Oct 01

AHTCC Encourages Members to Weigh in on CRA

Community Reinvestment Act Comments Due October 13

The AHTCC encourages all member organizations to weigh in on the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation’s (FDIC) Notice of Proposed Rulemaking to amend the Community Reinvestment Act (CRA) regulations by the October 13 deadline, and has provided our survey results and other resources below to assist with drafting comments.

Under the proposal, banks with assets between $1.649 billion and $10 billion would no longer be subject to the investment test, which has been a powerful incentive for investment in the Housing Credit. More information about the proposed changes to CRA can be found on the AHTCC Regulatory Issues Resource Center. Notably, the Federal Reserve is not joining in the proposed rulemaking.

In response to the proposal, the AHTCC has conducted a survey to gauge the potential impact and has provided a CRA factsheet to support our members and industry partners in their advocacy efforts. The OCC and FDIC are accepting comments on the proposed rule through the Federal Register, and the AHTCC encourages all members to submit comments before the October 13 deadline.

The Importance of CRA for the Housing Credit

CRA is central to supporting Housing Credit demand. Banks provide roughly 75 to 80 percent of Housing Credit equity, and at least 71 percent is considered CRA-motivated. The CRA investment test in particular has helped create a deep, competitive, and efficient market for the Housing Credit, which is especially important in light of the recent historic expansion of the program as part of One Big, Beautiful Bill.

The Impact of the CRA Proposed Rule on Housing Credit Investment

Removing the investment test requirement for banks under the $10 billion threshold would remove an incentive for a significant number of banks to invest in the Housing Credit. In an AHTCC survey, at least 108 banks below the $10 billion threshold invested approximately $1.6 billion in Housing Credit equity over the five-year survey period. Extrapolating these results to the full Housing Credit market, banks under the $10 billion threshold invested approximately $2 billion in Housing Credit equity over those five years.

The Impact of the CRA Proposed Rule on Rural Areas

Banks under the $10 billion threshold play a particularly important role in financing affordable housing in rural communities. AHTCC survey data show that approximately one-third of Housing Credit equity investments from banks under $10 billion in assets supported rural markets, indicating that banks in this asset range play an outsized role in investing in rural communities. By comparison, 8.1 percent of Housing Credit equity in a CohnReznick industry-wide sample was invested in nonmetro counties, a proxy for rural and small-town markets.

CRA Rulemaking Provides Opportunity to Reiterate Request for Lower Housing Credit Risk Weighting in Basel III Rulemaking

In addition to CRA advocacy, the AHTCC continues to urge federal banking regulators to lower the risk weight of Housing Credit investments from 100 percent to 20 percent, and in no case more than 50 percent under new regulatory capital rules which are currently under development. In June, the AHTCC submitted comments to federal banking regulators on proposed Basel III capital rules and joined a coalition letter signed by 26 other affordable housing, banking, lending, and multifamily housing organizations, urging regulators to recognize the strong performance of Housing Credit investments. Especially in light of the CRA proposed rule, which could adversely impact demand for the Housing Credit, the AHTCC urges members advocate with the banking regulators and congressional allies for a lower risk weight for Housing Credit investments in order to increase investor demand for the program. Please use our resources below in your advocacy: