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#2082428 - 06/08/16 02:40 PM Inside outside test
Rocky P Offline
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Florida
Usually a bank needs 50% of the lending inside the AA to pass the first CRA test. Have the regulators relaxed their standards?

"Although "Bank" made a majority of loans outside of the AA, the bank meets the standard for satisfactory performance based on mitigating factors. Overall, "Bank" originated or purchased 29 percent of their residential real estate loans within the AA by number and 24 percent by dollar volume.

The "Bank" is a nationwide lender with their Internet products, thus the majority of loans are outside the AA."

Are there new standards, or if the bank is a national lender, <30% is still OK?

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CRA
#2082512 - 06/08/16 07:25 PM Re: Inside outside test Rocky P
Inspector Offline
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Rocky - To my knowledge there has been no change that allows a number under 50% to be sufficient on its own. I think the key language in the quote you included is "mitigating factors". Is the only mitigating factor the internet products? I don't think that should really count as a mitigating factor so if that is it someone did the bank a nice favor.

The 29% was for residential real estate. Were there other products that brought the totals up closer to 50%?
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#2082887 - 06/10/16 02:53 PM Re: Inside outside test Rocky P
Rocky P Offline
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Florida
Thanks Inspector.

Minimal commercial loans. Additionally, assessment area very large for bank size, most LMI/minority tracts didn't even have applications.

Just wondering if regulators softening standards because most of the loans came off the internet.
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#2082893 - 06/10/16 03:00 PM Re: Inside outside test Rocky P
RR Jen Offline
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The Fed doesn't appear to be. They indicated in a recent conversation they expect banks to follow the "spirit of CRA" and loan money back into the areas it came from (aka where your deposits come from).
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#2082954 - 06/10/16 05:41 PM Re: Inside outside test Rocky P
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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They keep talking about looking at how things are in the current environment but there are no changes. As Jen said...the conversation is that you are taking deposits from your AA and are expected to be lending back to the AA.

That being said, if a good part of lending is outside, a bank needs to be prepared (if it wants a satisfactory rating) to be able to show:

>it has already met the credit needs inside of its AA, and
>how are loans outside of AA being funded...sales of loans in secondary market, broker deposits, a line of credit for a specific portfolio.

Show how you are not harming the assessment area.

Nothing is a guarantee, but go into an exam prepared to explain what is going on, why and how, and impact on AA.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2083056 - 06/11/16 02:14 AM Re: Inside outside test Rocky P
Rocky P Offline
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Posts: 7,650
Florida
KB -

HMDA 29% number, 24% dollar in AA. Huge AA for Intermediate bank and most LMI & MM tracts don't even have an app, let alone a loan. Non-HMDA lending insignificant.

I can understand the premise - it's Ok to lend outside if you are taking care of your AA first, but that did not appear to be the case, and bank gets SAT!

Cannot figure it out, and feel bad for banks who are constrained by the reg.
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Integrity. With it, nothing else matters. Without it, nothing else matters.

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#2083057 - 06/11/16 01:18 PM Re: Inside outside test Rocky P
Kathleen O. Blanchard Offline

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Do you know the mitigating factors? Someone made a convincing argument.

So much of CRA is individual vs being consistent across institutions and examinations.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2083082 - 06/13/16 01:55 PM Re: Inside outside test Rocky P
RR Jen Offline
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RR Jen
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Running and riding everywhere ...
I'd be curious to look at the disclosure tables on those LMI tracts. Are there ANY applications at all? Are they commercial in nature or possibly a university taking up the majority of it? If there were 100 HMDA loans in that LMI tract and you didn't get any, you may have a problem. If there were only 3 and you missed out, no biggie.
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I don't need any more negativity in my life...be positive and helpful people or I will kick you in the shins!!!

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#2083101 - 06/13/16 03:03 PM Re: Inside outside test Rocky P
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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I located the exam report in question. I will take a look when I have time. Perhaps they won the discussion about funding via sales, not via deposits from assessment area. We likely won't be able to unravel that just from the report.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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