A
These are activities that help to attract and retain businesses and residents. An activity is presumed to revitalize or stabilize a low- or moderate-income geography if the activity has been approved by the governing board of an Enterprise Community or Empowerment Zone (designated pursuant to 26 U.S.C. § 1391) and is consistent with the board’s strategic plan is presumed to be an activity that revitalizes or stabilizes a low- or moderate-income geography . There is the same presumption if the activity has received similar official designation as consistent with a federal, state, local or tribal government plan for the revitalization or stabilization of the geography. To determine whether other activities revitalize or stabilize a low- or moderate-income geography, the activity’s actual impact on the geography, if information about this is available, is evaluated. If no information is available, then the evaluation is determined by whether the activity is consistent with the community’s formal or informal plans for the revitalization and stabilization of the low- or moderate-income geography.
Some loans may provide only indirect or short-term benefits to low- or moderate-income individuals in a low- or moderate-income geography. These loans are not considered to have a community development purpose.
Activities that Revitalize or Stabilize a Low- or Moderate-Income Geography:
Affiliate: Any company that controls, is controlled by, or is under common control with, another company.
Affordable Housing: Generally defined as housing units for which the occupants pay no more than 30 percent of their gross incomes. Housing costs that exceed 30 percent are considered to be excessive cost burdens, and costs that exceed 50 percent are considered severe cost burdens.
Area Median Income: (1) The median family income for the MSA, if a person or geography
is located in an MSA, or for the metropolitan division, if a person or
geography is located in an MSA that has been subdivided into metropolitan divisions; or (2) The statewide nonmetropolitan median family income, if a person
or geography is located outside an MSA.
Assessment Area: One or more of the geographic areas delineated by the bank and used by the regulatory agency to assess an institution’s record of CRA performance in accordance with Sec. 228.41. See Regulation BB, section 228.41 for requirements.
B
Bank Branch: One or more of the geographic areas delineated by the bank and used by the regulatory agency to assess an institution’s record of CRA performance in accordance with Sec. 228.41. See Regulation BB, section 228.41 for requirements. Any branch bank, branch office, branch agency, additional office, or any branch place of business at which deposits are received, checks are paid or money is lent. The term does not include automated teller machines or other automated, unstaffed banking facilities.
Bank -Owned Community Development Corporation (CDC): A corporation, either for-profit or nonprofit, that is capitalized by one or more banks for the purpose of making debt and/or equity investments in projects that promote community and economic development, including affordable housing. The corporation can be a wholly owned subsidiary of an individual bank or bank holding company, or a shared ownership corporation among several banks, other financial institutions, community organizations, and public and private investors.
Beige Book: Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by district and sector.
Board of Governors of the Federal Reserve System (The Board) (FRS) (The Fed): One of the four federal banking regulatory agencies, along with the FDIC, OCC and OTS. The Board and the 12 regional Federal Reserve Banks regulate state-chartered banks that are members of the Federal Reserve System.
Borrower Distribution: The distribution of home mortgage or consumer loans among borrowers of different income levels: low, moderate, middle, and upper. Also, the distribution of small business or small farm loans by loan size and entity size.
Branch: A staffed banking facility approved as a branch, whether shared or unshared, including, for example, a mini-branch in a grocery store or a branch operated in conjunction with any other local business or nonprofit organization. LPOs and other offices are not “branches” unless they are authorized as branches of the institution through the regulatory approval process of the institution’s supervisory agency.
Brownfields: Abandoned, idled, or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination.
Brownfields Redevelopment Initiative (BRI): A General Services Administration initiative to address the financial and legal risks of cleaning up and redeveloping brownfields.
Business Improvement District (BID): A BID is an organization of property owners in a commercial district that taxes itself to raise money for neighborhood improvement and promotion. BID activities often include clean-ups and crime control, marketing campaigns and lobbying efforts.
Business Incubator: A facility that provides assistance, such as below-market rents, shared services and technical assistance, to new businesses. Tenants typically include manufacturing, service and technology firms. Sponsors may be private developers, community-based organizations, public agencies or universities.
C
Call Report: Consolidated Reports of Condition and Income, filed quarterly by all national and state-chartered banks, as required by the Federal Financial Institution Examination Council (FFIEC). Federally insured savings institutions file Thrift Financial Reports (TFR) on a quarterly basis, as required by the Office of Thrift Supervision.
Capacity Building: Term used in community development industry to mean increasing the ability of a community or an organization to accomplish its goals.
Census Tract: Small, relatively permanent statistical subdivisions of a county. Census tracts usually have between 1,000 and 8,000 persons and, when first delineated, are designed to be homogeneous with respect to population characteristics, economic status, and living conditions. Census tracts do not cross county boundaries. The spacial size of census tracts varies widely, depending on the density of settlement.
Certified Community Development Entity: See Community Development Entity . Certification as a Community Development Entity (CDE) allows organizations to participate, directly or indirectly, in the New Markets Tax Credit program. If an organization is certified as a community development financial institution (CDFI) or a Specialized Small Business Investment Corporation(SSBIC) , it may automatically qualify as a CDE. (See CDFI and SSBIC)
Certified Community Development Financial Institution: Community Development Financial Institution certified by the CDFI Fund of the U.S. Treasury to participate in CDFI Fund programs. (See CDFI and CDFI Fund)
Certified Development Company (504 Corp.): A nonprofit corporation that provides growing small businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings guaranteed by the Small Business Administration (SBA) . These companies cover specific geographic areas and work with the SBA and private-sector lenders. (See SBA)
CHAT: CHAT - CRA/HMDA Analysis Tool (See CHAT Reports)
CHAT Reports: Institution-specific reports generated by Federal Reserve Banks using information about an institution’s assessment area, and HMDA- and CRA-reportable loan data. CRA/HMDA Analysis Tool (CHAT) reports are uniform in layout and help examiners to sample, map and analyze an institution’s lending performance. The reports also include demographic data that is used to analyze CRA performance.
Co-Housing: A hybrid form of housing that combines private and communal forms of living. Residents occupy individual housing units and share additional kitchen, dining and recreational facilities with other residents. Ownership and design may take a variety of forms. A limited-equity cooperative is a common form of urban co-housing.
Community Action Agency (CAA) : A publicly and privately funded agency that provides social support and self-sufficiency services to lower-income community residents. Services may include subsidized day care, development, and management of affordable housing and employment training.
Community Contact: Interviews conducted as part of the CRA examination to gather information that might assist examiners in understanding the bank's community, available opportunities for helping to meet local credit and community development needs, and perceptions on the performance of financial institutions in helping meet local credit needs. Communications and information gathered can help to provide a context to assist in the evaluation of an institution's CRA performance.
Community Development: An activity associated with one of the following five descriptions: (1) affordable housing (including multifamily rental housing) for low- or moderate-income individuals; (2) community services targeted to low- or moderate-income individuals; (3) activities that promote economic development by financing small businesses or small farms; (4) activities that revitalize or stabilize low- or moderate-income geographies; designated disaster areas; or distressed or underserved nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency; (5) loans, investments, and services that- support, enable or facilitate Neighborhood Stabilization Program (NSP) eligible activities in areas with HUD-approved NSP plans; are conducted within two years after the date when NSP program funds are required to be spent; and benefit low-, moderate- and middle-income individuals and geographies in the bank’s assessment area or outside the assessment area, provided that community development needs in the assessment area have been adequately addressed.
