that would

be more responsive to specific needs.

Some stakeholders have also noted

concerns that some banks may purchase

high volumes of mortgage-backed

securities shortly before their CRA

examinations and sell them shortly

afterwards, reducing any potential

benefits to liquidity for lenders and

credit availability for communities.

Stakeholders generally have not

opposed the consideration of mortgage-

backed securities as a qualified

investment, although some suggested

additional requirements, such as

preventing banks from receiving CRA

credit for mortgage-backed securities

that are purchased and then quickly

resold.

2. Rental Housing in Conjunction With

Government Programs

First, the agencies propose that a

rental housing unit would be considered

affordable housing if it is purchased,

developed, financed, rehabilitated,

improved, or preserved in conjunction

with a Federal, state, local, or tribal

government affordable housing plan,

program, initiative, tax credit, or

subsidy with a stated purpose or the

bona fide intent of providing affordable

housing for low- or moderate-income

individuals. Examples below

demonstrate how this component of the

definition intends to add greater clarity

around the many types of subsidized

activities that currently qualify for

consideration

tribal

government affordable housing plan,

program, initiative, tax credit, or

subsidy with a stated purpose or the

bona fide intent of providing affordable

housing for low- or moderate-income

individuals. Examples below

demonstrate how this component of the

definition intends to add greater clarity

around the many types of subsidized

activities that currently qualify for

consideration.

The proposal covers a broad range of

government-related affordable rental

housing activities for low- and

moderate-income individuals, including

affordable housing plans, programs,

initiatives, tax credits, and subsidies

pertaining to both multifamily and

single-family properties. This would

cover government subsidy programs that

provide affordable rental housing for

low- or moderate-income individuals,

such as Project-Based Section 8 Rental

Assistance and the HOME Investment

Partnerships Program. The proposal also

includes activities with rental properties

receiving LIHTCs. Although LIHTCs are

sometimes described as a ‘‘program,’’

the agencies propose including the term

‘‘tax credits’’ to provide clarity about the

eligibility of tax credit programs focused

on affordable housing for low- or

moderate-income individuals.

The proposed language encompasses

affordable housing activities tied to

every level of government, not just

Federal Government programs. In

addition to affordable housing programs

at the Federal level, the agencies also

propose to include state and local

affordable housing plans, programs,

initiatives, tax credits, or subsidies that

support affordable housing for low- or

moderate-income individuals. This

would include affordable rental units

for low- or moderate-income individuals

created as a result of local government

inclusionary zoning programs

ousing programs

at the Federal level, the agencies also

propose to include state and local

affordable housing plans, programs,

initiatives, tax credits, or subsidies that

support affordable housing for low- or

moderate-income individuals. This

would include affordable rental units

for low- or moderate-income individuals

created as a result of local government

inclusionary zoning programs.

Inclusionary zoning provisions in many

local jurisdictions provide requirements

or incentives for developers to set aside

a portion of housing units within a

property that meet an affordability

standard and are occupied by low- or

moderate-income individuals. In

addition, affordable multifamily

housing programs offered by state

housing finance agencies and affordable

housing trust funds managed by a local

government to support the development

of affordable housing for low- or

moderate-income individuals would be

included in this component. The

proposal also specifies that affordable

housing activities related to tribal

governments would be included under

the scope of the definition.

To qualify under the proposed

definition, a government-related

affordable housing plan, program,

initiative, tax credit, or subsidy would

need to have a stated purpose or bona

fide intent of supporting affordable

rental housing for low- or moderate-

income individuals. The agencies

propose this requirement to emphasize

affordable housing activities benefitting

low- or moderate-income individuals.

The agencies are not proposing a

separate affordability standard for this

prong of the definition and would rely

upon the affordability standards set in

each respective government affordable

housing plan, program, initiative, tax

credit, or subsidy, provided that the

program has a stated purpose or bona

fide intent of providing rental housing

that is affordable to low- or moderate-

income individuals

are not proposing a

separate affordability standard for this

prong of the definition and would rely

upon the affordability standards set in

each respective government affordable

housing plan, program, initiative, tax

credit, or subsidy, provided that the

program has a stated purpose or bona

fide intent of providing rental housing

that is affordable to low- or moderate-

income individuals.

The agencies seek feedback on

whether additional requirements should

be included to ensure that activities

qualifying under this definition support

housing that is both affordable to and

occupied by low- or moderate-income

individuals. For example, the agencies

are considering whether to include a

specific affordability standard of 30

percent of 80 percent of area median

income for the cost of rents of housing

that receives consideration under this

definition, or a requirement that any

programs verify that occupants of the

affordable units are low- or moderate-

income individuals.

The agencies seek feedback on

whether activities involving government

programs that have a stated purpose or

bona fide intent to provide affordable

housing serving low-, moderate-, and

middle-income individuals should

qualify under this definition in certain

circumstances. For example, the

agencies seek feedback on this

alternative when the housing is located

in a nonmetropolitan county, or in High

Opportunity Areas. The agencies

recognize that nonmetropolitan counties

may have limited opportunities for

affordable housing, and that it may be

appropriate to consider affordable

housing activities in these areas that

include middle-income renters.

Broadening this category to include

activities that support housing that is

affordable to middle-income individuals

in nonmetropolitan counties could

include developing affordable housing

in conjunction with programs such as

the U.S

tunities for

affordable housing, and that it may be

appropriate to consider affordable

housing activities in these areas that

include middle-income renters.

