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OCC revises CRA small and intermediate bank asset-size threshold adjustments
On December 30, the OCC announced revisions to the asset-size thresholds used to define small and intermediate small banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, a small bank or savings association will mean an institution that, as of December 31 of either of the past two years, had assets of less than $1.384 billion. An intermediate small bank or savings association will mean an institution with assets of at least $346 million as of December 31 of both of the prior two years, and less than $1.384 billion as of December 31 of either of the prior two years. The adjustments follow a final rule issued last month, which rescinded the OCC’s 2020 CRA rule and replaced it with a rule based largely on the prior rules adopted jointly by the federal banking agencies in 1995, as amended. (Covered by InfoBytes here.) Under the 2021 final rule, banks are evaluated under different CRA examination procedures based on their asset-size threshold amounts. As previously covered by InfoBytes, the Federal Reserve Board and the FDIC also announced joint annual adjustments to the CRA asset-size thresholds used to define “small bank” and “intermediate small bank” in December.
FDIC announces Alabama disaster relief
On December 23, the FDIC issued FIL-82-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Alabama affected by severe storms and flooding. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the weather and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
Agencies release 2020 CRA data
On December 21, the three federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibility—the Federal Reserve Board, the FDIC, and the OCC—announced the release of the 2020 small business, small farm, and community development CRA data. The analysis contains information from 687 lenders about originations and purchases of small loans (loans with original amounts of $1 million or less) in 2020, a 1.2 percent decrease from the 695 lenders that reported data in 2019. According to the analysis, the total number of originated loans decreased by approximately 1.7 percent from 2019, with the dollar amount of originations increasing by roughly 7.9 percent. The analysis further noted that 621 banks reported community development lending activity totaling nearly $169 billion in 2020, a 52 percent increase from 2019.
Agencies release annual CRA asset-size threshold adjustments
On December 16, the Federal Reserve Board and the FDIC announced joint annual adjustments to the CRA asset-size thresholds used to define “small bank” and “intermediate small bank,” which are subject to streamlined CRA evaluations, but not subject to the reporting requirements applicable to large banks unless they choose to be evaluated as one. A “small bank” is defined as an institution that, as of December 31 of either of the prior two calendar years, had less than $1.384 billion in assets. An “intermediate small” bank is defined as an institution that, as of December 31 of both of the prior two calendar years, had at least $346 million in assets, and as of December 31 of either of the past two calendar years, had less than $1.384 billion in assets. The joint final rule takes effect on January 1, 2022.
Agencies provide post-tornado assistance
On December 15, the OCC, Federal Reserve Board, FDIC, NCUA, and state regulators (collectively, “agencies”) issued a joint statement reminding banks of supervisory expectations related to disaster recovery, and specifically tornadoes. According to the statement, the agencies “recognize the serious impact of tornadoes on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision.” The agencies also “encourage institutions operating in the affected areas to meet the financial services needs of their communities.” The statement also, among other things, addressed supervisory expectations connected to lending, temporary bank facilities, publishing requirements, regulatory reporting requirements, the Community Reinvestment Act credit, and investments.
The agencies acknowledged the unusual circumstances faced by institutions affected by the severe weather and suggested they work with borrowers in communities under stress, stating that this can be consistent with safe-and-sound practices as well as in the public interest. For example, the agencies noted that “many financial institutions face staffing, power, telecommunications, and other challenges in re-opening facilities after tornado damage,” and that “the damage caused by tornadoes may affect compliance with publishing and other requirements for branch closings, relocations, and temporary facilities under various laws and regulations.” The agencies noted that contacting one’s primary federal and/or state regulator is part of the steps when operational challenges persist and when compliance difficulties in publishing or other requirements arise. A complete list of the affected disaster areas can be found here.
The FDIC also issued FIL-78-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Kentucky affected by recent severe weather events. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other relief, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
OCC formally rescinds CRA rule
On December 14, the OCC issued a final rule rescinding its 2020 Community Reinvestment Act Rule (2020 Rule) and replacing it with a rule based largely on the prior rules adopted jointly by the federal banking agencies in 1995, as amended (1995 Rules). (See also OCC Bulletin 2021-16.) According to the OCC, the “action is intended to facilitate the ongoing interagency work to modernize the CRA regulatory framework and promote consistency for all insured depository institutions.” As previously covered by a Buckley Special Alert, the 2020 Rule was intended to modernize the regulatory framework implementing the CRA and provided for at least a 27-month transition period for compliance based on a bank’s size and business model, among other things.
In September, the OCC solicited comments on a proposal to rescind the 2020 Rule (NPRM) and issued a series of frequently asked questions discussing the rulemaking process and providing a general timeline on the transition from the 2020 Rule (covered by InfoBytes here and here). The FAQs addressed questions including concerns related to the transition period for tracking activities that qualify under the 2020 Rule but would not qualify should the 1995 Rules be reinstated. The OCC announced that after reviewing transition issue comments received on the NPRM, the final rule had been adopted largely without modification. The final rule carries a compliance date of January 1, 2022, for all national banks and federal and state savings associations, with the exception of the final rule’s public file and public notice provisions, which have a delayed compliance date of April 1, 2022. According to the OCC, transitioning back to the 1995 Rules should carry a limited burden as the June 2020 Rule had only been partially implemented.
