CRA

[dvoth at comp.uark.edu]

Thank you very much for the posting on the proposed revision of CRA. I
knew this would be coming, but I really didn't expect it to happen so soon.


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[wlm4 at cornell.edu (Will]

The National Credit Union Administration (NCUA) has announced an intent to
add a "service" component to the CAMEL examination ratings. There has also
been discussion about applying the Community Reinvestment Act (CRA) to
Credit Unions.

NCUA will look at four items:
1) Loan to share ratio. Makes sure a CU is lending out all its
deposits.
2) Market penetration. Makes sure a CU is agressive in serving all
potential members.
3) Rate Structure. Comparison with local financial institutions.
4) Cost/Benefit Analysis. Would assure that each service (and each
member) pays its way.

Likewise, CRA has some similar elements.
1) A reasonable loan-to- deposit ratio (with 60% deemed to be
reasonable), Examiners evaluate each bank's loan- to-deposit ratio, making
adjustments for seasonal variations, loans sold to the secondary market, and
various lending-related activities.
2) A good mix of loans. A good distribution of loans throughout the
bank's service area(s), look at the distribution of mortgage, small business
and small farm loans throughout a bank's service area(s). Banks have the
option to have their consumer lending counted. If they choose this option,
they have to collect and disclose some information about those loans.
3) The absence of bona fide complaints from the community about its
CRA performance, The criterion dealing with complaints from the community
was modified to focus instead on the bank's record of taking action in
response to any complaints.
4) The lack of evidence of fair lending violations. Market share
analysis, which would have evaluated whether or not a lender was being as
aggressive in doing business in low and moderate income communities as in
upper income neighborhoods within its service area(s)
5) Loans for affordable housing or community economic development
needs that are not being met by the private market and that primarily
benefit low and moderate income people or small businesses/farms. Loans for
multi-family housing are considered so important that they can be counted
twice, once as regular loans and once as community development loans
6) Investment primarily benefit low and moderate income people or
small businesses or small farms.
7) Service. percentage of its branches that were located in or
accessible to low and moderate income communities. Adjustments to that
score would have been made based on the types of retail banking services
made available to low and moderate income communities, and the non-credit
services it provided that supported community development efforts (such as
homeownership counseling and technical assistance to small businesses).
applied in the context of the markets being served and the particular
characteristics of the bank. The agencies will compile a community
assessment based on demographic data on the bank's service area(s) (median
income, housing costs, etc.); the examiner's assessment of local credit
needs; the bank's products, business strategy, capacity and constraints; its
past performance and performance of similarly-situated lenders; information
in its public file; and any other information the examiner deems relevant.
8) Data Collection and Public Disclosure. minority and women-owned
small businesses.
Strategic plans may now be approved for up to five years, although annual
measurable performance goals are required. Public participation, both
informal and formal, is required

It's a comparative disadvantage that Banks alone have to comply with CRA.
Could there come a time when all financial intermediaries (Banks, Credit
Unions, Insurance Companies, Mortgage Brokers, Loan Funds, ETC) have to be
accountable for their use of public funds? In light of this interest, what
is it that we as practitioners measure when we are trying to see if we are
doing our job?


************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********



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[RGWhitt1 at aol.com]

Please Cancel My Involvement With This Mailing List


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