Broadening this category to include

activities that support housing that is

affordable to middle-income individuals

in nonmetropolitan counties could

include developing affordable housing

in conjunction with programs such as

the U.S. Department of Agriculture

Section 515 Rural Rental Housing or

Multifamily Guaranteed Rural Rental

Housing programs.67

Under a second alternative, the

agencies would consider these activities

in high opportunity areas. One option

would be to define high opportunity

areas to align with the definition of

these areas by the Federal Housing

Finance Agency (FHFA), as discussed in

Section V.68 These areas include census

tracts with high costs of development

and low poverty rates, and the agencies

consider affordable housing activities in

these areas to be especially responsive.

For example, these activities may

include financing for a multifamily

rental housing development that serves

middle-income residents in a high

opportunity area that is supported by

tax-exempt bonds that are issued by

state or local agencies to support

affordable housing. Consideration of

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r a multifamily

rental housing development that serves

middle-income residents in a high

opportunity area that is supported by

tax-exempt bonds that are issued by

state or local agencies to support

affordable housing. Consideration of

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69 Thyria Alvarez and Barry L. Steffen, HUD,

Office of Policy Development and Research, ‘‘Worst

Case Housing Needs 2021 Report to Congress’’ (July

2020) (agencies’ calculations using Exhibit A–12 at

74), https://www.huduser.gov/portal/publications/

Worst-Case-Housing-Needs-2021.html.

activities supporting housing that is

affordable to middle-income families in

these geographies would reflect the

limited supply of affordable housing in

these markets and would provide

additional flexibility for banks to

identify opportunities to address

community needs. However, the

agencies have also considered that

broadening the definition could reduce

the emphasis on activities that serve

low-and moderate-income individuals

more directly and where the need is

more acute.

3. Multifamily Rental Housing With

Affordable Rents

For the second prong of the affordable

housing definition in proposed

§ l.13(b), the agencies propose to

provide clear and consistent criteria in

order to qualify affordable low- or

moderate-income multifamily rental

housing that does not involve a

government program, initiative, tax

credit, or subsidy, also referred to as

‘‘naturally occurring affordable

housing’’ in this SUPPLEMENTARY

INFORMATION, for purposes of CRA

affordable housing consideration.

The agencies recognize that naturally

occurring affordable housing is an

important source of affordable housing

for many low- and moderate-income

individuals

that does not involve a

government program, initiative, tax

credit, or subsidy, also referred to as

‘‘naturally occurring affordable

housing’’ in this SUPPLEMENTARY

INFORMATION, for purposes of CRA

affordable housing consideration.

The agencies recognize that naturally

occurring affordable housing is an

important source of affordable housing

for many low- and moderate-income

individuals. In addition, the agencies

also recognize that this category of

housing poses unique challenges in

terms of ensuring that its benefits

extend to low- or moderate-income

individuals, since there is often no

consistent way to confirm renter income

for these properties, in contrast to

properties receiving government

subsidies. The proposed definition

seeks to address this by clarifying that

this category of affordable housing can

receive CRA credit if it meets a specified

set of applicable standards.

First, in order to qualify under this

prong of the proposed definition, the

agencies propose that the rent for the

majority of the units in a multifamily

property could not exceed 30 percent of

60 percent of the area median income

for the metropolitan area or

nonmetropolitan county. These rental

amounts would need to reflect the rents

used by the bank to underwrite the

property, including post-construction or

post-renovation monthly rents. Second,

naturally occurring affordable housing

would also need to meet at least one of

the following criteria in order to

increase the likelihood that units benefit

low- or moderate-income individuals: (i)

The housing is located in a low- or

moderate-income census tract; (ii) the

housing is purchased, developed,

financed, rehabilitated, improved, or

preserved by a non-profit organization

with a stated mission of, or that

otherwise directly supports, providing

affordable housing; (iii) there is an

explicit written pledge by the property

owner to maintain rents affordable to

low- or moderate-income individuals for

at least five years or the length of t

ct; (ii) the

housing is purchased, developed,

financed, rehabilitated, improved, or

preserved by a non-profit organization

with a stated mission of, or that

otherwise directly supports, providing

affordable housing; (iii) there is an

explicit written pledge by the property

owner to maintain rents affordable to

low- or moderate-income individuals for

at least five years or the length of the

financing, whichever is shorter; or (iv)

the bank provides documentation that a

majority of the residents of the housing

units are low- or moderate-income

individuals or families, for example

documentation that a majority of

residents have Housing Choice

Vouchers.

a. Affordability Standard for Naturally

Occurring Affordable Housing

The proposed rental affordability

standard for naturally occurring

affordable housing—30 percent of 60

percent of the area median income—is

intended to target the definition for

units affordable to low- or moderate-

income households. This would

establish a higher bar than what is often

used today to determine whether rents

are affordable for low- or moderate-

income individuals, which is 30 percent

of 80 percent of area median income.

The agencies considered using the

standard of 30 percent of 80 percent of

area median income but believe it

would be preferable to use a more

targeted definition to ensure that rents

are affordable to low-income

households and to increase the

likelihood that low- or moderate-income

households will occupy the units. For

example, in 2019, approximately 46

percent of occupied rental units with

affordability levels between 61–80

percent of area median income were

occupied by middle- or upper-income

households.69 This is compared to 24

percent of occupied rental units with

affordability levels under 60 percent of

area median income being occupied by

middle- or upper-income households

l occupy the units. For

example, in 2019, approximately 46

percent of occupied rental units with

affordability levels between 61–80

percent of area median income were

occupied by middle- or upper-income

households.69 This is compared to 24

percent of occupied rental units with

affordability levels under 60 percent of

area median income being occupied by

middle- or upper-income households.

Limiting eligibility to those units with

affordability levels under 60 percent of

area median income may therefore help

to ensure that the households served by

this housing are in fact low- or

moderate-income households.

