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F ederal R eserve Bank

D. M c T E E R , J R .





M ay



D a lla s ,te x a s


Notice 92-40

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District

Int er a g e n c y Question s and Ans wers
Regardin g C o m m u n i t y Rei n v e s t m e n t
The Consumer Compliance Task Force of the Federal Financial Institu­
tions Examination Council (FFIEC) has revised question 29 of the Interagency
Questions and Answers regarding community reinvestment to reflect information
that was inadvertently omitted. The set of questions and answers was previ­
ously distributed in Notice 92-30, dated April 13, 1992.

For reader convenience, the entire set of questions and answers,
including the revision to question 29, is attached.

For additional information, please contact Debra Clements, Compli­
ance Analyst, FFIEC, at (202) 357-0186.
For additional copies of this B a n k ’s
notice, please contact the Public Affairs Department at (214) 651-6289.
Sincerely yours,

7^ / $ .


For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (



What does the term "office" mean as used in the regulation?
Office refers generally to a facility of an institution that
accepts deposits, including an electronic deposit facility.
It does not include purely administrative offices, agencies,
loan production offices or facilities used, for example, only
for the check collection process.
In delineating a local
community, an institution need not consider shared electronic
deposit facilities,
unless otherwise directed by the
appropriate agency.


What is meant by "local community" and how detailed a map
should be used to portray it?
The term "local community" refers to the contiguous area
surrounding each office or group of offices of an institution.
Although the geographic areas served by an institution may
vary with the type of service, only one local community is to
be delineated for a particular office or group of offices.
Any map which depicts an institution’s local community or
communities with reasonable clarity may be used. The map need
not show each street in the community, nor be prepared
professionally by a cartographer.
Low- and moderate-income
neighborhoods should not be specifically indicated on the map.
The community delineation, however, must not unreasonably
exclude such neighborhoods.
An institution may delineate
several local communities on one map.
However, each local
community, comprising the entire community, must be delineated
with sufficient clarity so that the areas included in those
local communities are obvious.
If the entire community is
made up of more than a few local communities, or the local
communities are separated by significant distances, it may be
easier and clearer to use a separate map for each local
Furthermore, the locations of the institution's
offices need not be shown on the maps.


How should an institution deal with low- and moderate-income
neighborhoods in its local community delineation?
The CRA regulation requires that low- and moderate-income
neighborhoods not be unreasonably excluded from a delineation
of the local community.
As the regulation states,
"Institutions are expected to be generally aware of low- and
moderate-income neighborhoods within their community, without
undertaking extensive research. "No attempt need be made to
moderate-income neighborhoods. If institutions desire further
information about low- and moderate-income neighborhoods, they

should consult such sources as:
the agencies'
examination procedures and state and local
development and planning agencies.

joint CRA

What should be included In a CRA statement?
For guidance, refer to the "Statement of the Federal Financial
Supervisory Agencies Regarding the Community Reinvestment Act"
(Federal Register, Vol. 54, No. 64, April 5, 1989). However,
at a minimum, an institution's CRA statement must include for
each local community:

A map delineating that local community.


A list of the types of credit it is prepared to extend in
that community.


A copy of the Community Reinvestment Act Notice provided
for in the regulation. Also, an institution's board of
directors must, at least annually, review each CRA
Statement, and act on any material changes in a statement
at the board's first regular meeting after the change.
In addition, each institution is encouraged, but not
required, in its statement to:
Describe how its current
community credit needs.



help meet

Report on its record of helping to meet community
credit needs.
Describe its efforts to ascertain community credit
including communication with community

How specific a list of credit offered in a local community is
needed for the CRA Statement?
Each type of credit the institution is prepared to extend in
its local community should be listed.
The regulation
indicates that greater specificity is desired for residential
mortgage and housing rehabilitation loans and loans to small
businesses and farms.
In those general categories,
subcategories, such as "residential loans for l-to-4 dwelling
units," "residential loans for 5 dwelling units and over,"
should be used.


If an
of all

institution is
only at some
those types of
of its offices

prepared to offer particular types of
of its offices in a local community,
credit be listed on the CRA Statements
in that community?