Community Development Block Grants (CDBG): Flexible federal aid intended for use by cities and towns to promote neighborhood revitalization, economic development, and improved community facilities and services. Specific uses of the funds are left to the discretion of local governments. Funds are administered by either state or city offices, depending on the size of the city or town. (See Entitlement Community)
Community Development Corporation (CDC): An organization, which may be owned and controlled by community residents, engaged in affordable housing, social services, business and/or commercial development. Although CDCs vary in size and scope, the vast majority are nonprofit, tax-exempt 501(c)(3) organizations. CDCs have boards of directors, generally comprised of local residents, public officials, funders, bankers, relevant professionals and/or community leaders. (See Bank-Owned CDC)
Community Development Credit Union (CDCU): A nonprofit credit union chartered to serve the members of a low-income community. A CDCU’s services vary, but generally include services not offered by mainstream financial institutions, such as small loans at below-market rates to individuals who may not otherwise qualify for bank loans. CDCUs rely heavily on banks, foundations and other investors for deposits to support their work.
Community Development Entity (CDE): A domestic corporation or partnership that: (1) has a mission of serving, or providing investment capital for low-income communities or low-income persons; (2) maintains accountability to residents of low-income communities through its representation on a governing board of or advisory board to the entity; and (3) has been certified as a CDE by the CDFI Fund. (See CDFI Fund) Annually, the CDFI Fund will allocate New Markets Tax Credits to CDEs under a competitive application process. These CDEs will then sell the credits to taxable investors in exchange for stock or a capital interest in the CDEs. (See New Markets Tax Credit)
Community Development Finance (Gap Financing): A specialized area of finance that uses credit enhancements offered by governmental agencies and private organizations to help finance projects with community development purposes that are not “bankable,” that is, do not meet the standards for conventional bank financing. Deficiencies seen in these projects may include insufficient or too uncertain cash flows, too little collateral, excessive interest rate or default risk, or lack of experience. Credit enhancements used may include grants of cash or land, loan guarantees, interest rate subsidies, rent subsidies (for housing projects), tax credits, tax abatements, linked deposits, soft-second mortgages and many more. This is often called gap financing, because it is critical to fill the gap between what a conventional lender will finance and what is needed. (See soft-second mortgage)
Community Development Financial Institution (CDFI): A financial institution that has community development as its primary mission. CDFIs provide wide ranges of financial products and services, including mortgage financing for first-time home-buyers, financing for needed community facilities, commercial loans and investments to start or expand small businesses, loans to rehabilitate rental housing, and financial services needed by low-income households and local businesses. In addition, CDFIs may provide services that help ensure that credit is used effectively, such as technical assistance to small businesses and credit counseling to consumers. CDFIs include community development banks, credit unions, loan funds, venture capital funds, and microenterprise loan funds.
Community Development Financial Institutions Fund, The: A U. S. Treasury Department fund created to expand the availability of credit, investment capital, and financial services in distressed urban and rural communities. The CDFI Fund provides relatively small infusions of capital to institutions that serve distressed communities and low-income individuals. By stimulating the creation and expansion of diverse community development financial institutions (CDFIs) and Community Development Entities (CDEs), and by providing incentives to traditional banks and thrifts, the Fund’s investments and New Markets Tax Credit programs work toward building private markets, creating healthy local tax revenues and empowering residents. (See CDFI, CDE, and New Markets Tax Credit)
Community Development Loan: A loan that:
(1) Has as its primary purpose community development; and
(2) Except in the case of a wholesale or limited purpose bank:
(i) Has not been reported or collected by the bank or an affiliate
for consideration in the bank's assessment as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203 of this chapter); and (ii) Benefits the bank's assessment area(s) or a broader statewide
or regional area that includes the bank's assessment area(s).
Community Development Loan Fund (CDLF): A private, nonprofit organization that channels private investment capital to community-based organizations and projects. It may operate independently or as part of a community-based organization. Terms and rates for loans made by a CDLF are generally more flexible than those offered through conventional financing channels. CDLFs may also provide borrowers with technical assistance to reduce the risks of these higher-risk loans.
Community Development Service: A service that:
(1) Has as its primary purpose community development;
(2) Is related to the provision of financial services; and
(3) Has not been considered in the evaluation of the bank's retail
banking services under Sec. 228.24(d).
Community Development Test: Method used to assess the record of a wholesale or limited purpose bank of helping to meet the credit needs of its assessment area(s) through its community development lending, qualified investments, or community development services.
Community Development Test for Intermediate Small Banks: Community Development Test for Intermediate Small Banks – One of the two performance tests intermediate small banks are subject to. This test includes the following criteria:
(1) The number and amount of community development loans;
(2) The number and amount of qualified investments;
(3) The extent to which the bank provides community development services; and
(4) The bank’s responsiveness through such activities to community development lending, investment, and services needs.
Community Development Test for Wholesale or Limited Purpose Banks: Community Development Test for Wholesale or Limited Purpose Banks- Method used to assess the record of a wholesale or limited purpose bank of helping to meet the credit needs of its assessment area(s) through its community development lending, qualified investments, or community development services.
Community Housing Development Organization (CHDO) (Pronounced Chodo ): A private nonprofit organization that has among its purposes the provision of decent housing that is affordable to low- and moderate-income persons. A CHDO must maintain accountability to its low-income community and have a demonstrated capacity for carrying out planned activities. Participating jurisdictions under the HOME Investment Partnership (HOME) Program must reserve not less than 15 percent of their HOME allocations for investment in housing to be developed, sponsored, or owned by CHDOs certified by the participating jurisdiction. (See HOME)
Community Land Trust (CLT): A private nonprofit corporation that acquires and holds land in perpetuity to be developed for specific community uses, usually affordable housing. CLTs control the terms of sale of all properties and improvements on the land to maintain long-term interests, while allowing leaseholders to retain general ownership rights of their properties. Local residents, including leaseholders on CLT-owned land, manage CLTs.
Community Reinvestment Act (CRA): An act intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations. Implemented by Regulation BB, the CRA requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions. CRA examinations are conducted by the federal agencies responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRS), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).
Community-Based Organization (CBO): A nonprofit organization that works to serve the community in which it is based. Services provided vary and may include health, housing, education, employment and training services.
Complexity: The quality or state of being complex. Complex is defined as “a whole made up of complicated or interrelated parts.”
Component Test Ratings: Component Test Ratings- Component test ratings are the individual ratings assigned to each performance test in a CRA examination. For example, a large bank receives three component test ratings: one for the lending test, one for the investment test, and one for the service test. The possible CRA component test ratings are: “Outstanding,” “High Satisfactory,” “Low Satisfactory,” “Needs to Improve,” and “Substantial Noncompliance.”
Composite Ratings: The composite rating is the bank’s overall CRA rating, after having aggregated each component test rating. The possible CRA composite ratings are: “Outstanding,” “Satisfactory,” “Needs to Improve,” and “Substantial Noncompliance.” Composite ratings can be assigned at the Institution, state, or multistate MSA rating.