The OCC further noted that “strategic plans approved under the June 2020 Rule may remain in effect” but that “these plans must comply with the provisions of the final rule, as applicable.” Also, since the final rule stipulates that a bank’s record of helping to meet the credit needs of its assessment area(s) will be taken into consideration, “provisions in strategic plans that include goals for activities outside a bank’s assessment area(s) will no longer be applicable, and the OCC will no longer evaluate these activities when assessing the bank’s performance.” Additionally, the OCC stated that the new rule is intended to limit the CRA burden on banks, bank communities, and examiners while ensuring that insured depository institutions can “meet the credit needs of their entire communities, including low- and moderate-income [] neighborhoods,” consistent with safe and sound operations.
NYDFS proposes expanding CRA to support minority- and women-owned businesses
On November 3, NYDFS issued proposed changes to the state’s Community Reinvestment Act (New York CRA) to guarantee the department “has the necessary data to ensure banks are evolving to best serve their communities and protect against redlining and fair lending violations.” The proposed regulation further specifies the type of communities the New York CRA plans to support and will enable NYDFS to evaluate the extent to which minority- and women-owned businesses are offered and provided credit. In June 2020, NYDFS issued an industry letter (covered by InfoBytes here) to alert regulated entities that it planned to make changes to its CRA examination process in response to an amendment to the New York CRA, which required NYDFS to consider “several aspects of banking institutions’ activities with respect to minority- and women-owned businesses.” Among other things, the proposed regulation outlines data collection and submission requirements, including (i) asking whether a business applying for a loan or credit is minority- or women-owned or both; (ii) reporting application details such as the date, type of credit applied for and amount, and whether the application was approved or denied; and (iii) reporting a business’s size and location. Comments will be accepted for 60 days following publication in the State Register.
The New York CRA has undergone several expansions recently. As previously covered by InfoBytes, the New York governor signed legislation on November 1 expanding the New York CRA to cover non-depository lenders. Under the amendments, nonbank mortgage providers’ lending and investment in low- and moderate-income communities will be subject to NYDFS review.
New York expands CRA requirements to non-depository mortgage lenders
On November 1, the New York governor signed S5246A, which expands the New York Community Reinvestment Act (New York CRA) to cover non-depository lenders. Under the act, nonbank mortgage providers’ lending and investment in low- and moderate-income communities will be subject to NYDFS review. The anti-redlining law—which previously only measured banks’ activities in low- to moderate-income communities—is intended to “ensure everyone has fair and equal access to lending options in their pursuit of purchasing a home, especially in communities of color which continue to be impacted by the effects of the pandemic and have historically faced many more hurdles when seeking a mortgage,” Governor Kathy Hochul stated. The act follows a report issued by NYDFS in February, which examined redlining in the Buffalo metropolitan area and concluded that there is a “distinct lack of lending by mortgage lenders, particularly non-depository lenders” to majority-minority populations and to minority homebuyers in general. (Covered by InfoBytes here.) At the time, the report made numerous recommendations, including a recommendation to amend the New York CRA to cover nonbank mortgage lenders and a request that the OCC and the CFPB investigate federally regulated institutions serving the Buffalo area for violations of fair lending laws. The act takes effect in a year.
FDIC releases September enforcement actions
On October 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in September. During the month, the FDIC made public six orders consisting of “one Consent Order, two terminations of Consent Orders, one Order to Pay Civil Money Penalty, one Order Terminating Decision and Order to Cease and Desist, and one Order of Termination of Insurance.” Among the orders is an order to pay a civil money penalty imposed against a Nebraska-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank “[m]ade, increased, extended, or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance,” and also allegedly “[f]ailed to comply with proper procedures for force-placing flood insurance in instances where the collateral was not covered by flood insurance at some time during the term of the loan.” The order requires the payment of a $24,000 civil money penalty.
The FDIC also issued a consent order to a Utah-based bank, which requires the bank to take measures to correct current alleged violations (and prevent future violations) of TILA, RESPA, E-Sign Act, ECOA, CRA, and TISA, as well as the statutes’ implementing regulations. The bank neither admitted nor denied the alleged violations but agreed to, among other things, develop a sound risk-based compliance program and implement an effective training program to ensure compliance.
OCC releases FAQs on proposal to rescind 2020 CRA rule
On October 26, the OCC issued responses to frequently asked questions on its notice of proposed rulemaking (NPRM) to rescind its 2020 Community Reinvestment Act Rule (2020 Rule) and to replace it with rules based largely on those adopted jointly by the federal banking agencies in 1995, as amended. As previously covered by InfoBytes, the OCC noted it intends to align the agency’s CRA rules with current Federal Reserve Board and FDIC rules, “thereby facilitat[ing] the on-going interagency work to modernize the CRA regulatory framework and create consistency for all insured depository institutions.” The FAQs discuss the rulemaking process and provide a general timeline on the transition from the 2020 Rule. The FAQs also answer questions concerning: (i) CRA bank-type determinations; (ii) qualifying activity determinations; (iii) the qualifying activity confirmation request system; (iv) the transition period for tracking activities that qualify under the 2020 Rule but would not qualify should the 1995 rules be reinstated; (v) examination administration; (vii) assessment areas; (vii) targeted geographic areas; (viii) strategic plans; and (ix) submitting public comments.