Yes. Because the institution is willing to extend that type
of credit to any creditworthy borrower in the community, the
institution should list the types of credit on the CRA
Statement of each office even though a prospective borrower at
one office may be referred to another when seeking to make
application. The institution should recognize, however, that
public complaints may arise because of such practices; and the
significantly discourages applications for such credit or
otherwise adversely affects the institution’s CRA performance.
What is a "small” business or farm?
For CRA purposes, the term ’small’ refers to the absolute size
of the business and farm rather than the relative size in
their industries. Because a major concern of CRA is that all
creditworthy borrowers have reasonable access to loans from
banks and savings and loans, small businesses and farms
generally are viewed as those which do not have access to
regional and national credit markets and must rely on their
local lending institutions for credit.
How should past and current CRA Statements and public comment
files be made available to the public in each office of an
institution, particularly an institution that has offices in
more than one local community?
An institution that has offices in more than one local
community should maintain current CRA Statements for all its
local communities at its head office and current CRA
Statements for each local community in each office of the
institution in that local community, except off-premises
electronic deposit facilities. Any CRA Statements that were
in effect during the past two years should be retained with
the public comment letters in the public comment file.
comment file for the entire institution must be maintained at
the head office, and a comments file pertaining to a
particular local community must be retained at a designated
office in that community.
Are all signed, written CRA comment letters to be placed in
the public comment file?
The regulations state that the institution must put into a
public file, all signed, written comments relating to the CRA
Statement or to the institution’s performance in helping to
meet community credit needs. The only exception to this is

comments which reflect adversely on the reputation of any
person, or which would violate a law. The institution must
use its own judgment in deciding which comments should be
placed in the public file.
Signed, written comments which
might harm a person’s reputation should be retained in a
confidential file for inspection by the examiner.

If a letter is addressed in part to an institution’s overall
CRA performance, but contains information which is harmful to
an individual or violates a law, should the institution
withhold the entire letter from the public file?
The institution may do so.
Alternatively, the statements
which reflect adversely on an individual or violate a law may
be deleted from the letter and the balance included in the
public file. In any event, the entire original letter should
be retained for inspection by the examiner.


When should comments about an institution’s CRA Statement!s)
or performance and/or the institution's response(s) be made
Any such signed, written comment that is placed in the public
comment file will be available for inspection by any
interested person and the CRA examiner. Comments received by
a supervisory agency will be on file at the agency.
Those comments are available to the public and the financial
institution unless exempted from disclosure under the Freedom
of Information Act.


Must the institution respond to any or all comments received
from the public?
There is no requirement that the institution respond.
However, the institution may find it helpful to respond to
certain comments to foster a dialogue with members of the
community or to present relevant information to a regulatory
agency. If any situation responds to a letter in the public
file, the response
must also be placed in that file, unless it reflects adversely
on any person or violates a law.


Are there any requirements relating to the size and placement
of the Community Reinvestment Act Notice?
The notice must be placed in the public lobby of the financial
institution but the size and placement may vary. For example,
if the notice takes the form of a poster, the poster must be
placed within the lobby where it will be seen by customers and
be of sufficient size to be easily read from a normal

distance. If the notice is provided in the form of a flyer,
a supply of such flyers printed in easily-read type and placed
where they will be noticed will suffice.
The notice
requirement may also be satisfied by making the CRA Statement,
which includes the notice, available as a brochure in the
lobby, where it will be noticed.

What information and avenue of communication are available to
members of a community who are concerned about the performance
of financial institutions in their community?
Financial institutions are being encouraged to communicate
with members of their community. The CRA regulation requires
financial institutions to make available to the public their
CRA Statement.
The statement contains a map showing the
boundaries of the local community delineated by the
institution and lists the types of credit that the institution
is prepared to extend to members of the community.
statement also contains a copy of the "Public Notice" which
must be placed in the offices of all financial institutions.
The Public Notice states that the public may write to the
financial institution or the appropriate regulatory authority
about the institution’s performance in helping to meet
community credit needs.
Members of the community may also review letters from the
public received by a financial institution regarding such
performance. Announcements of CRA-covered applications may be
obtained by writing to an institution's supervisory agency.
Anyone may comment on the filing of an application covered by
the CRA by writing to the appropriate supervisory agency
listed either in the applicant’s newspaper notice or its CRA
The agencies have varying comment periods for
Therefore, any questions about the comment
period should be directed to the regional office of the
appropriate agency. Comments received within the appropriate
period will be considered by the agency in the application


Must an institution document that it is actually extending the
types of credit listed in its CRA Statement as being offered
in the local community?
The CRA regulations do not require any documentation beyond
the public comment files. However, examiners will review:

Information required to be maintained
applicable fair housing regulations.


