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OCC issues CRA FAQs
On February 22, the OCC issued Bulletin 2022-4 announcing responses to frequently asked questions (FAQs) regarding the December 2021 final rule rescinding the OCC’s Community Reinvestment Act (CRA) rule issued in June 2020. (The December 2021 final rule was covered by InfoBytes here.) According to the OCC, highlights of the FAQs include providing general information regarding the final rule, and addressing inquires related to, among other things: (i) the impact of the final rule on CRA bank type; (ii) qualifying activities and the qualifying activity confirmation request system; (iii) the transition period; (vi) examination administration; and (v) assessment areas.
Hsu predicts CRA proposal in “not-too-distant” future
On February 14, acting Comptroller of the Currency Michael J. Hsu announced that the OCC, Federal Reserve Board, and the FDIC plan to release a joint notice of proposed rulemaking for strengthening and modernizing the Community Reinvestment Act (CRA) in the “not-too-distant future.” Speaking before the National Community Reinvestment Coalition, Hsu stressed the importance of expanding financial access and inclusion for low- and moderate-income (LMI) communities, and explained that while banks have made substantial CRA investments in these communities, “significant disparities continue to exist in many LMI areas and are most prevalent for Black, Hispanic, and Native American communities and borrowers across our nation.” As previously covered by InfoBytes, the OCC’s 2020 final rule to modernize the CRA was formally rescinded in December to facilitate ongoing interagency work. Stating that the Fed’s September 2020 Advance Notice of Proposed Rulemaking on CRA modernization (covered by InfoBytes here) has served as the “basic framework” for current interagency discussions, Hsu outlined several overarching objectives including: (i) increasing levels of CRA activity to help persistent disparities, particularly in LMI communities, “to ensure that banks are engaging with and being responsive to local stakeholders and the local needs of LMI communities, not just applying one-size fits all solutions”; (ii) increasing “the clarity, consistency, and transparency” of CRA supervisory expectations and standards regarding eligible CRA activities and how these activities are evaluated and assessed; and (iii) updating “CRA standards to reflect changes in the business of banking, in particular the increased use of mobile and internet delivery channels”—a business model, Hsu noted, that did not exist when the regulators last updated the CRA regulations. Pointing out that trends and studies have shown that it is insufficient to evaluate a bank’s CRA performance solely on a branch-based model, as banks are increasingly closing branches and focusing on online and mobile banking, Hsu stressed the need to broaden regulators’ evaluation of banks’ CRA performance “to more appropriately reflect the communities the banks serve” in order to fulfill the CRA’s core mission.
OCC looks at compliance with state laws in CRA evaluations
On February 2, the OCC issued Bulletin 2022-2 addressing the agency’s processes for considering state banking commissioner input related to the performance of national banks under state community reinvestment laws, as well as state consumer complaint referrals. Among other things, the Bulletin outlines OCC policy and procedures for considering state input on the community reinvestment performance of OCC-supervised banks, including the implementation of Riegle–Neal Interstate Banking and Branching Efficiency Act community reinvestment-related provisions. Noting that several states and the District of Columbia have adopted community reinvestment laws that are similar to the federal Community Reinvestment Act (CRA), the OCC states that it will consider input from state banking commissioners regarding a national bank’s performance under applicable state community reinvestment laws when evaluating the bank’s CRA performance. The Bulletin also provides general guidance related to the OCC’s expectations concerning the handling of consumer complaints that state officials refer to national banks and federal savings associations, as well as state referrals of complaints to the OCC. The Bulletin “reminds banks that the OCC’s exclusive visitorial authority is not a basis for declining to address consumer complaints referred by state or local officials,” and “encourages banks to explain to state officials how complaints were resolved but without compromising consumers’ privacy interests or other confidential information.” Additionally, state officials are encouraged to refer to the OCC complaints alleging violations of federal fair lending laws or illegal, predatory, unfair, or deceptive acts or practices.
Bulletin 2022-2 rescinds OCC Advisory Letters 99-1 and 2004-2.
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.
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 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.
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.
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.
OCC releases bank supervision operating plan for FY 2022
On October 15, the OCC’s Committee on Bank Supervision released its bank supervision operating plan for fiscal year 2022. The plan outlines the agency’s supervision priorities and highlights several supervisory focus areas including: (i) strategic and operational planning; (ii) credit risk management, including allowances for loan and lease losses and credit losses; (iii) cybersecurity and operational resiliency; (iv) third-party oversight; (v) Bank Secrecy Act/anti-money laundering compliance; (vi) consumer compliance management systems and fair lending risk assessments; (vii) Community Reinvestment Act performance; (viii) LIBOR phase-out preparations; (ix) payment systems products and services; (x) fintech partnerships involving potential cryptocurrency-related activities and other services; and (xi) climate-change risk management. The plan will be used by OCC staff members to guide the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and technology service providers.
The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes has previously covered.