Interagency Q&A .12(h) – 5: The regulation indicates that community devel. includes “activities that revitalize or stabilize low- or moderate-income geographies.” Do all loans in a low- to moderate-income geography have a stabilizing effect?

Compliance > Regulation BB - CRA
Q:  § __.12(h) – 5: The regulation indicates that community development includes “activities that revitalize or stabilize low- or moderate-income geographies.”  Do all loans in a low- to moderate-income geography have a stabilizing effect?
 
A:  No.  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.  For example, a loan for upper-income housing in a low- or moderate-income area is not considered to have a community development purpose simply because of the indirect benefit to low- or moderate-income persons from construction jobs or the increase in the local tax base that supports enhanced services to low- and moderate-income area residents.  On the other hand, a loan for an anchor business in a low- or moderate-income area (or a nearby area) that employs or serves residents of the area and, thus, stabilizes the area, may be considered to have a community development purpose.  For example, in a low-income area, a loan for a pharmacy that employs and serves residents of the area promotes community development.
 
 
 
This Interagency Q&A, and others, was released in July 2016.  The 2016 Q&As consolidates and supersedes all previously published “Interagency Questions and Answers Regarding Community Reinvestment,” and were noted as being effective immediately.  They may be found here:  http://www.ffiec.gov/cra/qnadoc.htm
 

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