Community Reinvestment Act

Kevin Grace, Director of National Programs

Cheryl Brenn, Director of International Programs

2015 Training Institute 2

Agenda

• What is CRA• What CRA is not• CRA Enforcement

• How HOBY qualifies for CRA• How to get started

• Part 1• Part 2• Part 3

• Final Thoughts

What is CRA?

Community Reinvestment Act

2015 Training Institute 4

What is CRA?

• Community Reinvestment Act• Federal legislation intended to encourage depository

institutions (banks) to help meet the credit needs of the communities in which they operate.

• Targets low and moderate income neighborhoods• Very complex regulations enacted by Congress in 1977

(12 U.S.C. 2901)• Compliance closely monitored by regulators and

examiners• CRA was amended to include credit unions

2015 Training Institute 5

What is CRA? cont’d

Regulators check to make sure banks are meeting credit need of communities:• Are banking institutions extending credit to

low/moderate income neighborhoods in communities in which they serve?

• Are banking institutions supporting affordable housing, small businesses, community development projects, and consumer credit needs?

2015 Training Institute 6

What CRA is Not

• A regulation governing non-profits• A regulation requiring bank intuitions to give to

non-profits• A government program• A school scholarship program• Associated with HOBY cooperating

organizations

2015 Training Institute 7

CRA Enforcement

The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.

Why is this important to know?To be a trusted investment, HOBY sites that seek CRA funds will need to maintain their collected data and return any unused/unapplied funds.

How HOBY Qualifies for CRA

Community Reinvestment Act

2015 Training Institute 9

How HOBY qualifies for CRA

HOBY qualifies for CRA by meeting the Investment Test.

HOBY can identify schools in a given state that qualify under CRA standards based on criteria that federal regulators have suggested by providing scholarships to schools in low/moderate income neighborhoods.

Example: In California a school will qualify for direct sponsorship if it is either located in a low or moderate income Census Tract or the student population has at least 50% participation in the California State Meal Assistance Program.

This requirement differs from state to state. Check your state regulations.

All sponsorships for this CRA program will be earmarked and 100% of the funds will be directly applied to support the student attending the Leadership Seminar from the CRA qualified school. Therefore, 100% of a banks investment will qualify under CRA examination standards.

2015 Training Institute 10

How HOBY qualifies for CRA, cont’d

HOBY qualifies for CRA by meeting the Service Test.

There are two different ways for institutions to gain CRA credit on the Service Test:

1. In 1998, HOBY launched the Leadership for Service program as a component of the Leadership Seminars. The program is part of HOBY's commitment to the Presidents' Summit for America's Future. Through Leadership for Service, HOBY provides young people with the tools and training necessary to successfully complete 100 hours of volunteer service in their local communities. There is opportunity for the Sponsor to assist the student after they have attended the Leadership Seminar to help them identify community organizations to serve out their 100 hours of community service.

2. Additionally, part of the HOBY program is for students to take what they learned at the Leadership Seminar and go back to school and present a one-day CLeW workshop along the same lines to other students within their school. The Sponsor will be able to assist in offering their financial expertise on a panel as well as helping to coordinate the financial aspects of putting on the seminars.

How to get started

Community Reinvestment Act

2015 Training Institute 12

Part 1 – Qualifying the Schools for CRARefer to the CRA Step by Step Guide on HOBY Online to complete these tasks:

1) Create a database of schools2) Look at the regulatory sites below and find your local State offices that

can help give clear direction on how to qualify a school as low to moderate income for CRA purposes in your state.

www.ffiec.govwww.fdic.gov

www.bog.frb.fed.uswww.occ.treas.govwww.ots.treas.gov

3) Look up the Income Tract for the school’s neighborhood

4) Look up the school’s Free/Reduced Lunch Program participation %

5) Filter the results

2015 Training Institute 13

Part 2 – Finding the Banks and Credit Unions

Refer to the CRA Step by Step Guide on HOBY Online to complete these tasks:

1) Create a database of banks and credit unions in the HOBY Affiliate’s site / state.

2) Research each bank and credit union to determine which counties they do business in.

3) Research each bank and credit union to determine if the bank has a formal grant process

4) Filter the results to reveal which banks and credit unions will accept a written request.

Note: Large banks, such as Bank of America, will require a formal grant application to give CRA dollars to a qualifying organization.

2015 Training Institute 14

Part 3 – Organize the Mailing Materials

Review the CRA Templates on HOBY Online. All needed materials are included to complete a CRA mailing.

1) The Cover Letter – introduction to the bank

2) HOBY and CRA FAQs – confirms how HOBY meets the CRA tests

3) CRA Qualified Sponsorship Opportunities – suggests sponsorship levels

4) Additional information for Sponsorships – gives the CRA need by county

5) CRA School List – list of every CRA school by county

6) L4S Highlights – demonstrates a return on investment (optional)

Refer to the CRA Step by Step Guide to complete the above tasks.

2015 Training Institute 15

Final Thoughts

• While this seems like a lot of work, it can be shared between volunteers and simultaneously recorded in Google Drive

• Review the CRA Q & A on HOBY Online• Focus on Smaller and Regional banks.• Follow-up with the CRA officer at the bank.• Several states have CRA laws that are modeled on the federal law

and may carry additional requirements. Make sure to check with your state regulators on definitions for low/moderate income families.

• Nationally chartered financial institutions such as national banks are often exempt from state laws in which they have a branch if the state laws conflicts with the federal laws.

• Banks can use grants to comply with CRA laws and may require a formal grant application.