Loan registers if required by the agency.






Application files required to be kept under the Federal
Reserve Equal Credit Opportunity regulation.
Housing loan statements prepared under the Home Mortgage
Disclosure regulation.
Examiners will also use other
available materials (such as advertising copy) to
determine if the institution is offering in good faith to
extend the types of credit that it has listed on its CRA

Will activities in addition to lending be considered in the
CRA assessment?
Yes. Although the principal focus is on loans, the agencies
recognize that other activities and efforts contribute toward
the CRA’s goals.
The agencies will consider the extent to
which an institution’s activities foster local community
revitalization-for example, the purchase of state or municipal
bonds or involvement through investment or other contributions
in a local community development project. The agencies also
will consider activities such as:

The institution’s record of opening and closing branches
and offering services (including noncredit services).


Marketing and special credit-related programs to make
community members aware of credit services offered at its



Efforts to establish a dialogue with community members
concerning credit needs of the community.

The extent of participation by the institution’s board of
directors in formulating policies and reviewing its CRA

Will an institution’s performance in helping to meet community
credit needs be assessed even if an institution does not make
an application covered by the CRA or is legally precluded from
doing so?
Although the Congress directed that the approval or
rejection of applications be used to encourage community
investment by banks and S&Ls on a safe and sound basis, it
also sought to have each supervisory agency use its
examination ’to encourage’ institutions to be sensitive to
their responsibilities to help meet local credit needs. As
envisioned by the Congress, this effort by the agencies is to
be ongoing and not limited to the formal applications process.



How will the agencies "encourage" institutions to help meet
the credit needs of their local communities?
Encouragement will be provided in three ways. First, within
the limits of the agencies' resources, their staffs will
provide information and technical assistance and will meet
with representatives of industry and the management of
individual institutions to explain the CRA, regulations, and
examination procedures.
This exchange of information will
help institutions to understand the purposes of the CRA and
how the agencies plan to implement the act. Second, as part
of each CRA examination, agency examiners and field staff will
discuss with management their findings on the institution's
CRA performance.
Where appropriate, the agency staff may
suggest ways in which the institution can improve its
performance. Third, in decisions on applications, where CRA
is a material factor, the agencies will publicly comment on an
institution’s record of performance.


Will an institution be given a poor CRA assessment for making
loans outside its local community?
The agencies’ assessment of an institution’s performance will
focus on its record in helping to meet credit needs within its
community. The act, implementing regulations, and examination
procedures set no numerical criteria for the amount of loans
that an institution should make within its local community or
communities. If an institution is effectively helping to meet
local credit needs, activities conducted outside its local
community will not affect its CRA performance record.


May an institution use a policy of making certain loans only
to existing customers, without adversely affecting its CRA
In examining an institution, the agencies will pay special
attention to any restrictions placed on the availability of
those types of credit that an institution has indicated on its
CRA Statement that it would- extend in its local community.
Examiners will focus on whether any such institution has or
would have a significantly greater impact on low- and
moderate-income neighborhoods and/or classes of borrowers
protected under the Fair Housing and Equal Credit Opportunity
Acts than it does on the remainder of the community. In every
case, examiners will consider:

The business rationale for adopting a particular policy.



Whether other policies would serve the same business
purpose with less adverse impact.


The relative ease of becoming a customer eligible for
credit under the restriction.


Whether the institution has adopted a policy of limiting
certain loans to customers as a temporary response to
tight money conditions or as a permanent policy.

Loans available on any restrictive basis should be listed on
the CRA Statement with the restrictions noted. However, the
agencies recognize that institutions occasionally make certain
specialized loans to good customers-loans which they do not
offer on a regular basis. This type of spot lending activity
need not be listed on the CRA Statement.

