FRB: Application filing information - Community Reinvestment Act (CRA) and the Applications Process

When the Federal Reserve System (FRS) accepts an application for which a financial institution's CRA record must be taken into consideration, the institution's most recent CRA performance evaluation and rating is a particularly important and often a controlling factor in the consideration of an institution's record of meeting the credit needs of its community because it represents a detailed, on-site evaluation of that institution by its federal supervisory agency. A financial institution’s record of CRA performance may be the basis for denying or conditioning approval of an application.

In evaluating an application, FRS staff determine whether depository institutions affiliated with the applicant and target in the proposed transaction have satisfactory or better consumer compliance and CRA ratings. FRS staff conduct independent reviews of CRA and compliance performance when the financial institution(s) involved in an application have less than satisfactory CRA or compliance ratings or when the FRS receives comments or protests from interested parties on CRA or compliance grounds.

Although applications are evaluated on a case-by-case basis, FRS staff commonly analyze and review the following information in conjunction with the institutions' CRA performance:

CRA and compliance examination reports;
CRA record of lending to small businesses and small farms as well as Home Mortgage Disclosure Act (HMDA) data reported by the financial institution;
Recent actions taken to improve CRA and/or compliance performance weaknesses;
Enforcement actions, and/or any identified fair lending referrals or investigations pending by the Department of Justice, Department of Housing and Urban Development, or Federal Trade Commission;
Comments submitted by interested parties and the financial institution’s response to those comments; and,
Any additional information FRS staff has requested from the applicant that is considered necessary to complete the record or to address concerns raised by the public.

Following completion of the record, FRS staff review all the relevant information received in connection with the application. This review focuses on the financial institution’s CRA record of lending in low- and moderate-income (LMI) areas and to LMI applicants within the financial institution’s assessment areas. Although an applicant's lending in its entire assessment area is generally reviewed, FRS staff members will typically focus their scrutiny on issues raised in public comments received in connection with the application. HMDA data may also be reviewed to shed additional light on an institution's lending to LMI and minority areas and individuals. Specifically, an institution's home mortgage lending is compared with the overall aggregate lending within a specific geographic area. FRS staff evaluate additional factors that may influence an institution's lending in a particular area, including, but not limited to, the lending products offered by the institution, demographic characteristics of a geographic area, and competition within the institution's market. The FRS acts on an application based on the financial institution’s CRA and compliance record as a whole, and in light of public comments received in connection with an application.

The Opportunity for Public Input

An important aspect of the applications process is the opportunity for the public to comment in writing on any or all of the factors the FRS must consider in evaluating an application--including the applicant's CRA performance. In some instances, public comments provide insight to a financial institution’s CRA performance. Written comments received from the public, which may express either support for or opposition to the application, are reviewed by FRS staff, sent to the applicant financial institution, and included as part of the public record that the FRS carefully examines in the evaluation of an application.

Submitting a Comment on an Application

Public comments may be submitted in connection with an application currently under review by the FRS. Comments need not be submitted in any particular format; however, they should be supported with facts about the applicant's performance and should be as specific as possible in explaining the basis for the comment. The FRS maintains a list (H.2A) of applications and notices that have been filed or will be filed shortly with the FRS under the Bank Holding Company Act or the Change in Bank Control Act. The list briefly describes the proposal, identifies the Reserve Bank that is processing the proposal, and lists the date for the expiration of the Federal Register comment period. Public comments can be sent to the appropriate Federal Reserve Bank identified in the list, or to the Federal Reserve Board. Contact information and addresses are provided at the end of the listing.