However, a potential drawback to

using an affordability standard anchored

to 60 percent of area median income is

that it could restrict eligibility for

properties with affordability levels at 80

percent of area median income where

many, but not all, of the units are

occupied by low- or moderate-income

households. The agencies seek feedback

on the alternative approach of using 80

percent area median income as the

affordability standard under proposed

§ l.13(b)(2).

In calculating whether rents meet the

affordability standard, the agencies

propose using the monthly rental

amounts as underwritten by the bank.

The definition further specifies that this

rent would need to reflect any post-

construction or post-renovation rents

considered as part of the bank’s

financing. Consider, for example, a

multifamily property that meets the

proposed affordability standard before

bank financing, but where the property

owner plans to renovate the building

after receiving the loan and

subsequently increases the rents above

the affordability standard. In this

example, if the bank relied on the post-

renovation rents as part of its

underwriting, then the loan would not

count for CRA purposes under the

proposed affordable housing definition

fordability standard before

bank financing, but where the property

owner plans to renovate the building

after receiving the loan and

subsequently increases the rents above

the affordability standard. In this

example, if the bank relied on the post-

renovation rents as part of its

underwriting, then the loan would not

count for CRA purposes under the

proposed affordable housing definition.

The agencies’ objective in including this

provision is to target CRA credit to

properties that are likely to remain

affordable and to avoid providing credit

for activities that may result in

displacement of low- or moderate-

income individuals.

The agencies seek feedback on

whether there are alternative ways to

ensure that CRA credit for naturally

occurring affordable housing is targeted

to properties where rents remain

affordable for low- or moderate-income

individuals.

The proposed definition would

require the majority of units in a

naturally occurring affordable housing

property to meet the affordability

standard. Properties in which fewer

than 50 percent of units are affordable

would not qualify under the proposed

definition. This requirement is intended

to ensure that activities qualifying as

naturally occurring affordable housing

support housing that remains affordable

to and occupied by low- or moderate-

income individuals.

The agencies seek feedback on

whether single-family rental housing

should also be considered under the

naturally occurring affordable housing

category, provided it meets the same

combination of criteria proposed for

multifamily rental housing. The

agencies also seek feedback on whether

such an alternative should be limited to

rural areas

occupied by low- or moderate-

income individuals.

The agencies seek feedback on

whether single-family rental housing

should also be considered under the

naturally occurring affordable housing

category, provided it meets the same

combination of criteria proposed for

multifamily rental housing. The

agencies also seek feedback on whether

such an alternative should be limited to

rural areas. The agencies recognize that

the composition of the housing stock

varies across geographies, and that some

areas, such as rural communities, may

lack affordable multifamily rental

housing that is either in conjunction

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70 See Q&A § l.12(g)(1)–1.

71 The sample used for this analysis includes all

census tracts for which there was non-missing

renter median income data (2019 5-year American

Community Survey) plus census tracts that were

known to be low- or moderate-income but had

missing data. The agencies’ analysis found that

there are 69,161 census tracts with non-missing

renter median income data. Of those census tracts,

22,521 (33 percent) are designated low- or

moderate-income; 27,070 (39 percent) are

designated as renter low- or moderate-income; and

the remaining 19,570 (28 percent) are neither low-

or moderate-income nor renter low- or moderate-

income. Seventy-three percent of all census tracts

could be a geography where affordable housing is

located under that alternative proposal.

72 The agencies expect that the length of financing

would often go beyond the five-year written

affordability pledge. The agencies would scrutinize

short-term financing (less than five years) to ensure

such financing is not a way to avoid the

affordability commitment.

with a government program or naturally

occurring affordable housing

le housing is

located under that alternative proposal.

72 The agencies expect that the length of financing

would often go beyond the five-year written

affordability pledge. The agencies would scrutinize

short-term financing (less than five years) to ensure

such financing is not a way to avoid the

affordability commitment.

with a government program or naturally

occurring affordable housing. In these

communities, single-family rental

housing may be an important source of

affordable housing for low- and

moderate-income individuals. In

considering how and whether to

incorporate affordable single-family

rental housing into the naturally

occurring affordable housing definition,

the agencies are mindful of the fact that

home mortgage loans for single-family

rental housing would count in the

geographic distribution metrics of the

proposed Retail Lending Test.

b. Additional Eligibility Standards for

Naturally Occurring Affordable Housing

The agencies are proposing four

additional criteria under proposed

§ l.13(b) for qualifying multifamily

housing with affordable rents as

naturally occurring affordable housing.

These criteria are intended to focus the

definition on housing that is more likely

to benefit low- or moderate-income

individuals or increase the likelihood

that rents will remain affordable for

low- or moderate-income individuals. In

addition to the underwriting

requirement (rents not exceeding 30

percent of 60 percent of area median

income), the proposal requires a

property to meet at least one of the

following criteria: (i) The location of the

housing is in a low- or moderate-income

census tract; (ii) the housing is

developed in association with a non-

profit organization with a mission of, or

that otherwise directly supports,

affordable housing; (iii) the financing is

provided in conjunction with a written

affordability pledge by the developer of

at least 5 years, or the length of the

financing, whichever is shorter; or (iv)

the bank provides documentation tha

come

census tract; (ii) the housing is

developed in association with a non-

profit organization with a mission of, or

that otherwise directly supports,

affordable housing; (iii) the financing is

provided in conjunction with a written

affordability pledge by the developer of

at least 5 years, or the length of the

financing, whichever is shorter; or (iv)

the bank provides documentation that

the majority of the housing units are

occupied by low- or moderate-income

households.