In assessing an institution's CRA performance, will an
examiner seek information outside of the institution being
The examiner will seek such information if he or she believes
that it is necessary to complete a fair and accurate picture
of the institution's performance.
For example, if the
examiner believes that the institution's description of its
community is unreasonable, the examiner may review the
delineations of other, similar institutions in the community.
In addition, contacts may be made with persons who have
commented on an institution's performance, local officials,
local business owners, community residents, real estate
brokers, and others.


What sanctions are available to the agencies under the CRA?
A poor CRA performance record may result in denial of an
The agencies may also use the full range of
their enforcement powers to ensure compliance with the
requirements of the CRA regulations, such as preparing a CRA
Statement, maintaining public comment files, and providing the
public notice.
In addition, prohibited discriminatory or
other illegal credit practices which are adverse factors under
the CRA, will also result in sanctions under the Equal Credit
Opportunity Act, federal fair housing laws, or other consumer
credit protection laws.



Are applications for electronic deposit facilities covered by
the CRA?
Generally, such applications are covered. The agencies have
different rules regarding processing of applications for
electronic deposit facilities, and institutions should,
therefore, consult their supervisory agency before filing.


How are bank and savings and loan holding companies affected
by the CRA?
The CRA applies to applications filed by holding companies to
merge or to acquire commercial banks and savings and loan
associations. When decisions on such applications are made,
the Federal Reserve Board and the Office of Thrift Supervision
will consider the CRA records of all the bank or S&L
affiliates of the applicant holding company.
The parent
holding company need not prepare a CRA Statement or public
notice, or maintain public comment files. The holding company
must conform to the requirements of the regulation for media
notices of applications filed to acquire a bank or S&L.


How does the CRA affect applications by banks and S&Ls that
are subsidiaries of holding companies?
Applications by a bank or S&L that is a subsidiary of a
holding company will be treated by the agencies in the same
way as those filed by any bank or S&L. Only the CRA record of
the applying bank or S&L will be taken into account. The bank
or S&L may request, however, that the agency consider the
contribution of any of the bank's or S&Ls nondepository
affiliates in helping to meet the credit needs of the
community or communities of the applicant bank or S&L. For
example, if the applicant bank or S&L has an affiliate
community development corporation operating in the same
community as the applicant, the applicant may ask that the
contributions of that corporation in helping to meet the
credit needs of the particular community be considered by the
agency in assessing the overall CRA record of the applicant.


Banking agency CRA "Interpretation 101" (12 CFR 25.101,
12 CFR 228.100, and 12 CFR 345.101) excludes from CRA
requirements certain institutions that serve solely as
correspondent banks, trust companies, or clearing agents. Are
there other federally-regulated financial institutions that
are excluded from the scope of CRA?
No. The
one that
All such

CRA defines a "regulated financial institution" as
meets the definition of an "insured bank" or an
institution," pursuant to section 3 of the FDIC Act.
institutions are subject to CRA.


To what extent will a "regulated financial institution" which
is subject to statutory and/or regulatory constraints that
prevent it from operating as a "full service" financial
institution be expected to meet CRA performance requirements?
The institution has an affirmative obligation to seek out ways
consistent with its permitted activities to assist, directly
or indirectly, in meeting the credit needs identified in its
local community, with appropriate attention to low- and
moderate-income neighborhoods. As indicated in the answer to
Question 16 of this series, many services other than direct
credit services can be developed to benefit the local
community in a manner consistent with the intent of the CRA.
The CRA implementing regulations of the federal financial
supervisory agencies include twelve factors to be considered
in assessing CRA performance. Every institution’s overall CRA
performance record should compare favorably, consistent with
its resources and capabilities, with the issues expressed
through these twelve factors.
A financial institution’s
inability to provide specific credit products or services
because of statutory or regulatory limitations does not
preclude a positive CRA performance evaluation.
An institution’s board of directors should assure that CRA
performance is an integral part of the institution’s business
Expected compliance will include, at minimum,
meeting the basic obligations to define a local community, to
ascertain the credit needs within that community, and to
demonstrate responsiveness, directly or indirectly, to the
needs identified.