Consolidated Plan (formerly known as the Comprehensive Housing Affordability Strategy, "CHAS"): A five-year planning document required of state and local governments as a condition for receiving federal funds for housing and community development programs from HUD. The plan must describe the community's housing and community development needs and conditions. The plan must also describe how low- and moderate-income populations will benefit. In addition, the plan must describe the resources, policies and programs that exist or will be created to meet these needs. The plan must be updated annually by the participating jurisdiction to remain eligible for funding.
Consumer Loan: A loan to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. Consumer loans include the following categories of loans:
(1) Motor vehicle loan, which is a consumer loan extended for the
purchase of and secured by a motor vehicle;
(2) Credit card loan, which is a line of credit for household,
family, or other personal expenditures that is accessed by a borrower's
use of a ``credit card,' as this term is defined in Sec. 226.2 of this
chapter;
(3) Home equity loan, which is a consumer loan secured by a
residence of the borrower;
(4) Other secured consumer loan, which is a secured consumer loan
that is not included in one of the other categories of consumer loans;
and
(5) Other unsecured consumer loan, which is an unsecured consumer
loan that is not included in one of the other categories of consumer
loans.
Cooperative Housing: A form of housing in which residents form a corporation for the purpose of owning and managing the property collectively. Membership in the cooperative gives them the right to occupy units and take part in the management and operation of the building. Residents own shares in the corporation proportional to their shares of the mortgage, rather than owning individual units.
Core Deposits: The sum of demand deposits, all NOW and ATS accounts, MMDA savings, other savings deposits, and time deposits with balances less than $100,000. Core deposits are generally stable, lower-cost funding sources. These deposits are typically funds of local customers who also have borrowing or other relationships with the institution.
Covered Interstate Branch: (1) Any branch of a bank and any branch of a foreign bank that is established or acquired outside of the bank’s home state, pursuant to the IBBEA. (2) Any bank controlled by an out-of-state bank holding company.
CRA Disclosure Statement: The Federal Financial Institution Examination Council (FFIEC) prepares annual CRA disclosure statements for each bank that is required to collect and report small business, small farm, and community lending data under the CRA. These disclosure statements summarize small business and small farm loans on a state-by-state basis, as well as information about the bank’s community development lending, by the individual banks that report these data.
CRA Notice: A notice posted in main offices and branches to notify the public about CRA. See Appendix B to Regulation BB for requirements.
Credit Enhancements: Special arrangements and programs, usually from public sources that improve the evaluation of a potential borrower's creditworthiness by mitigating risks associated with the borrower or project. Enhancements may include mortgage insurance, tax credits or abatement, rent supplements, interest rate subsidies, loan guarantees, flexible loan structure, terms, conditions or underwriting, or allowance for sweat equity.
D
Demographics: The statistical characteristics of human populations (such as age, race, sex, income, etc.) used especially to identify markets.
Department of Housing and Urban Development (HUD): See “Housing and Urban Development.”
Department of Veterans Affairs (VA): An agency of the federal government that provides, among other services, guaranteed home loans for veterans.
Designated Disaster Area: Designated Disaster Area - A “designated disaster area” is a disaster area designated by federal or state government. Such designations include, for example, Major Disaster Declarations administered by the Federal Emergency Management Agency (http://www.fema.gov).
Distressed non-metropolitan middle-income geography: Distressed non-metropolitan middle-income geography - A middle-income, nonmetropolitan geography will be designated as distressed if it is in a county that meets one or more of the following triggers: (1) an unemployment rate of at least 1.5 times the national average, (2) a poverty rate of 20 percent or more, or (3) a population loss of 10 percent or more between the previous and most recent decennial census or a net migration loss of five percent or more over the five-year period preceding the most recent census
E
Earned Income Tax Credit (EITC): A refundable federal income tax credit for low-income working individuals and families provided in part to offset the burden of Social Security taxes and to provide an incentive to work. The credit, sometimes called the Earned Income Credit (EIC), reduces the amount of federal tax owed and can result in a federal tax refund check.
Economic Development by Financing Businesses or Farms that Meet Certain Size Eligibility Standards: Economic Development by Financing Businesses or Farms that Meet Certain Size Eligibility Standards- a loan, investment or service, whether made directly or through an intermediary, must meet both a size test and a purpose test to meet the community development definition under the CRA regulation. An activity meets the size requirement if it finances entities that either meet the size eligibility standards of the Small Business Administration’s Development Company (SBDC) or Small Business Investment Company (SBIC) programs, or have gross annual revenues of $1 million or less. To meet the purpose test, the activity must promote economic development. An activity is considered to promote economic development if it supports permanent job creation, retention, and/or improvement for persons who are currently low- or moderate-income, or supports permanent job creation, retention, and/or improvement either in low- or moderate-income geographies or in areas targeted for redevelopment by Federal, state, local or tribal governments. The agencies will presume that any loan to or investment in a SBDC, SBIC, or New Markets Venture Capital Company promotes economic development.
Empowerment Zone (EZ): See Renewal Community/Empowerment Zone/Enterprise Community (RC/EZ/EC).
Enterprise Community (EC): See Renewal Community/Empowerment Zone/Enterprise Community (RC/EZ/EC).
Enterprise Zone: An economically depressed area targeted for revitalization by a city or state through tax and other incentives given to companies that locate or expand their operations within the zone.
Entitlement Community: A metropolitan city or urban county with a population of at least 50,000 which, because of its size, is entitled to receive annual Community Development Block Grant (CDBG) funds directly from the federal government. Non-entitlement communities receive CDBG funds through a state agency, usually an office of community or economic development. (See CDBG)
Exam Scope: The exam scope includes the products and affiliates reviewed during the examination, the period the examination covers, and the procedures—meaning whether a full-scope review or a limited-scope review is to be performed for specific assessment areas. (See full-scope review and limited scope review)
F
Family: All persons living in the same household who are related by birth, marriage or adoption.
Federal Agricultural Mortgage Corporation (Farmer Mac): A federally chartered secondary market for first mortgage agricultural real estate loans. Farmer Mac purchases, or commits to purchase, qualified loans from agricultural mortgage lenders, thereby improving the availability of mortgage credit to farmers, ranchers and rural homeowners.
Federal Deposit Insurance Corporation (FDIC): One of the four federal banking regulatory agencies, along with the Board of Governors of the Federal Reserve System, OCC and OTS. The FDIC regulates state-chartered banks that are not members of the Federal Reserve System.
Federal Financial Institutions Examination Council (FFIEC): A formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision and to make recommendations to promote uniformity in the supervision of financial institutions.
Federal Home Loan Bank: One of 12 regional wholesale banks established to provide community financial institutions with a reliable low-cost source of funds for home mortgage, small business, rural and agricultural loans.
Federal Home Loan Mortgage Corp. (FHLMC) (Freddie Mac): A Congressionally chartered corporation that purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. Freddie Mac also provides programs that offer greater flexibility in underwriting guidelines for lower-income homebuyers.
Federal Housing Administration (FHA): An agency within the Department of Housing and Urban Development that administers loan programs, loan guarantee programs and loan insurance programs designed to make more housing available.
Federal National Mortgage Association (FNMA) (Fannie Mae): A Congressionally chartered private corporation that specializes in buying mortgage loans on the secondary market, mostly from mortgage bankers. Fannie Mae also provides programs that offer greater flexibility in underwriting guidelines for lower-income homebuyers.
