Making Home Affordable Programs

We are helping our customers modify and refinance their current mortgages into more affordable plans under the Making Home Affordable programs. I believe our activities should receive favorable consideration under CRA but I'm not sure how our acitivities should be captured. We are an ISB being regulated by the FRB and also a HMDA reporter. The refinances are reportable under HMDA so they're considered under the Lending Test, but what about the loan modifications? Under community development services or loans? Your thoughts will be very much appreciated. Thanks!

Consideration is provided under responsive lending activities, per the following excerpt from official Q&As.

§ __.22(a) – 1: Are there any types of lending activities that help meet the credit needs of an institution’s assessment area(s) and that may warrant favorable consideration as activities that are responsive to the needs of the institution’s assessment area(s)?

A1. Credit needs vary from community to community. However, there are some lending activities that are likely to be responsive in helping to meet the credit needs of many communities. These activities include:
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• Establishing loan programs with the objective of providing affordable, sustainable, long-term relief, for example, through loan refinancings, restructures, or modifications, to homeowners who are facing foreclosure on their primary residences.
Examiners may consider favorably such lending activities, which have features augmenting the success and effectiveness of the small, intermediate small, or large institution’s lending programs.

Keep in mind that those activities might be classed under the community development test rather than the lending test. You indicated that you are regulated by FRB. We are OTS-regulated, and that's how they classified our program. FRB may see things differently.

Thanks for your input. I forgot to mention that we are the servicer of the loans (being refinanced and modified) which were sold to Freddie Mac when they were first originated. After I posted, I found the following which makes me think that our activities (loan modification efforts) should be reported under CD services, acting on behalf of Freddie Mac:

§ll.12(i)—3: What are examples of
community development services?
A3. Examples of community
development services include, but are
not limited to, the following:
• Providing foreclosure prevention
programs to low- or moderate-income
homeowners who are facing foreclosure
on their primary residence with the
objective of providing affordable,
sustainable, long-term loan
modifications and restructurings.

Sinatra - is your bank subject to the data collection requirement under HMDA? Even though we are an ISB and have the flexibility to report loans that would've classified as Small Business as CD loans, because we are a HMDA reporter, I think that loans reportable under HMDA must be reported as such and will continue to be evaluated under the Lending test. I'll have to research further. Any help would be appreciated. Thanks again!

Yes, we are a HMDA reporter, and HMDA loans are, of course, considered in the lending test.

But our foreclosure prevention initiatives were not HMDA-reportable, so OTS classed them under community development.

Sounds good! Since loan modifications won't be reportable under HMDA, I think that we will most likely receive positive consideration under the Community Development Test. I will be presenting it under the community development services component. Thank you so much! :-)