What do the regulatory agencies expect from institutions that
have voluntarily limited or specialized their services to
target particular markets?
Such an institution has the same continuing and affirmative
obligation as a ’full service" institution to help meet the
credit needs of its entire local community, consistent with
safe and sound operations.
An institution's self-imposed
service or market limitations may not be used as justification
for a failure to define its local community or to help,
directly or indirectly, in meeting the credit needs within
Whether or not an institution operates as a "full service"
entity is not a determining factor in evaluating its CRA
performance. Every institution should be able to demonstrate
that it' is fulfilling its CRA responsibilities, either within
the context of its chosen service specialties or in other


-.ways. The final measure of CRA performance is in the credit
benefits accruing to the institution’s local community as a
result of that institution’s activities, irrespective of the
vehicle by which those credit benefits are provided.

In addition to traditional direct lending activities, what
activities can financial institutions- consider in meeting
Reinvestment Act?
The answer to this question is primarily designed to provide
guidance to regulated financial institutions that are not
’full service’ providers.
The guidance herein can also be
utilized by full service institutions as a means of augmenting
comprehensive CRA program.
Some of these activities may
require prior regulatory agency approval.
The following are some non-traditional activities that
financial institutions may consider to help meet their
responsibilities under the Community Reinvestment Act.
Debt Investments and Related Securities

Purchase of mortgage-backed securities or collateral
trust notes from lenders or other community development
finance intermediaries serving primarily low- and
moderate-income areas or persons.


Purchase of housing, community and economic development
loans, or participations in loans or loan pools from
other financial institutions, state and local government
corporations, community loan funds, or other community
development intermediaries originating loans to help meet
the needs of low-and moderate-income persons or small


participations in pools representing such loans) made to
low- and moderate-income persons, or to small farm and
small business owners, such as:
SBA guaranteed loans or loan pools;
FmHA guaranteed farm, business or housing loans;
FHA guaranteed loans;
EDA (U.S. Economic Development Administration)
guaranteed loans;
State housing or economic development agency
guaranteed loans.


Purchase of state and local government agency housing
mortgage revenue bonds or industrial revenue bonds.

Equity Investments
Some activities to serve community credit needs may be carried
out through certain federal and state supervisory agencies’
programs to promote community development investments. Such
investments are required to serve predominantly a public or
community purpose.
Activities that might be carried out
directly by an institution under these programs include:

Purchase of limited partnership shares to provide the
equity financing for public purpose projects such as
construction of low- and moderate-income housing or
provision of small business seed capital.
partners could be quasi-public or private, for-profit or
nonprofit organizations.


Investment in the stock of a public purpose corporation,
either for-profit or nonprofit, chartered to carry out
activities to benefit low- and moderate-income areas and
residents or small businesses.

For certain banks and holding companies, the formation of, or
investment in, a community development corporation may, in
accordance with applicable laws and restrictions, be a viable
way to address certain credit needs in the communities of
banks or holding company subsidiary banks.
Limited service or specialized banks in a holding company that
owns a community development corporation operating in the
bank’s community could take advantage of the CDC's activities
in planning and executing its own CRA responsibilities.
Activities that could be carried out through a community
development corporation subsidiary include, for example:

Acting as a general partner, joint venture partner and/or
equity investor in projects that have a clear public
purpose, particularly projects focused on assisting lowand moderate-income housing or small business, and on the
redevelopment of deteriorating or blighted areas where


Carrying out a program to provide needed technical
assistance on financial matters to small businesses or
public-purpose organizations.


Financing and managing a public-purpose revolving loan
fund to provide financing that cannot normally be
provided through the private market.
An example is a
fund to lend monies for pre-development costs involved in
evaluating and packaging projects for financing by
financial institutions and/or public sector investors.


An activity that could be carried out by the institution,
directly or through establishment of a separate corporation,
multi-bank/multi-investor Small Business Investment Company
(SBIC) or Minority Enterprise Small Business Investment
Company (MESBIC) licensed by the U.S. Small Business
Other Services and Activities [revised]

Letters/lines of credit to community-based organizations,
private developers, nonprofit development corporations or
other community finance intermediaries to support
financing of low- and moderate-income housing or small
business development.