Low- or Moderate-Income Census

Tract. The first proposed criterion is the

location of eligible properties in a low-

or moderate-income census tract,

because the majority low- or moderate-

income status of a census tract indicates

that affordable rental housing in that

census tract is likely to benefit low- or

moderate-income individuals. Using

geography as a proxy for tenant income

is generally consistent with current

guidance.70 In addition, census tract

income data is readily available and

verifiable information, in contrast to

verifying tenant income, which may

prove infeasible for many property

owners or developers.

An additional approach that the

agencies seek feedback on is whether to

expand this criterion to also encompass

middle- and upper-income census tracts

in which at least 50 percent of renters

are low- or moderate-income. Following

the same logic as the proposed low- and

moderate-income census tract criteria,

the agencies have considered that

affordable rental housing in a

neighborhood in which the majority of

renters are low- or moderate-income

would also be likely to benefit low- or

moderate-income individuals. In

addition, applying this standard would

qualify affordable housing in more

middle-and upper-income census tracts,

thereby expanding this criterion beyond

only low- and moderate-income census

tracts

considered that

affordable rental housing in a

neighborhood in which the majority of

renters are low- or moderate-income

would also be likely to benefit low- or

moderate-income individuals. In

addition, applying this standard would

qualify affordable housing in more

middle-and upper-income census tracts,

thereby expanding this criterion beyond

only low- and moderate-income census

tracts. While 33 percent of census tracts

are designated as low- or moderate-

income, a total of 72 percent of census

tracts meet either the low- and

moderate-income census tract standard

or the low- and moderate-income

median renter census tract standard.71

The agencies seek feedback on whether

these additional census tracts should be

added to the proposed definition.

Additionally, the agencies seek

feedback on an alternative in which no

geographic criteria are included. Under

this option, activities qualifying as

supporting naturally occurring

affordable housing would instead be

required to meet one of the other criteria

described below (mission-driven non-

profit organization, written affordability

pledge, or tenant income

documentation), in addition to the

standard of rents not exceeding 30

percent of 60 percent of area median

income. By removing the geographic

criteria, this alternative approach would

be intended to equally apply the other

criteria across census tracts of all

income levels. However, the agencies

are mindful that this alternative would

require banks to provide documentation

required under the other proposed

criterion in order to receive

consideration for naturally occurring

affordable housing.

Mission-Driven Non-Profit

Organization. A second proposed

criterion for determining whether

multifamily housing with affordable

rents is eligible is if the housing is

purchased, developed, financed,

rehabilitated, improved, or preserved by

any non-profit organization with a

stated mission of, or that otherwise

directly supports, providing affordable

housing

ccurring

affordable housing.

Mission-Driven Non-Profit

Organization. A second proposed

criterion for determining whether

multifamily housing with affordable

rents is eligible is if the housing is

purchased, developed, financed,

rehabilitated, improved, or preserved by

any non-profit organization with a

stated mission of, or that otherwise

directly supports, providing affordable

housing. The agencies intend this

provision to encompass organizations

that target services to low- or moderate-

income individuals and communities,

and may also have a mission to serve

individuals and communities that are

especially vulnerable to housing

instability. In addition, affordable

properties in any census tract, including

middle- and upper-income census

tracts, could qualify under this option.

This criterion does not include

government programs or entities, as

such activities would be considered

under the affordable housing category in

proposed § l.13(b)(1).

Written Affordability Pledge. A third

proposed criterion for determining if

multifamily housing with affordable

rents is eligible under the definition is

the presence of an explicit written

pledge on the part of the property owner

to maintain rents that are affordable for

at least five years or for the length of the

financing, whichever is shorter.72 This

prong would address concerns about the

likelihood of rents in an eligible

property increasing in the future and

potentially displacing low- or moderate-

income households. In addition,

affordable properties in any census

tract, including middle- and upper-

income census tracts, could qualify

under this option. Some stakeholders

have urged the requirement of a written

pledge in order for any naturally

occurring affordable housing to qualify

for CRA purposes. However, the

agencies are mindful that such a

requirement would necessitate

additional documentation to receive

consideration for naturally occurring

affordable housing

dle- and upper-

income census tracts, could qualify

under this option. Some stakeholders

have urged the requirement of a written

pledge in order for any naturally

occurring affordable housing to qualify

for CRA purposes. However, the

agencies are mindful that such a

requirement would necessitate

additional documentation to receive

consideration for naturally occurring

affordable housing. For this reason, the

agencies believe that it is preferable to

include this criterion as one of several

options for meeting the eligibility

standard.

Tenant Income Documentation. A

fourth proposed criterion for

determining if multifamily housing with

affordable rents is eligible under the

definition is documentation provided by

the bank demonstrating that the

majority of the housing units are

occupied by low- or moderate-income

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33897

Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

73 The housing choice voucher program is the

Federal government’s major program for assisting

very low-income families, the elderly, and the

disabled to afford decent, safe, and sanitary housing

in the private market. See 24 CFR part 982 (program

requirements for the tenant-based housing

assistance program under Section 8 of the United

States Housing Act of 1937 (42 U.S.C. 1437f); the

tenant-based program is the housing choice voucher

program). See also ‘‘U.S. Department of Housing

and Urban Development, Housing. Choice Vouchers

Fact Sheet,’’ https://www.hud.gov/topics/housing_

choice_voucher_program_section_8.

individuals or households. Such

documentation would be direct

evidence that the activity benefits low-

or moderate-income individuals. In

addition, this criterion could apply to

affordable properties in any census

tract, including middle- or upper-

income census tracts

Development, Housing. Choice Vouchers

Fact Sheet,’’ https://www.hud.gov/topics/housing_

choice_voucher_program_section_8.

individuals or households. Such

documentation would be direct

evidence that the activity benefits low-

or moderate-income individuals. In

addition, this criterion could apply to

affordable properties in any census

tract, including middle- or upper-

income census tracts. For example, a

multifamily rental property with a

majority of rents set at 30 percent of 60

percent of area median income that is

located in a middle-income census tract,

and where the bank can document that

the majority of occupants receive

Housing Choice Vouchers,73 would

receive consideration under this

criterion. The agencies recognize that it

may be challenging for banks to obtain

this documentation. Accordingly, the

agencies are proposing to include this

factor as one of several options for

meeting the eligibility standard.