Financial Holding Company (FHC): An FHC is nothing more than a bank holding company that qualifies and elects to be treated as such. FHCs have the flexibility to conduct nonbanking activities under a number of authorities. Generally speaking, to qualify as an FHC under Section 225.81 of Regulation Y, a bank holding company must be both well-managed and well-capitalized and have a satisfactory CRA performance.
Flexible: Some definitions of flexible are “(1) able to adjust readily to different conditions or (2) making or willing to make concessions.”
Full-Scope Review: Under a full-scope review, a bank’s CRA performance is analyzed considering both quantitative factors (for example, geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative performance context factors (for example, innovativeness, complexity and responsiveness) of these activities.
G
Gap Financing: See Community Development Finance.
General Obligation Bonds: A bond backed by the full faith and credit and taxing authority of the government issuer.
Geocode: Process by which address information is transformed to the state, county, census tract, and MSA codes used in CRA. There are many geocoding programs available for purchase by banks, as well the FFIEC geocoding system fromGeographic Data Technology, Inc., which is available on the FFIEC web site (www.ffiec.gov).
Geographic Distribution: The geographic dispersion and distribution analysis measures the distribution of loans within a bank’s assessment area(s) across geographies of different income levels. Specifically, the purpose of this analysis is to determine the extent to which a bank is serving geographies in each income category (low-, moderate-, middle-, and upper-income) and whether there are any conspicuous gaps unexplained by the performance context analysis.
Geography: Geography means a census tract delineated by the United States Bureau of the Census in the most recent decennial census.
Government National Mortgage Association (Ginnie Mae): A government organization established to assist in housing finance with two main programs: the first is to guarantee payments to investors in mortgage-backed securities and the second is to absorb the write-down of low interest rate loans that are used to finance housing opportunities for lower-income households.
Government-Sponsored Enterprise (GSE): A federally established, privately owned corporation designed to increase the flow of credit to specific economic sectors. GSEs typically receive their financing from private investment, and the credit markets perceive that GSEs have implied federal financial backing. GSEs issue capital stock and short- and long-term debt instruments, issue mortgage-backed securities, fund designated activities and collect fees for guarantees and other services. GSEs generally do not receive government appropriations.
Gramm-Leach-Bliley Act (GLBA): President Bill Clinton signed the GLBA into law on November 12, 1999. It requires financial institutions to ensure the security and confidentiality of customer records and information. The GLBA is subdivided into seven titles, many of which have had significant impacts on the future direction of the financial services industry in the United States. From the time of the Great Depression in the 1930s, legislation has been in place, such as the Glass-Steagall Act and the Bank Holding Company Act, to limit the interaction and cross-product selling by the major financial industry segments--banks, securities firms, and insurance companies. The GLBA eliminates many of these barriers to affiliation between these institutions. In addition, it contains important provisions for consumer protection and privacy. One of these important provisions relates to having satisfactory CRA ratings before engaging in certain new financial activity. The GLBA also extended the examination frequency requirements for small banks with outstanding and satisfactory ratings. Under GLBA, the definition of small bank is an institution with assets of $250 million or less.
Grant: A gift, usually given by a foundation, a government agency or other entity, that may take the form of money, land or in-kind services. Grants require no repayment but can have limitations placed by the grantor. Grants provide equity to a project, thereby reducing debt and improving the project's feasibility and affordability.
H
HMDA Disclosure Statement: The Federal Financial Institution Examination Council (FFIEC) prepares annual HMDA disclosure statements for each bank that is required to collect and report mortgage lending data under HMDA. These disclosure statements summarize mortgage and home improvement lending information for the individual banks that report these data.
HOME: A HUD program that provides formula grants to states and localities that communities use, often in partnership with local nonprofit groups, to fund a wide range of activities to build, buy, and/or rehabilitate affordable housing for rent or homeownership or provide direct rental assistance to low-income people. HOME is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households. To receive HOME funds, a jurisdiction must submit a Consolidated Plan to HUD for approval. (See Consolidated Plan)
Home Improvement Loan: A loan that is to be used at least in part for the purpose of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which the dwelling is located (Home improvement loans not secured by a dwelling are to be reported only if the institution classifies the loan as a home improvement loan; dwelling-secured home improvement loans are to be reported without regard to classification.)
HOME Investment Trust Fund: A line of credit established by HUD for each participating jurisdiction for which Consolidated Plan and program descriptions are approved. The fund provides financing for all affordable housing projects outlined in the participating jurisdiction's plan. (See HOME and HUD)
Home Mortgage Disclosure Act: Home Mortgage Disclosure Act (HMDA)-A federal banking law that the reporting and disclosure of home mortgage loan data that can be used to assist: (1) in determining whether financial institutions are serving the housing needs of their communities; (2) public officials in distributing public-sector investments so as to attract private investment to areas where it is needed; and (3) in identifying possible discriminatory lending patterns.
Home Mortgage Loan: A ``home improvement loan,'' ``home purchase loan,'' or a ``refinancing'' as defined under the Home Mortgage Disclosure Act (HMDA). (See HMDA)
Home Purchase Loan: A loan secured by a dwelling and made for the purpose of purchasing that (or another) dwelling
Home State: The home state (1) for state banks, the state that chartered the bank; (2) for national banks, the state in which the main office of the bank is located; or (3) for foreign banks, refer to 12 USC 3103(c).
Host State: The state in which a bank establishes or acquires a covered interstate branch.
Host State loan-to-deposit ratio: The ratio of total loans in the host state to total deposits in the host state for all banks that have the state as their home state (these ratios are calculated annually by the Federal Reserve System, FDIC, and the OCC)
Household: One or more persons who occupy a housing unit. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements.
Housing and Urban Development (HUD): The U.S. Department of Housing and Urban Development, created to administer programs of the federal government that provide assistance for housing for the development of the nation's communities. HUD administers housing and home finance programs, the Public Housing Administration and FHA.
Housing Assistance Council (HAC): A private organization that provides funds, training, and other types of assistance to nonprofit groups to facilitate construction of housing for lower-income residents of rural areas.
Housing Partnership (HP): A nonprofit organization that brings together the interests, resources and financial support of public agencies, local businesses, banks and community organizations to increase the supply of affordable housing in a particular city or state. Working with other local nonprofit organizations, HPs generally design and implement projects, secure financing and provide technical assistance.
Housing Trust Fund (HTF): A fund established by state legislation or a city ordinance that uses public capital to finance the construction or renovation of affordable housing. The fund is designed to have an ongoing source of revenue, usually from tax- or program-generated revenue or from development ordinance requirements. HTFs are typically administered by public agencies .
I
Inclusionary Zoning: A zoning ordinance that requires a developer to include affordable housing or its funding as part of the development. Typically, a developer makes a certain percentage of the units affordable in exchange for incentives, such as waivers of zoning requirements relating to density or expedited development permitting.
Individual Development Account (IDA): A leveraged, or matched, savings account that includes financial literacy training. IDA programs are restricted to lower-income individuals and families. Funds saved may only be used for education expense, the purchase of a first home, or to start a business. The match funding may be provided by public or private sources.
Innovative: One definition of this term is “being or producing something like nothing done or experienced or created before.”
Interagency Q&As (Q&As): The interagency-approved question and answer document that accompanies Regulation BB to provide informal staff guidance for agency personnel, financial institutions, and the public. The Q&As document is a very in-depth guide to CRA examples, and is used widely by examiners performing CRA assignments .
