OCC and FDIC Propose Major Changes to CRA Bank Designations

So much for a sleepy August.  As we have previously reported, the FDIC and OCC are preparing to publish a Notice of Proposed Rulemaking (NPR) in the Federal Register that would change the designation of banks across the country. 

The proposal would define “small bank” as a bank with less than $1 billion in total assets, reflecting an increase from the current small bank asset threshold of less than $412 million. Small banks would retain a lending test. 

The proposal would replace the “intermediate small bank” category with a new “intermediate bank” category for banks with between $1 billion and $10 billion in assets, reflecting an increase from the current intermediate small bank threshold range of $412 million to $1.649 billion.

Intermediate banks would no longer have an investment test but would have a lending and Community Development test.  The proposal also shifts the weighting of exams to allow lending to outweigh community development. Here is an excellent overview produced by our friends at NAAHL.   

To get a better idea of the potential impact the proposed rule could have on investment in LIHTC, our colleagues at the AHTCC have developed a syndicator survey. All responses to the survey will remain private, and only the statistical analysis will be used as the industry prepares its responses to the proposal rule changes. If you would like to help by filling out the survey, please do so and return to dgasson@housingadvisorygroup.org.    

Ultimately, our concerns center on fewer banks being required to participate in community development activities (LIHTC) and those that maintain the community development test choosing to instead increase their lending activity to satisfy their CRA requirements. As of the distribution of this update, the regulators have yet to file the NPR in the Federal Register.  Once this occurs, the 60-day clock begins for public comment. We will provide you with data and materials to use for your comments. 

On a brighter note, before leaving Washington for the August work period, the Senate passed a continuing resolution funding the government through December 11.  Included in the CR was language that would allow the administration to repurpose unobligated funds within the Housing Choice Voucher Program to cover rental assistance and extend availability of some expiring homeless assistance grants. Similar language was included in the House CR, which they passed before leaving town earlier in August.  The House CR extended funding through December 4. 

The House and Senate will have to reconcile their two CR’s when they return to Washington after the August recess.  There are some significant differences in the two CRs, as the House carried a number of Administration requests on defense funding, how and by whom federal grants would be approved, and the potential for funding border patrol activities.   

In the end, the goal of avoiding a government shutdown is more attainable with the early passage of the two bills. Everyone’s hope is that the House and Senate can come to an agreement on funding and push the debate into December.