4. Activities That Support Affordable

Homeownership for Low- or Moderate-

Income Individuals

The agencies propose a third prong

for the affordable housing definition to

include: (i) Activities that directly assist

low- or moderate-income individuals to

obtain, maintain, rehabilitate, or

improve affordable owner-occupied

housing; or (ii) activities that support

programs, projects, or initiatives that

assist low- or moderate-income

individuals to obtain, maintain,

rehabilitate, or improve affordable

owner-occupied housing. This category

could include owner-occupied housing

in single-family or multifamily

properties.

While these activities could be

conducted in conjunction with a variety

of financing types, such as conventional

mortgages, shared equity models, or

community land trusts, any reported

mortgage loan that is evaluated under

the Retail Lending Test would not count

under this definition

housing. This category

could include owner-occupied housing

in single-family or multifamily

properties.

While these activities could be

conducted in conjunction with a variety

of financing types, such as conventional

mortgages, shared equity models, or

community land trusts, any reported

mortgage loan that is evaluated under

the Retail Lending Test would not count

under this definition. Instead, this

category would include activities such

as construction loan financing for a non-

profit housing developer building

single-family owner-occupied homes

affordable to low- or moderate-income

individuals; financing or a grant to a

non-profit community land trust

focused on providing affordable housing

to low- or moderate-income individuals;

a loan to a resident-owned

manufactured housing community with

homes that are affordable to low- or

moderate-income individuals; a shared-

equity program operated by a non-profit

organization to provide long-term

affordable homeownership; and

financing or grants for organizations that

provide down payment assistance to

low- or moderate-income homebuyers.

Activities eligible under this criterion

may include activities with a

governmental or non-profit organization

with a stated purpose of, or that

otherwise directly supports, providing

affordable housing. Additionally, this

category may include activities

conducted by the bank itself, or with

other for-profit partners, provided that

the activity supports affordable

homeownership for low- or moderate-

income individuals. For example, a

bank providing direct down payment

assistance or supporting free home

repairs or maintenance for low- or

moderate-income homeowners could be

considered under this prong of the

definition

include activities

conducted by the bank itself, or with

other for-profit partners, provided that

the activity supports affordable

homeownership for low- or moderate-

income individuals. For example, a

bank providing direct down payment

assistance or supporting free home

repairs or maintenance for low- or

moderate-income homeowners could be

considered under this prong of the

definition.

The agencies seek feedback on what

conditions or terms, if any, should be

added to this criterion to ensure that

activities that support affordable low-

and moderate-income homeownership

are sustainable and beneficial to low- or

moderate-income individuals and

communities.

5. Mortgage-Backed Securities

The agencies propose to define

standards for investments in mortgage-

backed securities related to affordable

housing that qualify for community

development consideration. Consistent

with current practice, the agencies are

proposing that mortgage-backed

securities would qualify as affordable

housing when the security contains a

majority of either single-family home

mortgage loans for low- and moderate-

income individuals or loans financing

multifamily affordable housing that

otherwise qualifies under the proposed

affordable housing definition in

proposed § l.13(b).

This definition recognizes that

purchases of qualifying mortgage-

backed securities that contain home

mortgage loans to low- or moderate-

income borrowers or that contain

qualifying affordable housing loans are

investments in affordable housing. The

issuance and purchase of these

securities may improve liquidity for

affordable housing development and for

lenders that make home mortgage loans

to low- or moderate-income borrowers,

which in turn allows them to make

more loans to low- or moderate-income

borrowers than would otherwise be

possible

that contain

qualifying affordable housing loans are

investments in affordable housing. The

issuance and purchase of these

securities may improve liquidity for

affordable housing development and for

lenders that make home mortgage loans

to low- or moderate-income borrowers,

which in turn allows them to make

more loans to low- or moderate-income

borrowers than would otherwise be

possible. However, some stakeholders

have noted that qualifying purchases of

mortgage-backed securities are lower in

impact and responsiveness to

community credit needs than other

qualifying affordable housing activities

that more directly support housing for

low- or moderate-income individuals.

The agencies seek feedback on

alternative approaches that would create

a more targeted definition of qualifying

mortgage-backed securities. One

alternative the agencies are considering

is to consider mortgage-backed

securities for only the portion of loans

in the security that are affordable. For

example, if 60 percent of a qualifying

mortgage-backed security consists of

single-family home mortgage loans to

low- or moderate-income borrowers,

and 40 percent of the security consists

of loans to middle- or upper-income

borrowers, the mortgage-backed security

would receive consideration only for the

dollar value of the loans to low- or

moderate-income borrowers. This

treatment would reflect that a qualifying

mortgage-backed security represents a

purchase of multiple home mortgage

loans, some of which may not meet the

definition of affordable housing or have

a primary purpose of community

development. However, the agencies are

mindful of the added complexity that

this approach could create.