Interest Subsidy: A grant to reduce the interest a borrower is required to pay on a loan. Such a subsidy may take one of three forms: a direct cash grant to a lending institution to write down the bank's interest rate; a government-sponsored, low-interest loan subordinated to a participating lender; or a lower-than-market-rate loan to a qualified borrower as a result of an advance from a public entity.
Intermediary: A nongovernmental entity that promotes local community development activities by fostering networking and providing funding, technical
Intermediate Small Bank: Intermediate small bank means a small bank with assets of at least $280 million as of December 31 of both of the prior two calendar years and less than $1.122 billion as of December 31 of either of the prior two calendar years.
Interstate Banking and Branching Efficiency Act (IBBEA): The Interstate Banking and Branching Efficiency Act - The Riegle–Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act) allows banks to branch across state lines. Section 109 of the act prohibits a bank from establishing or acquiring a branch or branches outside its home state, pursuant to the act, primarily for the purpose of deposit production.Section 110 of the act includes requirements for the contents of written performance evaluations and ratings assigned.
Investment Banking: This is a test definition to see how it looks. Nothing more, nothing less.
Investment Test: The criteria used to evaluate a bank's record of helping to meet the credit needs of its assessment area(s) through qualified investments that benefit its assessment area(s) or a broader statewide or regional area that includes the bank's assessment area(s).
Investor: An organization, corporation, individual or other entity that acquires an ownership position in a project, thus, assuming risk of loss in exchange for anticipated returns.
L
Leader: Some definitions of leader are (1) one that leads or guides or (2) one who is in charge or in command of others.
Lending Consortium: See Loan Consortium.
Lending Test: The criteria used to evaluate a bank's record of helping to meet the credit needs of its assessment area(s) through lending activities by considering a bank's home mortgage, small business, small farm, and community development lending. If consumer lending constitutes a substantial majority of a bank's business, the bank's consumer lending will be evaluated in one or more of the following categories: motor vehicle, credit card, home equity, other secured, and other unsecured loans. In addition, at a bank's option, the one or more categories of consumer lending will be evaluated, if the bank has collected and maintained, as required in Sec. 228.42(c)(1), the data for each category that the bank elects to have the Board evaluate.
Lending Test for Large Banks: Lending Test for Large Banks - The criteria used to evaluate a bank's record of helping to meet the credit needs of its assessment area(s) through lending activities by considering a bank's home mortgage, small business, small farm, and community development lending. If consumer lending constitutes a substantial majority of a bank's business, the bank's consumer lending will be evaluated in one or more of the following categories: motor vehicle, credit card, home equity, other secured, and other unsecured loans. In addition, at a bank's option, one or more categories of consumer lending will be evaluated, if the bank has collected and maintained, as required in Sec. 228.42(c)(1), the data for each category that the bank elects to have the Board evaluate.
Lending Test for Small Banks: Lending Test for Small Banks - The criteria used to evaluate a small bank's (including an intermediate small bank) record of helping to meet the credit needs of its assessment area(s) through lending activities. The criteria include:
(1) The bank’s loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, other lending-related activities, such as loan originations for sale to the secondary markets, community development loans, or qualified investments;
(2) The percentage of loans and, as appropriate, other lending-related activities located in the bank’s assessment area(s);
(3) The bank’s record of lending to and, as appropriate, engaging in other lending-related activities for borrowers of different income levels and businesses and farms of different sizes;
(4) The geographic distribution of the bank’s loans; and
(5) The bank’s record of taking action, if warranted, in response to written complaints about its performance in helping to meet credit needs in its assessment area(s).
Limited Equity Homeownership (LEH): Multifamily residences owned and controlled by tenants in which resale values are restricted to maintain the long-term affordability of the units. LEH residences are often developed with public assistance in the form of relaxed zoning regulations or the discounted sale of publicly owned land to reduce development costs. An LEH can take the form of a cooperative or condominium.
Limited Purpose: A bank that offers only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market and for which a designation as a limited purpose bank is in effect, in accordance with Section 228.25(b).
Limited-Scope Review: Under a limited-scope review, a bank’s CRA performance is analyzed considering only quantitative factors (for example, geographic distribution, borrower distribution, total number and dollar amount of investments and branch distribution).
Linked Deposit: The deposit of public funds by a city or state government in exchange for a commitment from the financial institution to provide low-cost loans to qualified borrowers. These deposits are not necessarily earmarked for particular uses, but are conditional, in the sense that they will be withdrawn if the institution does not perform as expected.
Loan Consortium: A collaboration among financial institutions that pools capital to finance affordable housing and economic development projects. The consortium can be structured as an independent nonprofit corporation or an informal lending agreement. An institution's participation in each loan may be predetermined or done on a case-by-case basis.
Loan Guarantee: A pledge of loan repayment, by a private or public source, of a portion of a loan made by a commercial bank for specified purposes, such as affordable housing or economic development. With a guaranty, the bank benefits by reducing its risk in lending, and the borrower benefits by accessing financing it would not otherwise have been able to obtain.
Loan Production Office: A staffed facility, other than a branch, that is open to the public and that provides lending-related services, such as loan information and applications. Loan production offices are not considered to be branches for the purposes of CRA.
Loan-to-Deposit Ratio: A ratio used for? evaluating a bank under the small bank CRA procedures. The loan-to-deposit ratio is used to ascertain whether the bank is lending and is calculated according to the A small institution’s loan-to-deposit ratio is calculated in the same manner that the Uniform Bank Performance Report/Uniform Thrift Performance Report (UBPR/UTPR): Net Loans/ Total Deposits.
Local Initiatives Support Corporation (LISC): A nationwide intermediary that assists neighborhood-based Community Development Corporations (CDCs) in the development of affordable housing, commercial and community facilities, as well as job-creation through industrial projects by marshaling private and public resources, extending financial assistance in the form of loans, grants and loan guarantees, and providing technical support .
Low Income: For purposes of classifying a borrower’s income, low income means an individual income that is less than 50 percent of the area median income. For purposes of classifying a geography, low income is a median family income that is less than 50 percent of the area median income.B111
Low-and-Moderate Income (LMI): The combination of low- and moderate-income individuals or geographies. ( See low-income and moderate-income)
Low-Income Credit Union (LICU): A credit union that has secured designation by the National Credit Union Administration (NCUA) as a low-income credit union. Requirements include documentation that a majority of the credit union's member-households earn less than 80 percent of the national median household income. LICUs may be called community development credit unions (CDCUs). (See CDCU)
Low-Income Housing Tax Credit (LIHTC): A Congressionally created tax credit available to investors in low-income housing designed to encourage investment that helps finance construction and rehabilitation of housing for low- income renters.
M
Manufactured Homes (Prefabricated Housing): Factory-built housing that is assembled on site. Manufactured homes are typically less expensive than conventionally built housing.
Matched Funding: Financing that is based on the condition that the amount must be matched with funds from another source on a one-for-one basis or according to some other formula within a certain period.
Median Family Income: The dollar amount that divides the family income distribution into two equal groups, half having incomes above the median, half having incomes below the median. The median family income is based on all families within the area being analyzed.
