MReport February 2020

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58 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Regulators Split on Community Lending Standards The Fed's Governor said a new standard by other banking regulators would fail to account for differences across communities. A n official with the U.S. Federal Re- serve said this week that bank regulators should pursue a more nuanced approval to updating the com- munity lending standards for banks, according to Reuters. Lael Brainard, Fed Governor, said that a new standard proposed by other U.S. banking regulators would fail to account for differ- ences across communities across the nation. Brainard added the regulators should apply an ad- ditional test to larger banks. Reuters states the regulators are trying to update rules in the 1977 Community Reinvestment Act, which requires regulators to assess how well banks are serving the needs of lower-income areas. The rules were last updated in 1995. The Fed shares responsibil- ity for enforcing the Community Reinvestment Act with two other regulators: the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. According to Reuters, those two regulators proposed a rule update in December without the U.S. cen- tral bank's support, which would establish a uniform standard to evaluate a banks' effort to support lower-income communities. Brainard, however, is against a broad-based approved, saying it failed to capture differences in communities with different amounts of lower-income families. "Any comprehensive and uni- form metric does have the risk of unintended consequences (and) of not being responsive to local com- munity needs," she said at an event in Washington. She added the Fed is not feeling the same pressure to ultimately get all three agencies to agree on a consistent rule. "It's extremely important to eventually find common ground," she said. "It is so much more important, in my view, to get this done right than to get it done fast." According to the Fed, the agen- cy supervises members banks for compliance with the Community Reinvestment Act. To achieve this, the Fed: • Examines state member banks to evaluate and rate their per- formance under the CRA; • Considers banks' CRA performance in context with other supervisory information analyzing applications for merg- ers, acquisitions, and branch openings; and • Shares information about com- munity development techniques with bankers and the public. "Any comprehensive and uniform metric does have the risk of unintended consequences (and) of not being responsive to local community needs." —Lael Brainard, Fed Governor

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