The agencies are also considering

whether to limit consideration of

mortgage-backed securities to the initial

purchase of a mortgage-backed security

from the issuer, and not considering

subsequent purchases of the security

on of affordable housing or have

a primary purpose of community

development. However, the agencies are

mindful of the added complexity that

this approach could create.

The agencies are also considering

whether to limit consideration of

mortgage-backed securities to the initial

purchase of a mortgage-backed security

from the issuer, and not considering

subsequent purchases of the security.

This change would be intended to

emphasize activities that more directly

serve low- or moderate-income

individuals and communities and to

reduce the possibility of multiple banks

receiving CRA credit for purchasing the

same security.

The agencies seek feedback on these

alternatives and on other ways of

appropriately considering qualifying

mortgage-backed security investments

so as to emphasize community

development financing activities that

are most responsive to low- or

moderate-income community needs.

Request for Feedback

Question 3. Is the proposed standard

of government programs having a

‘‘stated purpose or bona fide intent’’ of

providing affordable housing for low- or

moderate-income (or, under the

alternative discussed above, for low-,

moderate- or middle-income)

individuals appropriate, or is a different

standard more appropriate for

considering government programs that

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rdable housing for low- or

moderate-income (or, under the

alternative discussed above, for low-,

moderate- or middle-income)

individuals appropriate, or is a different

standard more appropriate for

considering government programs that

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

74 12 CFR l.12(g)(3).

75 See Q&A § l.12(g)(3)–1.

76 Id.

provide affordable housing? Should

these activities be required to meet a

specific affordability standard, such as

rents not exceeding 30 percent of 80

percent of median income? Should

these activities be required to include

verification that at least a majority of

occupants of affordable units are low- or

moderate-income individuals?

Question 4. In qualifying affordable

rental housing activities in conjunction

with a government program, should the

agencies consider activities that provide

affordable housing to middle-income

individuals in high opportunity areas,

in nonmetropolitan counties, or in other

geographies?

Question 5. Are there alternative ways

to ensure that naturally occurring

affordable housing activities are targeted

to properties where rents remain

affordable for low- and moderate-

income individuals, including

properties where a renovation is

occurring?

Question 6. What approach would

appropriately consider activities that

support naturally occurring affordable

housing that is most beneficial for low-

or moderate-income individuals and

communities? Should the proposed

geographic criterion be expanded to

include census tracts in which the

median renter is low- or moderate-

income, or in distressed and

underserved census tracts, in order to

encourage affordable housing in a wider

range of communities, or would this

expanded option risk crediting activities

that do not benefit low- or moderate-

income renters?

Question 7

communities? Should the proposed

geographic criterion be expanded to

include census tracts in which the

median renter is low- or moderate-

income, or in distressed and

underserved census tracts, in order to

encourage affordable housing in a wider

range of communities, or would this

expanded option risk crediting activities

that do not benefit low- or moderate-

income renters?

Question 7. Should the proposed

approach to considering naturally

occurring affordable housing be

broadened to include single-family

rental housing that meets the eligibility

criteria proposed for multifamily rental

housing? If so, should consideration of

single-family rental housing be limited

to rural geographies, or eligible in all

geographies, provided the eligibility

criteria to ensure affordability are met?

Question 8. How should the agencies

consider activities that support

affordable low- or moderate-income

homeownership in order to ensure that

qualifying activities are affordable,

sustainable, and beneficial for low- or

moderate-income individuals and

communities?

Question 9. Should the proposed

approach to considering mortgage-

backed securities that finance affordable

housing be modified to ensure that the

activity is aligned with CRA’s purpose

of strengthening credit access for low- or

moderate-income individuals? For

example, should the agencies consider

only the value of affordable loans in a

qualifying mortgage-backed security,

rather than the full value of the

security? Should only the initial

purchase of a mortgage-backed security

be considered for affordable housing?

Question 10. What changes, if any,

should the agencies consider to ensure

that the proposed affordable housing

definition is clearly and appropriately

inclusive of activities that support

affordable housing for low- or moderate-

income individuals, including activities

that involve complex or novel solutions

such as community land trusts, shared

equity models, and manufactured

housing?

C

uestion 10. What changes, if any,

should the agencies consider to ensure

that the proposed affordable housing

definition is clearly and appropriately

inclusive of activities that support

affordable housing for low- or moderate-

income individuals, including activities

that involve complex or novel solutions

such as community land trusts, shared

equity models, and manufactured

housing?

C. Economic Development

The agencies propose several

revisions to what constitutes economic

development activities that are intended

to encourage activities supportive of

small businesses and small farms. The

proposal in § l.13(c) is also intended to

improve the overall transparency of the

definition by including certain activities

that are currently addressed in

guidance. In addition, the agencies seek

to simplify the way that small business

and small farm lending is considered

under CRA evaluations.

A significant change compared to the

current CRA regulations’ criteria for

economic development is that all

reported lending to small businesses

and small farms would be considered

under the proposed Retail Lending Test,

described in Section IX, and not under

the proposed economic development

definition. This change is related to the

agencies’ proposal to leverage the

CFPB’s proposed small business

standard under section 1071 to define

‘‘small business’’ and ‘‘small farm’’ as

those with $5 million in gross annual

revenues and below, as discussed above.

In some ways, the proposed Retail

Lending Test approach would afford

broader consideration of loans to small

businesses and small farms than the

current CRA approach taken as a whole

across the status quo lending and

community development tests. There

are also some differences that would

narrow consideration of some loans that

currently are considered under the

economic development criteria.

1. Background

a

osed Retail

Lending Test approach would afford

broader consideration of loans to small

businesses and small farms than the

current CRA approach taken as a whole

across the status quo lending and

community development tests. There

are also some differences that would

narrow consideration of some loans that

currently are considered under the

economic development criteria.

