Mortgage brokers are in a unique position with respect to the CRA. Although they have no bligation to comply with the CRA, they have opportunities to serve the needs of their bank clients by understanding its parameters.
As banks seek opportunities to make loans and real estate investments, and undertake ventures that potentially provide both credit
and financial profit, brokers that understand the requirements of the
CRA are able to introduce more attractive and innovative investment
possibilities to their clients.
Mortgage brokers also can help locate opportunities for banks
to lend in community-development projects, qualified investments
that are purchased with pretax income, or other loans in low- and
moderate-income areas where a bank may be less equipped to find
How to capitalize
One challenge in making loans within low- and moderate-income
areas is that many of them lack access to certain infrastructure. The
CRA presents an opportunity for mortgage brokers with connections
to leverage investments in infrastructure.
In July 2016, for example, the Federal Financial Institutions Exami-
nation Council (FFIEC) said, “Financing for the construction, expansion,
improvement, maintenance, or operation of essential infrastructure
may qualify for revitalization or stabilization consideration.”
Another example of community development is investment in
renewable-energy projects. Here, regulators have indicated that
“renewable energy facilities could benefit low- or moderate-income
individuals by reducing the cost of providing utilities to common areas
in an affordable housing development.”
A bank’s assessment area, or the geographic area it serves, is critical
to its regulation. Assessment areas generally consist of one or more
metropolitan areas. These areas cannot reflect illegal discrimination
or arbitrarily exclude low- or moderate-income populations.
Once assessment areas are established, regulators further divide
lending institutions according to performance standards dictated by
their asset sizes. There are three performance-standard groups:
■ Small banks, which generally have less than $1.226 billion in assets;
■ Large banks, which generally have assets exceeding the small-bank threshold; and
■ Wholesale or limited-purpose banks.
Limited-purpose banks offer narrow product lines, such as credit cards
or auto loans, to a regional market. Wholesale banks do not offer home
mortgages, small-business loans or consumer loans to retail customers.
Wholesale and limited-purpose banks undergo a community-development test in which regulators review their lending products,
services and qualified investments. For small and large banks,
compliance assessments are more detailed.
In order to assist lenders with CRA compliance, the FFIEC periodically
publishes interagency questions and answers. The FFIEC is comprised
of five regulatory bodies — the Federal Deposit Insurance Corp. (FDIC);
the Office of the Comptroller of the Currency (OCC); the Federal
Reserve System board of governors; the National Credit Union Administration; and the Consumer Financial Protection Bureau.
“A bank’s assessment area,
or the geographic area it serves,
is critical to its regulation.”
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