Get the Credit You Deserve – Part III
Get the Credit You Deserve – Part III
An important component of the Community Reinvestment Act (CRA) Examination is Community Development. In Part III, we will finish the series concentrating on community development investments and services.
To qualify, the community development activity must benefit the institution’s assessment area or a broader statewide or regional area that includes the assessment area.
Community Development Investments
The Interagency Questions and Answers Regarding Community Reinvestment provides the following examples of community development investments including, but not limited to, investments, grants, deposits, shares or donations in or to:
- Financial intermediaries;
- Organizations engaged in:
- Affordable housing rehabilitation and construction, including multifamily rental housing,
- Financing small businesses;
- Promoting community development by providing community services for low- and moderate-income (LMI) individuals, such as youth programs, homeless centers, soup kitchens, health care facilities, battered women’s centers, and alcohol and drug recovery centers;
- Projects eligible for low-income housing tax credits;
- State and municipal obligations, such as revenue bonds, that specifically support affordable housing or other community development;
- Not-for-profit organizations serving LMI housing or other community development needs, such as counseling for credit, homeownership, home maintenance, and other financial literacy programs; and
- Organizations supporting activities essential to the capacity of LMI individuals or geographies to utilize credit or to sustain economic development, such as: day care operations and job training programs that enable LMI individuals to work.
Community Development Services
The Interagency Questions and Answers Regarding Community Reinvestment indicates that to be a qualified service, services must be provided as a representative of the institution.
The following are examples of community development services:
- Providing technical assistance on financial matters to community development organizations such as:
- Serving on the board of directors;
- Serving on a loan review committee;
- Developing loan application and underwriting standards;
- Developing loan-processing systems;
- Developing secondary market vehicles or programs;
- Assisting in marketing financial services, including development of advertising and promotions, publications, workshops and conferences;
- Furnishing financial services training for staff and management;
- Contributing accounting/bookkeeping services;
- Assisting in fund raising, including soliciting or arranging investments; and
- Providing services reflecting financial institution employees’ areas of expertise at the institution, such as human resources, information technology, and legal services.
- Lending employees to provide financial services for organizations facilitating affordable housing construction and rehabilitation or development of affordable housing;
- Providing credit counseling, homebuyer and home-maintenance counseling, financial planning, or other financial services education to promote community development and affordable housing, including credit counseling to assist LMI borrowers in avoiding foreclosure on their homes;
- Establishing school savings programs or developing or teaching financial education or literacy curricula for LMI individuals;
- Providing electronic benefits transfer and point of sale terminal systems to improve access to financial services, such as by decreasing costs, for LMI individuals;
- Providing international remittance services that increase access to financial services by LMI persons;
- Providing other financial services with the primary purpose of community development, such as low-cost savings or checking accounts, free or low-cost government, payroll, or other check cashing services, that increase access to financial services for LMI individuals; and
- Providing foreclosure prevention programs to LMI homeowners who are facing foreclosure on their primary residence.
To ensure that you receive credit for the community development activities, the Federal Reserve Bank suggests to document the following:
- Date of loan/renewal, investment or service
- Name and address of the borrower or organization benefiting
- Dollar amount of the loan or investment
- Description of the activity and CD purpose
- Supporting documents (e.g., note, credit approval memo, loan agreement, investment prospectus, side letters, investment partnership agreement, etc.)
There are numerous resources available to you to obtain CRA Community Development information including but not limited to:
- Interagency Questions and Answers Regarding Community Reinvestment
- Supplement to CRA CD Q&A – 2013
- CRA Community Development – Examiner Insight FRB Webinar