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The Disastrous New CRA Rule: Part IV – Is the 80% Retail Lending Assessment Area Exemption Really a Break for Large Banks?

Dear Banker, The new CRA Rule contains a "break" for Large banks that would exempt them from having to declare Retail Lending Assessment Areas ("RLAAs") for any calendar year in which the bank lends more than 80% of its home mortgages, multifamily loans, small business loans, small farm loans, and automobile loans (if auto loans […]

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The Disastrous New CRA: Part III – It’s worse than you think and which banks are hurt the most

In Parts I and II I explained the devastating impact of the new CRA Rule and what the underlying reasons for that adverse impact are. In Part III I will touch upon what banks are most significantly impacted by the new Rule. If you are wondering about who gets affected the most by the new […]

New CRA Rule is a Disaster for Banks Part II: Key Regulator says Goal was “to raise the bar for CRA performance”

In my previous email I explained the devastating impact of the new CRA Rule on the percentage of banks receiving a less than satisfactory CRA Performance Rating. The data in Table 32 within the new Rule demonstrate that if the Rule had been applied from 2018-2020 there would be nearly a 900% increase in the […]

New CRA Rule is a Disaster for Banks: Part I – And the Numbers Prove it!

With all the news stories circulating about the new CRA Rule, it's surprising that not one article has addressed the topic that should be the biggest story of all - the catastrophic implications for banks! What I am referring to is the dramatic increase in the CRA exam failure rate that can be expected as […]

What is statistical significance and how is it applied to “Redlining” for banks?

Many bankers hear the term “Statistical Significance” but don’t know what it means and how it is relevant to potential fair lending violations. Typically, when an examiner is evaluating if a bank is redlining, they will calculate a lender’s penetration rate in majority-minority tracts (or a variation thereof) and compare the lender’s MM tract penetration […]

Section 1071 Q&As post twenty five

To determine the size of the small business do we include the entire relationship or just the information for the individual loan? It would be based on the GAR of the borrower and aﬃliates if borrower elects to provide that information (but it is not required, and lender may ignore aﬃliate GAR) Do you know […]

Section 1071 Q&As post twenty four

Will CRA Large Banks still need to report their loan data after this regulation take eﬀect? It is reporting small business image likely that CRA reporting would continue during the transition period. But after that (beginning in 2026) small business and small farm loans under CRA will likely be discontinued being reported under CRA. I […]

Section 1071 Q&As post twenty two

Do loan applications and originations for natural persons (individual, DBA, or sole proprietorship) count as a covered application or covered transaction?

Section 1071 Q&As post twenty one

I do regulatory reporting for a bank as well as their loan loss reserve. Will this affect the allowance calculation?I do regulatory reporting for a bank as well as their loan loss reserve. Will this affect the allowance calculation? No. Suggestions for risks to include in our initial risk assessment? Reporting loans and collecting PDI […]

Section 1071 Q&As post twenty

The definition of a small business loan based on revenues and loan size. And how does that differ from the definition of a CRA small business loan? Thank you. Loan size will not be relevant under 1071 unlike CRA where it is determinative. Under CRA you could make a $1 million loan to Walmart and […]

Section 1071 Q&As post nineteen

If the owners of a minority owned business are not minority individuals, then how do we define a minority owned business? The key to your question is to understand that the Bureau has introduced “control” as an alternative to ownership. They define control on page 817 as: The determination of the “status” (minority-owned, etc.) is […]

Section 1071 Q&As post eighteen

To be clear, 1071 is replacing CRA reporting or is it in conjunction with CRA reporting? The small business data collected under 1071 will replace small business and small farm data collected under CRA after 1071 is completely phased in. Community Development activity will continue to be reported under CRA as indicated in the 2022 […]

Section 1071 Q&As post seventeen

I'm confused. You have to ask if LGBTQ+ but you can't ask about the ownership of the business to determine if there is a principal owner? You must ask if there are any principal owners and if so, you must ask them the race, sex, and ethnicity questions, but only about principals who under 10171 […]

Section 1071 Q&As post fifteen

If the affiliate GAR and the non-affiliate GAR combined exceeds $5 million, would that loan no longer be a covered transaction? Would it be permissible to consider both when considering applicability but only report one? No, you never count the GAR of a business that’s not affiliated with the borrower. If the business is affiliated […]

Section 1071 Q&As post fourteen

If you are a HMDA reporter, you also need to determine almost immediately if the application is a HMDA reportable application or an application for 1071 so you know what to collect for demographic data from the applicant. You are correct if I understand your question. That’s one of the main points I was making […]

Section 1071 Q&As post twelve

Are all leases exempt? We finance leases but we are not the lessee Leases are exempt. Exactly how are you structuring the financing of leases? However, if you were to extend a loan to a business such as an automobile leasing company, and the loans were to be secured by the leases, we believe that […]

Section 1071 Q&As post eleven

Where are you getting that this is applicable to CRA? 2022 NPR says 1071 data will replace CRA small business and small farm loan data. Does this mean that Participations are excluded and considered not a covered transaction? Yes - Credit transaction purchases, purchases of an interest in a pool of credit transactions, and purchases […]

Section 1071 Q&As post ten

Can you discuss in more detail what is meant by consumer designated credit? Consumer-designated credit. The term “covered credit transaction” does not include consumer-designated credit that is used for business or agricultural purposes. A transaction qualifies as consumer-designated credit if the financial institution offers or extends the credit primarily for personal, family, or household purposes. […]

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