Alert March 16, 2010

Federal Banking Agencies Revise CRA Guidance to Allow Pro Rata Credit for Mixed-Income Housing

The FDIC, FRB, OCC, and OTS (the “Agencies”) published revisions to the Interagency Questions and Answers Regarding Community Reinvestment (“Q&As”).  After considering comments received, the Agencies adopted one new and two revised Q&As that were proposed on January 6, 2009.  The new Q&A provides examples of how to demonstrate that community development services meet the criteria of serving low- and moderate-income areas and people when actual income is not available.  The two revised Q&As enable consideration of a pro rata share of mixed-income affordable housing projects as community development projects.  The first revised Q&A addresses when an activity can be considered to have a “primary purpose” of community development.  Activities related to the provision of mixed-income housing—such as a development that has an affordable housing set-aside for low- and moderate-income individuals—would be considered community development activities, and an institution may receive pro rata consideration for the dollar amount of the loan or investment based on the percent of units set aside for affordable housing for low- or moderate-income individuals.  (As in the past, when the express, bona fide intent of an activity is community development, such as for the Low-income Housing Tax Credit Program, the full amount will be considered.)  The second revised Q&A adjusts reporting requirements for community development loans to address the percentage of units set aside for low- or moderate-income individuals.  Separately, the Agencies declined to adopt a recommendation that banks receive favorable consideration for providing financial literacy education to primary – and secondary – school students.