Metropolitan Area (MA): A metropolitan statistical area (MSA) or a metropolitan division (MD) as defined by the Office of Management and Budget. A MSA is a core area containing at least one urbanized area of 50,000 or more inhabitants, together with adjacent communities having a high degree of economic and social integration with that core. A MD is a division of a MSA based on specific criteria including commuting patterns. Only a MSA that has a population of at least 2.5 million may be divided into MDs.
Metropolitan Division (MD): Metropolitan division means a metropolitan division as defined by the Director of the Office of Management and Budget. (As designated by the U. S. Office of Management and Budget (OMB), a division of a metropolitan statistical area (MSA) based on specific criteria including commuting patterns. Only an MSA that has a population of at least 2.5 million may be divided into MDs.)
Metropolitan Statistical Area (MSA): MSA means a metropolitan statistical area as defined by the Director of the Office of Management and Budget. As designated by the U.S. Office of Management and Budget (OMB), an MSA is a core area containing at least one urbanized area of 50,000 or more inhabitants, together with adjacent communities having a high degree of economic and social integration with that core.
Microenterprise (Microbusiness): A very small business that usually has fewer than 10 employees, including the owner(s), and often lacks access to commercial banking finance.
Microenterprise Development Organization: A type of intermediary that focuses on microenterprises or an organization that works directly with microentrepreneurs, providing services to aspiring microentrepreneurs and assisting them in starting their own businesses.
Microenterprise Loan Fund: A revolving loan fund that provides small, short-term loans and technical assistance to small businesses. Loan amounts and terms are usually more flexible than conventional financing.
Micropolitan Statistical Area: As designated by the U. S. Office of Management and Budget (OMB), a core area containing at least one urbanized area of at least 10,000 but less than 50,000 population, together with adjacent communities having high degrees of economic and social integration with that core. A173
Middle-Income: For purposes of classifying a borrower’s income, middle-income means an individual income that is at least 80 percent and less than 120 percent of the area median income. For purposes of classifying a geography, middle-income is a median family income that is at least 80 percent and less than 120% percent of the area median income.
Mixed-Income Development: Housing development projects designed to attract more than one household income group in an effort to establish greater long-term stability to a neighborhood.
Mixed-Use Development: Development projects that include more than one type of real property development activity. Mixed-use projects may include any combination of housing, commercial, office, retail or other uses.
Moderate-Income: For purposes of classifying a borrower’s income, moderate-income means an individual income that is at least 50 percent and less than 80 percent of the area median income. For purposes of classifying a geography, moderate-income is a median family income that is at least 50 percent and less than 80 percent of the area median income.
Mortgage-Backed Security (MBS): An investment representing undivided interest in a pool of mortgages.
Mutual Housing: Long-term affordable housing developed, owned and managed by a nonprofit association. Residents pay one-time refundable membership fees and monthly percentages of their incomes to the association. In turn, they are given lifetime rights of occupancy and voices in the management of the property through resident councils and property management committees. Residents also have majority representation on the association's board of directors, whose other members include community and business leaders and public officials.
N
National Credit Union Administration (NCUA): The federal government agency that supervises, charters and insures federal credit unions. NCUA also insures state-chartered credit unions that apply and qualify for insurance.
National Equity Fund Incorporated (NEF): NEF was established to create a national investment pool to aggregate and channel corporate equity investments into affordable housing developments. A board of directors elected by LISC governs NEF and makes its investment decisions. (See LISC)
Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): A block grant program designed to provide federal assistance for Indian tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance.
Neighborhood Housing Services (NHS): A national network of neighborhood-based service organizations that are locally operated and funded. A local NHS focuses on a specific community or communities to increase the supply of affordable housing and promote neighborhood stability by providing below-market rate construction and rehabilitation financing, technical assistance and support for resident activism. Board members include local residents, business leaders, public officials and community representatives. All NHS affiliates receive assistance from, and are monitored by, the Neighborhood Reinvestment Corp.
Neighborhood Housing Services of America (NHSA): A private, nonprofit, tax-exempt corporation that acts as a secondary market to buy loans from the local affiliates of Neighborhood Housing Services. The affiliates make loans with interest rates and terms based on the borrowers’ abilities to repay to residents who do not meet conventional lending standards;. Typically, these loans cannot be sold on conventional secondary mortgage markets.
Neighborhood Reinvestment Corporation (NRC): A Congressionally chartered, federally funded, public nonprofit corporation established to assist in the revitalization of lower-income neighborhoods and in the provision of affordable housing in these neighborhoods. NRC works mainly through local Neighborhood Housing Services affiliates, providing training, operational grants and technical assistance. (See NHS)
Net Loan-to-Deposit Ratio: A small institution’s loan-to-deposit ratio is calculated in the same manner that the Uniform Bank Performance Report/Uniform Thrift Performance Report (UBPR/UTPR) determines the ratio. It is calculated by dividing the institution’s net loans and leases (total loans – Allowance for Loans & Lease Losses ) by its total deposits. Examiners will use this ratio to calculate an average since the last examination by adding the quarterly loan-to-deposit ratios and dividing the total by the number of quarters.
New Markets Venture Capital Company (NMVCC): A privately managed, for-profit investment company selected by the Small Business Administration (SBA ) to participate in the SBA New Markets Venture Capital (NMVC) program. NMVVCs provide equity-type capital and hands-on operational assistance to smaller businesses located in specific rural and urban areas. The mission of the SBA NMVC program is economic development in low-income areas that will create quality employment opportunities for residents and build wealth within these communities. (See SBA)
NGO: Nongovernmental organization.
Nonmetropolitan Area: MSA. (See MSA)
Nonprofit Corporation: A corporation established for purposes other than making profits that would be distributed to the owners, directors, members or officers. No part of the net earnings may benefit any person having a private or personal interest in the corporation.
O
Office of the Comptroller of the Currency OCC: One of the four federal banking regulatory agencies, along with the Board of Governors of the Federal Reserve System, FDIC and OTS. The OCC regulates banks with national charters.
Office of Thrift Supervision (OTS): Out-of-State Bank Holding Company- With respect to any state, a bank holding company, for which the home state is another state. One of the four federal banking regulatory agencies, along with the Board of Governors of the Federal Reserve System, FDIC and OCC. The OTS regulates thrift institutions.
Out-of-State Bank Holding Company: With respect to any state, a bank holding company, for which the home state is another state.
P
Peer Group: See Uniform Bank Performance Report. The introductory page of the UBPR describes the bank’s current peer group and the name and address of its holding company, if applicable. Detailed description of peer groups used for the UBPR can be found in the UBPR User’s Guide found at http://www.ffiec.gov/ubprguide.htm
Performance Context: The performance context is a broad range of economic, demographic, and institution- and community-specific information that an examiner reviews to understand the context in which an institution’s record of performance should be evaluated. The performance context is not a formal or written assessment of community credit needs.
Performance Criteria: These are the different criteria against which a bank’s performance in helping to meet the credit needs of its assessment area(s) are measured. The criteria relate to lending, investment and service retail and community development activities performed by a bank. The performance criteria have both quantitative and qualitative aspects. There are different sets of criteria for large banks, intermediate small banks, small banks, wholesale/limited purpose banks, and strategic plan banks.
Performance Evaluation (PE): A written evaluation of a financial institution’s record of meeting the credit needs of its community, as prepared by the federal financial supervision agency responsible for supervising the institution.
