Are you prepared for your CRA Exam with the recent OCC changes?
In December of 2021, the OCC rescinded the June 2020 CRA rule and replaced it with an amended rule, taking effect January 1, 2022. This exam will be unique compared to those in the past. This can drastically change the course of the examination for you and your company.
What is the CRA Examination?
The Community Reinvestment Act was passed in 1977 as an effort to help meet the credit needs of entire communities, including low- and moderate income neighborhoods. It requires each federal bank regulatory agency assesses a institution's record on lending within its safe haven against sound practices for economic development across all demographic groups represented within those areas being served by that particular lender.
The CRA has been successfully implemented through integrated into today’s society where it continues provide Americans with access both loans or mortgages despite background checks which protects consumers from financial exploitations.
The changes in CRA regulations are designed to put greater emphasis on performance instead of process, and establish different evaluation tests for institutions that range from large universities all the way down to small libraries with only one faculty member.
Five Steps to Getting Prepared for the CRA Exam
While preparing for a CRA Exam, there are many things an institution can do to get ready. Here are five things you can do to ensure you and your team are prepared.
Be Familiar With the Types of Performance Tests Applicable to Your Institution
The lending test is a set of three tests that small, intermediate-sized and large institutions will have to pass in order for their funds from being granted by the Bank. These include: The Lending Test, which measures how much risk can be absorbed by an institution's balance sheet, the Community Development Test, which aims at identifying areas where loans might not reach those who need them most due either economic challenges or social stigma or prejudice against certain groups.
Review Any Previous CRA Performance Evaluations of Your Institution
It’s important to review your institution's most recent consumer compliance examination report. Be aware of any identified or potential issues relating the use discriminatory and illegal credit practices in any geography that could impact on an organizations CRA performance evaluation.
Conduct Your Own Analysis
You'll need to have a plan in place before the examiners come so you can be prepared with advance analysis on available information. No matter how big or small your institution is, there are some key points that will help them get started:
• Your institution’s geographic distribution of loans
• Concentration of loans
• Customer complaint data
•Economic and demographic data
Be Prepared for the Future
If you are a small or medium-sized institution that is growing into larger proportions, prepare for the next phase of your CRA journey by preparing different reports and performance expectations. However if large institutions have been around long enough they can skip this step and just focus on making improvements now instead.
The institution's performance will be evaluated in the context of its local community and economy. This is your opportunity to provide information that shows how you are making loans, investments or service for this region; it should also highlight what kind of return these activities have provided so far.
Knowing the status of your institution will make you feel more confident about this examination. You'll know what to expect and that means less stress for everyone!
The CRA examination is no easy feat to overcome. It's critical for your institution’s bottom line, and ensuring that you have all of the proper training can make all of those difference in passing or failing this important test.