On June 17, the four federal bank and thrift regulatory agencies announced a proposed change to the Community Reinvestment Act (CRA) regulations to support stabilization of communities affected by high foreclosure levels. The proposed change specifically would encourage depository institutions to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD). Specifically, the agencies propose to revise the term “community development” to include loans, investments and services by financial institutions that support, enable or facilitate projects or activities that meet the criteria described in Section 2301(c)(3) of the Housing and Economic Recovery Act of 2008 (HERA) and are conducted in designated target areas identified in plans approved by HUD under the NSP, established pursuant to the HERA and the American Recovery and Reinvestment Act of 2009. The proposed rule would provide favorable CRA consideration to such activities that, pursuant to the requirements of the program, benefit low-, moderate-, and middle-income individuals and geographies in designated target areas.
Under the NSP, HUD has provided funds to state and local governments and nonprofit organizations for the purchase and redevelopment of abandoned and foreclosed properties. The agencies’ proposal would encourage depository institutions to make loans and investments and provide services to support NSP activities in areas with HUD-approved plans. The proposal would supplement existing CRA consideration for community development activities, including neighborhood stabilization activities. For example, for NSP areas identified in HUD-approved plans, the agencies would provide CRA consideration for activities that benefit individuals with incomes of up to 120% of the area median and geographies with median incomes of up to 120% of the area median. NSP-eligible activities would receive favorable consideration under the new rule only if conducted within two years after the date when NSP program funds are required to be spent.
Comments on the proposed rule must be submitted no later than 30 days from the date of its publication in the Federal Register, which is expected shortly.
Separately, the agencies also announced today they will hold four hearings to consider public comment on all aspects of the CRA regulations during the summer of 2010.