1. Background

a. Current Approach to Economic

Development

Under the current regulation,

community development is defined to

include ‘‘activities that promote

economic development by financing

businesses or farms that meet the size

eligibility standards of the SBA’s

Development Company (SBDC) or Small

Business Investment Company (SBIC)

programs (13 CFR 121.301) or have

gross annual revenues of $1 million or

less’’ 74 (the ‘‘current economic

development definition’’). Under

current guidance, activities qualify as

economic development if they meet

both a ‘‘size test’’ and a ‘‘purpose

test.’’ 75 An institution’s loan,

investment, or service meets the size

test if it finances, either directly, or

through an intermediary, businesses or

farms that either meet the size eligibility

standards of the SBDC or SBIC

programs, or have gross annual revenues

of $1 million or less. For consideration

under the size test, the term ‘‘financing’’

is considered broadly and includes

technical assistance that readies a

business that meets the size eligibility

standards to obtain financing. To meet

the purpose test, current guidance states

that a bank’s loan, investment, or

service must promote economic

development by creating, retaining, and/

or improving jobs for low- or moderate-

income persons, low- or moderate-

income geographies, areas targeted for

redevelopment, or by financing certain

intermediaries. Activities that support

job training or workforce development

are also considered to meet the purpose

test.76

b

es

that a bank’s loan, investment, or

service must promote economic

development by creating, retaining, and/

or improving jobs for low- or moderate-

income persons, low- or moderate-

income geographies, areas targeted for

redevelopment, or by financing certain

intermediaries. Activities that support

job training or workforce development

are also considered to meet the purpose

test.76

b. Stakeholder Feedback on Economic

Development

Stakeholders note various challenges

with the current economic development

definition. Some observe that while

guidance includes a variety of economic

development activities, the smallest

businesses and farms may still face

specific unmet financing needs.

Industry stakeholders indicate that it

can be difficult to demonstrate that an

activity meets both the size test and

purpose test. Specifically, these

stakeholders point to difficulty in

demonstrating that the primary purpose

of a loan or investment with a small

business or small farm was to create,

retain, and/or improve low- or

moderate-income employment and note

that this requirement eliminates

consideration of some other loans to

small businesses that are also high

impact, such as loans that help small

businesses purchase new equipment in

order to improve efficiency of

operations.

Stakeholders generally indicate that

more clarity is needed in the types of

activities that will be considered to

strengthen small business and small

farms, though some stakeholders note

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in

order to improve efficiency of

operations.

Stakeholders generally indicate that

more clarity is needed in the types of

activities that will be considered to

strengthen small business and small

farms, though some stakeholders note

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

77 SBA regulations define ‘‘small entities’’ for

banking purposes as entities with total assets of

$600 million or less. See 13 CFR 121.201 (Sector 52,

Subsector 522). The agencies have requested

permission from the SBA to use size standards for

defining small businesses and small farms that

differ from the SBA’s size standards, as provided in

15 U.S.C. 632(a)(2)(C).

78 This assumes the CFPB’s section 1071

rulemaking is finalized as proposed with a ‘‘small

business’’ defined as having gross annual revenues

of $5 million or less.

79 See 12 CFR l.12(v) (defining a small business

loan as a loan included in ‘‘loans to small

businesses’’ as defined in the instructions for

preparation of the Call Report). See also 12 CFR l

.12(w) (defining a small farm loan as a loan

included in ‘‘loans to small farms’’ as defined in the

instructions for preparation of the Call Report).

80 12 CFR l.12(g)(3). Activities that promote

economic development finance businesses and

farms that meet the size eligibility standards of the

SBDC or SBIC programs (13 CFR 121.301) or have

gross annual revenues of $1 million or less.

that the agencies should take a more

flexible approach to defining the types

of activities that qualify. Stakeholders

also support qualifying workforce

development for low- or moderate-

income individuals regardless of the

size of the business, as larger industries

are a source of jobs for low- or

moderate-income individuals.

2

1.301) or have

gross annual revenues of $1 million or less.

that the agencies should take a more

flexible approach to defining the types

of activities that qualify. Stakeholders

also support qualifying workforce

development for low- or moderate-

income individuals regardless of the

size of the business, as larger industries

are a source of jobs for low- or

moderate-income individuals.

2. Covering Small Business and Small

Farm Loans Under the Evaluation of a

Bank’s Retail Lending Performance

Under the proposal, a bank’s loans to

small businesses and small farms would

be evaluated in the Retail Lending Test

portion of the CRA examination. As

discussed further in Section VIII

regarding proposed § l.22 for the Retail

Lending Test, the agencies are

considering alternative size standards

for defining small businesses and small

farms that would differ from the SBA’s

size standards.77 Specifically, once

CFPB section 1071 data is available, the

agencies would transition from the

current CRA definitions of small

business and small farm loans to loans

to small businesses and small farms

with gross annual revenues of $5

million or less.78 In the interim, for

purposes of evaluation under the Retail

Lending Test, the agencies propose to

use the current approach that evaluates

small business and small farm loans

using the Reports of Condition and

Income (Call Report) definitions. This

current approach captures loans of $1

million or less to businesses, and loans

of $500,000 or less to farms, as reported

in the Call Report.79

Accordingly, the proposed economic

development definition would not

include a component to qualify a bank’s

loans to small businesses or small

farms—apart from activities undertaken

consistent with Federal, state, local, or

tribal government plans, programs, or

initiatives that support small businesses

or small farms as those entities are

defined in the plans, programs, or

initiatives

9

Accordingly, the proposed economic

development definition would not

include a component to qualify a bank’s

loans to small businesses or small

farms—apart from activities undertaken

consistent with Federal, state, local, or

tribal government plans, programs, or

initiatives that support small businesses

or small farms as those entities are

defined in the plans, programs, or

initiatives. With regard to economic

development, the agencies currently

evaluate businesses or farms that meet

the size eligibility standards of the

SBDC or SBIC programs (13 CFR

121.301) or have gross annual revenues

of $1 million or less, only if not reported

as a small business loan or a small farm

loan under the CRA.80 This would no

longer be the case under the agencies’

proposed economic development

definition, since all reported lending for

small businesses and small farms would

be considered under the proposed Retail

Lending Test.