Highly targeted corporate contributions (monetary and inkind) to support the personnel, facilities, marketing and
organizations or other financial intermediaries that
explicitly focus on helping meet credit needs of low- and
moderate-income persons or small businesses.
organizations might include:


nonprofit, neighborhood development corporations;
housing and other credit counseling organizations;
community foundations and loan funds;
Neighborhood Housing Services organizations;
SBA 504 Certified D e v e l o p m e n t companies

Technical assistance to community-based nonprofit groups,
state and local government agencies and community
development finance and secondary market intermediaries
which focus on helping to meet the credit needs of lowand moderate-income
Examples of such technical assistance
activities might include:
serving on the board of directors or loan review
development of loan application and underwriting
development of loan processing systems;
development of
secondary market vehicles or
marketing assistance, including development of
advertising and promotions, publications, workshops
and conferences;
training for staff and management;
accounting/bookkeeping services;
fund-raising, including soliciting or arranging

consumer education to broaden knowledge and use of
credit and deposit services.


Assistance to community development credit unions in the
institution's local community through, for example,
provision of technical assistance or stable deposits to
fund the credit union's lending.

When assessing CRA performance, do the regulatory agencies
consider a financial institutions' lending, investment,
development and general support activities outside of the
institution's delineated community?
As indicated in question 19, assessment of an institution’s
performance under CRA focuses on its record in helping to meet
credit needs within its delineated community.
The agencies
are aware, however, that financial institutions may organize,
support, or use a wide variety of programs, organizational
mechanisms or intermediaries that help finance such things as
low- and moderate-income housing,
small and minority
businesses and other community projects on a statewide,
regional or even national basis. Although these programs or
mechanisms may be available to support loans and investments
within an institution's delineated community, they often
provide the bulk of their financial support in other
geographical areas.
Under certain circumstances, the agencies will give positive
consideration in assessing CRA performance for active
participation by a financial institution in such programs and
mechanisms, even where most or all of the financing provided
may ultimately benefit low- and moderate-income borrowers or
neighborhoods located outside of the institution's delineated
In determining whether
and to what extent positive
consideration will be given, the agencies assess the
activities undertaken in the context of an institution’s
overall CRA program.
Where such participation augments or
complements an overall CRA program that is directly responsive
to the credit needs in an institution’s delineated community,
it will be considered favorably in reaching an overall CRA
conclusion. However, such activities and involvements will be
insufficient to compensate for an otherwise deficient record
of addressing the credit needs of an institution’s delineated
Examples of such programs or intermediary organizations (other
than traditional direct lending) are:



lending consortia or loan pools that provide community
development financing and technical assistance for
low-and moderate-income housing, small and minority
revitalization projects;


multi-investor community development corporations;


moderate-income housing;


and programs which
explicitly target loans for low- and moderate-income
housing, small and minority businesses, or small farms;


quasi-public housing, community development or economic
development finance corporations in which state or local
government agencies participate, often with financial
institutions or other contributors;


state bond programs for housing, community and economic
development, or public infrastructure projects;


public or private intermediaries which provide loan
guarantees or other credit enhancements used by financial
institutions to support community development lending and


loan participation and other
co-ventures undertaken with minority and women-owned
financial institutions.





These and similar vehicles help institutionalize and support
community development lending and investment.
In general,
they enhance the capacity of financial institutions to help
meet community credit needs, including those of low- and
moderate-income neighborhoods.

What effect would an institution's selling loans it has
originated within its delineated community have on the
institution's CRA performance?
The agencies have found that the sale of loans in
secondary market enhances CRA performance where such sales
enable an institution to recycle funds for origination of
additional loans within its delineated community.
Where loans are part of a comprehensive CRA program designed
to ascertain and help meet creditneeds within
institution’s delineated community, such loans clearly help
demonstrate CRA performance, whether
or not they
ultimately sold on the secondary market. To ensure that

appropriate consideration under CRA is given for loans sold,
however, institutions should consider retaining information
concerning when and where the loans were originated.






Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102