AHTCC Submits Comments on CRA Reform
Today the AHTCC submitted comments to the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) in response to the regulators’ proposed Community Reinvestment Act (CRA) reforms. Above all, the AHTCC urges that any changes to CRA preserve the incentive it provides for investment in the Housing Credit, and maintain our current ability to produce homes that are affordable to low-income households.
“While the Housing Credit finances virtually all affordable housing, CRA motivates the vast majority of these investments – making the Housing Credit’s success closely tied to CRA. An estimated 73 percent of Housing Credit investment comes from banks motivated by CRA requirements, meaning any changes to CRA could have significant effects on investment in the Housing Credit – and ultimately on our ability to build and preserve affordable housing,” the letter states.
“Certain changes to CRA could have an especially significant impact when our ability to build and preserve affordable housing is already facing significant disruptions as a result of the current COVID-19 crisis… The comments and recommendations we have [provided] are intended to support the provision of affordable housing to the low- and moderate-income people and communities that the CRA is designed to serve, at a time when it is needed more than ever.”The AHTCC thanks the CRA Working Group, led by Matt Josephs, First Vice President of the AHTCC and Senior Vice President of the Local Initiatives Support Corporation, and the representatives of 40 participating organizations, for their input in developing this response.
The AHTCC urges all affordable housing stakeholders to comment on the OCC and FDIC’s proposal by the deadline of Wednesday, April 8.
The AHTCC’s Recommendations
The AHTCC’s primary concerns with the proposed rule are that:
- The elimination of the separate investment test, and the shift to a ratio evaluation approach in which many more types of activities qualify for CRA credit, could make Housing Credit investments a much less appealing way of meeting CRA obligations relative to other easier options – impacting pricing and production,
- The list of activities that qualify for CRA credit in the community development category is too expansive, encouraging banks to meet obligations with lower-impact investments,
- The baseline metrics lack underpinning data and may not be robust,
- Examining only balance sheets, and not originations, could allow banks to meet targets based on current balance sheet assessment and limit or halt new investment activity, and
- The proposed approach to modernizing assessment areas may not address the issue of concentrations of CRA activity in areas where it is not as needed.
The AHTCC urges the OCC and FDIC to consider the following recommendations, which would alter the proposed evaluation methodology, thresholds, and treatment of assessment areas to ensure that Housing Credit investment is not subsequently decreased. These recommendations are further described in our comment letter.
Support community development through the CRA evaluation methodology:
- Revise the list of activities that qualify under the community development test.
- Require a minimum level of activity in the three activity categories which receive double weighting under the proposal (investments, loans to community development financial institutions [CDFIs], and loans to affordable housing).
- Provide further guidance on the performance context review of community development activities.
Set community development thresholds that meet community needs:
- Utilize bank-provided data and re-publish a proposed rule that outlines the methodology used to determine the community development thresholds.
Evaluate banks’ consistent support of low-income households:
- Consider originations of loans or investments in affordable housing in addition to balance sheet activity or factor decreases in originations into the evaluation methodology
- Provide credit for the full amount of community development investments at the time of commitment.
Incentivize proven community development tools where they are needed most:
- Allow those activities which receive double weighting under the proposal (investments, loans to CDFIs, and loans to affordable housing) across a state be eligible for CRA credit if the bank has an assessment area within the state and received a satisfactory rating in the previous rating period.
Submitting Your Own Comments
The AHTCC urges all affordable housing stakeholders to comment on the OCC and FDIC’s proposal by the deadline of Wednesday, April 8.
To assist in developing your own comments, please utilize our comments in any way that is helpful. Providing the OCC and FDIC with unified recommendations will strengthen the overarching message that the CRA must continue to strongly incentivize investment in the Housing Credit. For more information, please see our comment letter. If you have any additional questions, please contact Emily Cadik.
Submitting Comments to the OCC:
Submitting Comments to the FDIC:
- Include “FDIC” as the agency name and the identifier “RIN 3064-AF22” in your comments
- Email comments through this link with the subject: “January 09, 2020 – Community Reinvestment Act Regulations; Notice of Proposed Rulemaking; Comment Request (RIN 3064-AF22)”
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