Dear Dr. CRA:

As an avid reader of the Federal Register, I noticed that there were some changes to the CRA regulations in the October 4, 2010 issue (Vol. 75, No. 191). Can you help me make sense of these new changes and give me the bottom line?

Sincerely,
Need Exciting Reading Docket

Dear NERD, Of course! The good doctor is also an avid reader of the Federal Register, particularly on nights when he can't fall asleep. The October 4, 2010 changes you're referring to dealt with two separate legislative changes that impacted the CRA rules. These changes were originally proposed in a June 30, 2009 notice of proposed rulemaking, and the regulatory agencies took public comment on the proposal. The October 4th document is a final rule, so it is officially part of the CRA regulations going forward. These changes added two new paragraphs to the section of the regulation that describes the performance standards used by the agencies in conducting CRA examinations.

The first change deals with student loans. The new rule states that the agencies will consider certain student loans in their evaluation of a bank's performance in meeting community credit needs. As usual, the devil is in the details. The agencies will consider low-cost education loans, particularly in the bank's assessment area, to borrowers who have an income that is less than 50 percent of the area median income. In this context, "low-cost education loan" means a loan to a student at an institution of higher learning with interest rates and fees no greater than those of comparable education loans offered directly by the U.S. Department of Education.

The second change addresses collaboration with minority- owned financial institutions, women-owned financial institutions, and low-income credit unions. The new rule states that the agencies will consider capital investment, loan participation, and "other ventures" undertaken by the bank in partnership with any institution in one of these categories. These activities must help meet the credit needs of the local community in which the minority- or women-owned institution or low-income credit union is chartered. The activity need not be located in the investing bank's assessment area or even in the broader region that contains the bank's assessment area.

There's your bottom line! If you want to dig into the details, you can find the Federal Register Notice online by searching the 2010 volume for "Page 61035". And as always, be sure to check in with your own regulator if you have questions about how any particular transaction will be evaluated.