Community Reinvestment Act Covid-19

GeoDataVision continues to receive significant numbers of questions regarding the Community Reinvestment Act ("CRA") and the impact of Covid-19. The prudential banking regulators have published several documents on the topic. In this email and in some subsequent emails we will address some of those questions/issues.

Question: For the purposes of recognizing certain "revitalization and stabilization" activities for "community development" credit the Community Reinvestment Act recognizes some census tracts as "designated disaster areas" as published by FEMA. The Federal Emergency Management Agency ("FEMA") has issued major disaster declarations that include the entire country. Does that mean any and all activity in any census tract potentially qualifies for recognition under the "revitalization/stabilization" definition of community development?

Answer: Typically activities that attract or retain people or businesses to a designated disaster area will qualify for potential recognition under the revitalization/stabilization definition of community development under CRA. However, there is an important qualifier. Disaster Areas identified for Category A or Category B assistance are not considered (for CRA purposes) as "designated disaster areas". The Covid-19 major disaster declaration identifies the affected areas (all the USA) as qualified for Category B assistance. This category of assistance is considered to be of "temporary" nature and therefore would not ordinarily qualify for CRA purposes as designated disaster areas in which revitalization/stabilization activities would be recognized for community development qualification. However, the agencies have issued a Q&A that addresses this topic and creates a carefully defined exception for the Covid-19 disaster declaration. In that Q&A the agencies state, "The agencies believe that the Coronavirus Disease (COVID-19) national emergency raises unique needs for revitalisation and stabilization activities that differ from those typically undertaken in response to natural disasters or other emergencies . . . therefore, the agencies will grant consideration for activities that revitalize or stabilize these areas by protecting public health and safety, particularly for low- or moderate-income individuals, low- or moderate-income geographies, or distressed or underserved nonmetropolitan middle-income geographies".

Notice that the Covid-19 exception from the normal disqualification for Category B assistance for designated disaster areas is related to revitalizing or stabilizing affected areas by protecting public health and safety. Moreover, the agencies will give particular credit for such protective activity "for low- or moderate-income individuals, low- or moderate-income geographies, or distressed or underserved nonmetropolitan middle-income geographies."

To qualify for the Covid-19 exemption from the normal Category B limitation (for CRA purposes), activity that protects public health and safety therefore is essential for CD consideration under the revitalization/stabilization definition. Of course all revitalization/stabilization activity in low- or moderate-income tracts and distressed and underserved areas or other areas designated as disaster areas not limited to Category A or Category B assistance continues to potentially qualify without the need for the Covid-19 exemption. But if you are looking to get credit for revitalization/stabilization activity under the Covid-19 exemption for a designated disaster area the activity must protect public health and safety.

Don't forget the other 3 definitions of community development under CRA are not related to where the activity takes place (except it should be inside your assessment areas). So you can receive community development credit no matter the tract income classification or disaster area designation for all community development activities that promote affordable housing, community services, or economic development. It's only for revitalization/stabilization activity that tract income class, distressed or underserved status or disaster area designation matters .

- More to come in my next email on the Payroll Protection Plan loans and how they can potentially impact CRA performance ratings

Stay healthy!