Political Subdivision: A unit of government within a State, including a county, city, town, township, parish, village, Indian reservation, or other regional or intrastate governmental entity of a local government. Under CRA, a political subdivision cannot be a ward, school district, voting district, or water district.
Poverty: A term used to describe one of two slightly different definitions of the federal poverty measure: (1) the poverty thresholds used mainly for statistical purposes—for instance, preparing estimates of the number of Americans in poverty each year—and updated each year by the Census Bureau; and (2) the poverty guidelines used for administrative purposes—for instance, determining financial eligibility for certain federal programs, and issued each year by the Department of Health and Human Services (HHS).
Primary Purpose: The test used to determine if an activity meets the definition of community development. An activity meets the four prong definition of community development if:
Property Tax Abatement: Reduction or exemption from property tax granted by local government for a specified period.
Public File: A repository for information related to a bank’s CRA performance and for public comments or complaints related to the bank’s CRA performance. One purpose behind the public file requirement is to ensure that the public has enough information to form opinions and make comments. For this reason, Regulation BB sets forth minimum document and information requirements for the public file.
Public Funds: Deposit accounts of public bodies, such as state or local municipalities. These types of deposits often must be secured and typically fluctuate on a seasonal basis because of timing differences between tax collections and expenditures. General economic conditions can also be a factor in assessing the volatility of such deposits, as public entities may experience revenue shortfalls in times of economic decline. Though regarded as generally volatile, these accounts can be reasonably stable over time, or their fluctuations quite predictable. Local municipal deposits, for example, are often required to be maintained in the local community and therefore may display greater stability. State and certain local deposits, on the other hand, can be bid-type deposits that may tend to be less stable. Therefore, investigation is often needed to make informed judgments as to their stability.
Public Welfare Investment: The investment is in a corporation, limited partnership, or other entity, and:
(1) The Board has determined that an investment in that entity or
class of entities is a public welfare investment under paragraph 23 of
section 9 of the Federal Reserve Act (12 U.S.C. 338a), or a community
development investment under Regulation Y (12 CFR 225.25(b)(6)); or
(2) The Comptroller of the Currency has determined, by order or
regulation, that an investment in that entity by a national bank is a
public welfare investment under section 5136 of the Revised Statutes (12
U.S.C. 24 (Eleventh)); or
(3) The entity is a community development financial institution as
defined in section 103(5) of the Community Development Banking and
Financial Institutions Act of 1994 (12 U.S.C. 4702(5)); or
(4) The entity, directly or indirectly, engages solely in or makes
loans solely for the purposes of one or more of the following community
development activities:
(A) Investing in, developing, rehabilitating, managing, selling, or
renting residential property if a majority of the units will be occupied
by low- and moderate-income persons, or if the property is a ``qualified
low-income building' as defined in section 42(c)(2) of the Internal
Revenue Code (26 U.S.C. 42(c)(2));
(B) Investing in, developing, rehabilitating, managing, selling, or
renting nonresidential real property or other assets located in a low-
or moderate-income area and targeted towards low- and moderate-income
persons;
(C) Investing in one or more small businesses located in a low- or
moderate-income area to stimulate economic development;
(D) Investing in, developing, or otherwise assisting job training or
placement facilities or programs that will be targeted towards low- and
moderate-income persons;
(E) Investing in an entity located in a low- or moderate-income area
if the entity creates long-term employment opportunities, a majority of
which (based on full-time equivalent positions) will be held by low- and
moderate-income persons; and
(F) Providing technical assistance, credit counseling, research, and
program development assistance to low- and moderate-income persons,
small businesses, or nonprofit corporations to help achieve community
development.
Purpose Test: See Economic Development by Financing Businesses or Farms that Meet Certain Size Eligibility Standards
Q
Qualified Investment: A lawful investment, deposit, membership share, or grant that has as its primary purpose community development.
Qualitative Performance Criteria: The part of the evaluation based on qualitative aspects, meaning the qualities of lending, investment, and service activities.
Quantitative Performance Criteria: The part of the evaluation based on based on quantifiable activity, such as the number and dollar amount of lending and investing. Other quantifiable aspects include the number and dollar amount of loans in an assessment area to low- and moderate-income borrowers and in low- and moderate-income areas.
R
Redlining: Originally, the refusal by financial institutions to offer home loans in certain neighborhoods. Lenders and others involved in the mortgage lending process would literally draw red lines around certain neighborhoods, based on the income, racial and or ethic composition of the areas. More recently, the term has come to mean any systemic discriminatory practices in low-income or high- minority communities by various private enterprises, including lenders, insurance companies or others.
Refinancings: A transaction in which a new obligation satisfies and replaces an existing obligation by the same borrower. To determine whether or not a loan is covered by HMDA, the existing obligation must be a home purchase loan and both the new and the existing obligations must be secured by a first lien on a dwelling. For reporting purposes, both the existing and new obligations must be secured by a lien on a dwelling.
Regulation C: The Federal Reserve Regulation (12 CFR 203) that implements the Home Mortgage Disclosure Act(see Home Mortgage Disclosure Act)
Renewal Community/Empowerment Zone/Enterprise Community (RC/EZ/EC) Initiative: Federal programs of tax incentives, grants, loans and technical assistance, combined with partnerships of government, for-profit and nonprofit agencies, designed to spur private investment in urban and rural communities that have experienced severe economic decline. Each of the programs target different communities with different tools. Administration of these programs is shared by HUD, Rural Development and the U.S. Department of Health and Human Services.
Rent Supplement: A payment to an owner of private housing by a government agency to ensure affordability of rents for lower-income tenants. The owner receives the difference between a share of the tenant's monthly income (usually 30 percent) and an amount established by the agency to be a fair market rent.
Responsiveness: Some of the definitions are “(1) giving a response, (2) answering, (3) being quick to respond or react appropriately or sympathetically.”
Retail Banking: A bank engages in retail banking if it offers the traditional array of banking products, including home mortgage, small business, small farm and consumer loans, and deposit products.
Revenue Bond: A bond that pays principal and interest from the revenue generated by the projects being financed and, unlike general obligation bonds, is not backed by the full faith and credit and taxing authority of the issuer.
Revolving Loan Fund (RLF): A pool of funds structured so that loan payments are used to make more loans. RLFs are often funded by public investments and then leveraged by private investments to make affordable housing or economic development loans. Terms and rates are typically more favorable than those offered under conventional financing.
S
SBA New Markets Venture Capital: See New Markets Venture Capital Company.
Scoping: A process that identifies both the products and assessment areas that will be reviewed during a CRA examination. Assessment areas can be reviewed using all of the examination procedures (including a review of the quantitative performance criteria, the qualitative performance criteria, and performance context), which would be considered a full-scope review, or can focus on the quantitative factors alone, which would be considered a limited review.
Secondary Market: Markets into which originating lenders sell their loans to investors who are seeking longer-term investments. Typically, loans are bundled and sold as mortgage-backed securities. Secondary markets add liquidity to the mortgage market by replenishing the funds available for mortgage lenders to make loans.
Section 501(c)(3), Section 501(c)(4), and Section 501(c)(7): Internal Revenue Service codes for nonprofit organizations entitled to receive tax-exempt status and tax-deductible donations.
Section 8: A federal rent supplement program that provides rental assistance to very low-income and low-income families, as defined by HUD. The program pays the difference between the unit's market rent and the amount the tenant is deemed able to pay.
