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#2227906 - 12/21/19 03:34 AM CRA Proposed Rule-Making is radical & complicated
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,834
Connecticut
I've read and reread the notice of proposed rule-making and believe me it is radical and complicated. In their attempt to update the CRA regulations the regulators are potentially creating 2 problems for every problem they purportedly resolve. Moreover, they have made the performance benchmarks so convoluted and the overall performance framework so complicated that most bankers will have great trouble understanding what they are expected to do and the general public will be completely lost in my opinion.
I will be writing a more detailed critique of the proposed rule-making and on January 21, will be broadcasting a webinar on the details. But I think it is fair to characterize the proposed rule as radical and counterproductive. Here are ten of the most significant changes proposed:

(1) Assessment Areas will be changed to add "deposit-based" assessment areas to the traditional "facilities-based" communities
(2) As pointed out by KB in her comments on this topic, bankers will no longer be allowed to define their Assessment Areas based on the area their banks can "reasonably be expected to serve". The smallest geographic unit appears to be counties. This would be a very destructive provision that will require banks to adopt unrealistic assessment areas. Moreover, the Assessment Area can be changed only once during an examination period.
(3) ISB's will be eliminated and small banks will be those with assets of $500 million or less in the previous 4 quarters.
(4) the proposed new rule will eliminate the use of the data reported under HMDA and will substitute mortgage data from the Call Report
(5) the proposed rule will eliminate mortgages in low- and moderate-income census tracts as a CRA test, but will retain that test for small business and small farm loans
(6) the proposed rule will add consumer loans to the list of loans considered as a CRA activity
(7) all large banks must pass a community development test measure in relationship to domestic deposits adjusted for brokered deposits
(8) all banks, including small banks, will be required to collect and compile geographic and dollar value data pertaining to their domestic deposits
(9) benchmarks based on demographics and peer performance would be applied to each "distribution" test. A bank's performance must equal or exceed either the demographic or peer benchmark for each distribution test
(10) the AA ratio test will be replaced by an "impact" test that uses average dollar value loans compared to average domestic deposits at the "bank level" as well as for each AA. This requires maintaining information not only about loans originated, but the average value of loans over time. The results will be compared to “empirically-based standards developed by the regulators for every bank and every Assessment Area.

There will be a lot more to follow.
Last edited by Len S; 12/21/19 03:40 AM.
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#2227913 - 12/23/19 01:38 AM Re: CRA Proposed Rule-Making is radical & complicated Len S
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,277
It is one of the worst proposals I have ever seen. Of course reports would be issued faster; the banks would do all of the work.
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#2227919 - 12/23/19 03:58 PM Re: CRA Proposed Rule-Making is radical & complicated Kathleen O. Blanchard
ccman Offline
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Joined: Sep 2007
Posts: 896
And, where is the current ADMIN that touts, "Its reducing or eliminating federal regulations." I am all for rational, beneficial rules and regs, that
actually result in a valuable service to the community and industry.

The proposal should be DOA!! Write to your congressman, if you think that will do any good whatsoever! better yet, we need a RESET on CRA!!

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#2227957 - 12/23/19 09:52 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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I plan to comment and will be encouraging clients and everyone I know to comment.
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#2227999 - 12/26/19 07:12 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
CalifDreamin Offline
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CalifDreamin
Joined: Mar 2002
Posts: 2,201
Far from Calif
Yes, bankers need to comment!! Do you think the timing of this (while everyone will be pushing to get their data scrubbed and filed for filing) was on purpose in the hopes that none of us would have time to read/comment?
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#2228130 - 12/31/19 10:34 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
Len S Online
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Joined: Oct 2004
Posts: 1,834
Connecticut
I have drafted a 17 page commentary plus addendums with supporting data. I plan on submitting my commentary next week. We will be broadcasting a free webinar on January 21 that I am planning going for 2 hours because there is so much to cover. This is a time that the banking industry had better be prepared and respond to the proposal or it will be saddled with even more onerous data collection responsibilities and more rigid Assessment Area delineation rules that could be very destructive. As things stand, you will have to mid-February to submit comments although word is the Dems are asking to expand the comment period to 120 days, so the deadline may change.
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#2228141 - 01/02/20 03:38 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
JWills, CRCM Offline
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The Mitten State
We are a FED bank, and they have not jumped on the band wagon for CRA reform--is it safe to assume that for the time being, we would just continue as normal? We are a small bank, nearing the ISB threshold.
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#2228147 - 01/02/20 04:45 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
CompliantOkie Offline
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CompliantOkie
Joined: Dec 2013
Posts: 419
OOOOOOklahoma
Len do you have a link to the webinar you can share here?

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#2228148 - 01/02/20 04:49 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,935
TN
JWills - I'm in the same boat as you with the Fed being our prudential regulator. We are, however, a large bank. Right now I'm just sitting tight and reading information.
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#2228152 - 01/02/20 05:17 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
SoCalGal Offline
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Joined: Dec 2002
Posts: 38
Long Beach, CA
We are also a large bank with the FRB as our regulatory agency. Like Skittles, I am in a state of observation, although considering the proposal as if the changes would affect us. As such, I am also interested in Len's January 21 webinar access information.

BTW, thank you BOL for the opportunity to share information and to learn from these groups! As a long time member, from being new to Compliance, I have learned a great deal here. With gratitude and appreciation; Happy New Year!

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#2228164 - 01/02/20 06:29 PM Re: CRA Proposed Rule-Making is radical & complicated Len S
Len S Online
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Joined: Oct 2004
Posts: 1,834
Connecticut
Here is the URL for the webinar registration:Webinar on CRA NPR changes
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