The Community Reinvestment Act (CRA) remains a driving force behind private sector investment in underserved communities, including Cinnaire’s work to raise capital through equity investments and lending. The CRA has fundamentally been successful at increasing the level of bank activity that serves low- to moderate-income (LMI) communities and has been essential to the success of the Low Income Housing Tax Credit program, the New Markets Tax Credit program, and the growth of CDFI activities and partnerships in underserved communities.
Given the importance of CRA to our communities, last week we submitted a comment letter in response to the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), and the Federal Deposit Insurance Corporation (FDIC) joint Notice of Proposed Rulemaking (NPR) to strengthen and modernize the CRA regulatory framework. The proposed rule provides some long overdue updates to the rules of the road for CRA investment, which have not been changed since 1995. In the proposed rule, the regulators aim to create more standard evaluations of banks’ performance, update where activities will count for credit, and provide more clarity on what activities count. Of note for our work, the regulators made clear that the Housing Credit and CDFI activities will be eligible, noting their clear impact.
At the same time, some elements of the proposed rule have caused concern in the affordable housing and community development industries, including the elimination of the current separate investment test. In our letter, we recommend that regulators retain a separate investment test or provide strong mitigating factors to ensure a robust level of investment in tax credit programs and CDFI lending. We also endorsed an even weighting for the proposed Retail and Community Development tests, called for regulators to address abuses in the Housing Credit program, and called for other improvements.