Community Investments
Volume 9; No. 2; Spring 1997
The Federal Reserve Bank of San Francisco, in cooperation with volunteer
task force members, has published the findings of the
1996 -1997
Mortgage Credit Partnership Project
The MCP was conducted in San Francisco over a seven-month period, July
1996 through January 1997. By examining the many steps along the home
purchase process, the project participants identified barriers to minorityhome
ownership and developed a set of industry recommendations to address those
barriers.
For a FREE copy of the MCP report, please call the Community Affairs
Department at (415) 974-2978.
1997 National Community Development Lending School
August 10 - 14, 1997
University of Washington, Seattle
Join us for five days of intensive training on how to make community
development lending a profitable, dynamic venture for your institution.
A carefully planned curriculum taught by the field's top banking experts
will teach you how to think like an entrepreneur, manage risk, structure
profitable loans, analyze credit, develop community partnerships and
make sound business decisions for your institution. Plus, you'll develop
a valuable network of peers that will last for years to come!
Watch your mail... a brochure and registration application will
arrive in late May.
Correction
In the last issue of Community Investments (Winter, 1996) an article entitled
"Large Banks Transition to a New CRA" presented the double credit
calculation for consortia lending. The CRA regulation allows institutions
that invest in community development lending consortia or community development
banks to evaluate their investment in one of two ways: 1) institutions may
receive credit under the investment test alone, or 2) a portion of the investment
may be evaluated under the lending test and the remainder evaluated under
the investment test. The calculation we presented under option two was incorrect
and has been superseded by a new formula.1
The good news is that the new calculation for lending test credit achieves
greater results for an investing institution. Here's how the new "double
credit" calculation works using the example previously used:
| CDB Total Capitalization |
$10 million |
| CDB Total Assets |
$30 million |
|
- qualified investments |
$12 million (=40% total assets) |
|
- CD loans |
$18 million |
| Financial Institution Investment |
$1 million
(=10% of total capitalization)
|
| Investment Test Consideration |
$400,000 |
|
Because qualified investments
comprise 40% of CDB's total assets, the investing institution would
receive consideration for 40% of itstotal investment of $1 million.
|
| Lending Test Consideration |
$1,800,000 |
|
Investing institution receives
consideration for prorata share (in this case, 10%) of all community
development loans originated by CDB during the period under review.
|
| Total Investment & Lending Test
Consideration |
$2,200,000 |
1 Joint Interagency Interpretive
Letter 709 (Revised) July, 1996. |