The proposal to include small

business loans and small farm loans in

the Retail Lending Test, instead of

under the economic development

definition, is intended to recognize that

loans to small businesses and small

farms are primarily retail loan products,

and more appropriately considered

under the Retail Lending Test, while

emphasizing other activities to promote

access to financing for small businesses

and small farms under the economic

development definition. As discussed in

Section XVII, the agencies are proposing

that intermediate banks retain flexibility

to have certain retail loans—small

business, small farm, and home

mortgage loans—be considered as

community development loans. This

option would be available to an

intermediate bank if those loans have a

primary purpose of community

development and are not required to be

reported by the bank

discussed in

Section XVII, the agencies are proposing

that intermediate banks retain flexibility

to have certain retail loans—small

business, small farm, and home

mortgage loans—be considered as

community development loans. This

option would be available to an

intermediate bank if those loans have a

primary purpose of community

development and are not required to be

reported by the bank.

Small business and small farm

lending evaluated under the proposed

Retail Lending Test would not have the

accompanying requirement that these

loans demonstrate job creation,

retention, or improvement for low- or

moderate-income areas or individuals,

as is currently required for loans

considered under the current criterion

for economic development. As noted

above, some stakeholders have reported

having challenges demonstrating that

activities satisfied this criterion,

including demonstrating that jobs

created or retained meaningfully benefit

low- or moderate-income individuals

and families. The agencies believe that

this would appropriately broaden

consideration of small business and

small farm lending relative to the status

quo, although it would involve a change

of the test under which these loans

would be considered.

The agencies recognize that these

changes would have a number of

intersecting impacts on the activities

considered under the economic

development definition and evaluated

in the Retail Lending Test. For example,

loans to certain businesses that meet

SBIC and SBDC size standards and are

now covered community development

loans might not qualify for CRA

consideration under the proposal. For

some types of businesses, the SBIC and

SBDC size standards exceed gross

annual revenues of $5 million;

accordingly, loans to businesses that

meet SBIC and SBDC size standards and

have gross annual revenues exceeding

$5 million would no longer be covered

community development loans

are

now covered community development

loans might not qualify for CRA

consideration under the proposal. For

some types of businesses, the SBIC and

SBDC size standards exceed gross

annual revenues of $5 million;

accordingly, loans to businesses that

meet SBIC and SBDC size standards and

have gross annual revenues exceeding

$5 million would no longer be covered

community development loans. Under

this scenario, these loans would also not

be considered under the proposed Retail

Lending Test.

Another example of the impact from

this change involves the existing job

creation, retention, or improvement for

low- or moderate-income individuals

standard. Compared to the volume of

loans considered under the current

economic development criteria, a

greater volume of loans may be

considered under the proposed Retail

Lending Test as there would no longer

be a requirement that loans to small

businesses and small farms demonstrate

job creation, retention, or improvement

for low- or moderate-income

individuals. The agencies recognize the

critical importance of job creation as

part of supporting local economies, and

therefore seek feedback on the related

proposals in both the Retail Lending

Test and economic development

definition sections.

The agencies also seek feedback on

whether to continue considering bank

loans to small businesses and small

farms that currently qualify under the

economic development criteria as

community development activities

during the transition period before

solely considering these loans under the

Retail Lending Test.

3. Activities Aligned With Federal,

State, Local, or Tribal Efforts

The first prong of the proposed

economic development definition

includes activities undertaken

consistent with Federal, state, local, or

tribal government plans, programs, or

initiatives that support small businesses

or small farms as defined by these plans,

programs, or initiatives

loans under the

Retail Lending Test.

3. Activities Aligned With Federal,

State, Local, or Tribal Efforts

The first prong of the proposed

economic development definition

includes activities undertaken

consistent with Federal, state, local, or

tribal government plans, programs, or

initiatives that support small businesses

or small farms as defined by these plans,

programs, or initiatives. The current

community development definitions do

not include stand-alone criteria for

economic development activities

aligned with Federal, state, local, or

tribal efforts. These activities are,

however, referenced in the Interagency

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Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Proposed Rules

81 See, e.g., Q&A § l.12(g)(4)(i)–1 and Q&A § l

.12(g)(3)–1.

82 See Q&A § l.12(g)(3)–1.

83 See Q&A § l.12(g)(3)–1.

Questions and Answers.81 Aligning

economic development activities with

government programs that address

identified needs for small businesses

and small farms can encourage

coordination between banks,

government agencies, and other program

participants for activities that can be

highly responsive to the unmet needs of

communities.

In addition, this prong of the

proposed definition specifies that

lending to, investing in, or providing

services to SBDCs, SBICs, New Markets

Venture Capital Companies, qualified

Community Development Entities, or

U.S. Department of Agriculture Rural

Business Investment Companies would

qualify as economic development

ties that can be

highly responsive to the unmet needs

This text is long and has been trimmed here. Open the source document for the complete record.