Service Test: The criteria used to evaluate a bank's record of helping to meet the credit needs of its assessment area(s) by analyzing both the availability and effectiveness of a bank's systems for delivering retail banking services and the extent and innovativeness of its community development services.
Single Room Occupancy Housing (SRO): A residence in which tenants have private rooms but may share common areas, such as the kitchen, dining room, living room and bathroom. Sometimes called congregate housing.
Size Test: See Economic Development by Financing Businesses or Farms that Meet Certain Size Eligibility Standards
Small Bank: Small bank means a bank that, as of December 31 of either of the prior two calendar years, had assets of less than $1.122 billion.
Small Business Administration (SBA): An independent federal agency that guarantees loans to small businesses and assists them with certain management and financial issues.
Small Business Development Center (SBDC): A center that provides management and technical assistance to small business owners. SBDCs are generally located in academic institutions and are structured as joint ventures among the institutions, state and local governments, and the Small Business Administration (SBA). (See SBA.)
Small Business Investment Company (SBIC): A privately owned and managed venture capital fund, licensed and regulated by the Small Business Administration (SBA), that uses its own capital, plus funds borrowed with an SBA guarantee, to make equity and debt investments in qualifying small businesses. The SBIC program was created to fill the gap between the availability of venture capital and the needs of small businesses in start-up and growth situations. (See SBA.)
Small Business Loan: A loan included in ``loans to small businesses'' as defined in the instructions for preparation of the Consolidated Report of Condition and Income.
Small Farm Loan: A loan included in ``loans to small farms'' as defined in the instructions for preparation of the Consolidated Report of Condition and Income.
Soft- Second Mortgage: A second mortgage subsidized by a nonprofit organization, or local or state governmental agency, that minimizes the debt of the borrower and reduces the primary lender's risk. Typically, the subsidy involves forgiveness of the debt after a specified period, below-market rate of interest and/or forbearance of payments. Soft-second mortgages for housing finance primarily target lower-income households, while those for business purposes usually attach job creation criteria that may also benefit lower-income persons or neighborhoods.
Special Purpose Bank: Special purpose banks do not perform commercial or retail banking services by granting credit to the public in the ordinary course of business, other than as incident to their specialized operations. These banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and banks that engage only in one or more of the following activities: providing cash management controlled disbursement services or serving as correspondent banks, trust companies, or clearing agents. These banks are not subject to CRA.
Specialized Small Business Investment Corporation (301(d) SBIC) (SSBIC): A venture capital firm licensed and regulated by the Small Business Administration (SBA) that provides debt and equity financing to small businesses that are at least 50 percent owned and operated by socially or economically disadvantaged persons. The SBA guarantees the debt portion of SBIC investments, allowing these venture capital firms to leverage private capital. (See SBA)
Statewide loan-to-deposit ratio: Relates to an individual bank and is the ratio of a bank’s loans to its deposits in a particular state where the bank has interstate branches.
Subordinated Debt: Debt, such as a second mortgage that in a foreclosure is only paid after the first mortgage is paid off.
Subsidy: Financial assistance granted to an individual or organization.
Sustainable Development: Development that values and implements long-term planning to ensure the necessary leadership, financing and other resources needed to maintain the project without compromising the needs of future generations.
Sweat Equity: The equity added to a property through the owner's own labor, which reduces the cost of a home.
Syndicated Cooperative: A cooperative that is owned in part by outside investors. The syndicated cooperative is becoming a more popular method of development in high-cost housing areas. Investors are able to take advantage of federal tax credits while reducing costs for the cooperative members. In return, residents share control of the property and may have to buy out the investors’ shares after a certain period of time.
T
Tax Abatement: The temporary suspension of property tax payments on improvements to private redevelopments. The tax may be abated up to 100 percent on improvements for a specified time, and abatements are offered as a redevelopment tool in areas designated as blighted or distressed.
Tax Credit: Federal or state credit against the amount of taxes owed by the donor or investor. In some cases, owners and developers of community development projects and businesses may sell or transfer the credits in return for up-front equity investments.
Tax Increment Financing (TIF): A method of financing development projects using tax revenues generated by the development. Municipal TIF bonds are sold, secured by the incremental tax revenues generated by the developments in a designated TIF district. Bond proceeds are used to finance the development projects.
Temporary Assistance to Needy Families (TANF): A federal program to provide assistance and work opportunities to needy families by granting states the federal funds and flexibility to develop and implement their own welfare programs.
Transitional Housing: Temporary housing for families or individuals who have not yet found permanent housing but require more stability than an emergency shelter. Generally, residents stay for several months.
Tribally Designated Housing Entity (TDHE): The entity under Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA ) authorized by a tribe to receive NAHASDA grants and provide affordable housing for tribal members. (See NAHASDA)
U
Underserved Middle-Income Geography: A middle-income, nonmetropolitan geography will be designated as underserved if it meets criteria for population size, density, and dispersion that indicate the area’s population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs. The agencies use as the basis for these designations the “urban influence codes,” numbered “7,” “10,” “11,” and “12,” maintained by the Economic Research Service of the United States Department of Agriculture.
Uniform Bank Performance Report (UBPR): An analytical tool available from the FFIEC and created for bank supervisory, examination, and management purposes. A UBPR shows, in a concise format, a bank's performance and balance-sheet composition. Each UBPR also contains corresponding average data for the bank’s peer group and percentile rankings for most ratios. Other data tools also available include the Peer Group Report, which presents all peer averages.
Uniform Commercial Code (UCC): A set of uniform—but not identical—state laws governing commercial transactions. These laws help promote interstate commerce by making it simpler to pursue transactions in various jurisdictions. The UCC covers the sales of goods, bank deposits and collections, letters of credit, investment securities and secured lending, among other transactions.
Upper-Income: For purposes of classifying a borrower’s income, upper-income means an individual income that is 120 percent or more of the area median income. For purposes of classifying a geography, upper-income is a median family income that is greater than 120 percent of the area median income.
USDA Rural Development: An agency of the U.S. Department of Agriculture that makes loans, grants and loan guarantees in rural areas for housing, farming, utilities, business, industry, community facilities, and community development and empowerment. The programs primarily serve communities with populations of less than 25,000. The agency was formerly known as the Farmers Home Administration (FmHA).
V
Venture Capital: Money raised for higher-risk investments, usually in new or expanding private enterprises, with the expectation of repayment in profits and dividends but subject to the hazards of ownership. It is often called risk capital or equity capital.
Very Low Income: A certain level of income that is specifically defined by various governmental agencies, usually in relationship to the median income for the area. The criteria for designation as “very low income” vary among agencies and programs, and some programs and regulations, including CRA, do NOT use this designation.
Volatile Deposits: Deposits that are not core deposits . Examples of volatile deposits include brokered deposits and time deposits with balances of $100,000 or more . Because these types of deposits are more interest-rate sensitive, they are considered volatile. In some cases, a bank may not want to extend long-term loans against these types of deposits.
W
Wholesale Bank: A bank that is not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers, and for which a designation as a wholesale bank is in effect, in accordance with Section 228.25(b) of Regulation BB .
Women-Owned Business: A business that is at least 51 percent owned by one or more women, and the management and daily operations of which are controlled by one or more women.