CRCM Community Reinvestment Act (CRA) Compliance 2 — Questions and Answers
Question 1: Which of the following BEST qualifies as a community development service under CRA?
- Offering premium interest rates to attract high-net-worth depositors
- Installing ATMs exclusively in high-income shopping districts
- Providing free financial literacy workshops to low- and moderate-income individuals (Correct answer)
- Developing mobile banking features targeted at business customers
Correct answer: Providing free financial literacy workshops to low- and moderate-income individuals
Financial literacy education and counseling services targeted to LMI individuals qualify as community development services under CRA.
Question 2: Under CRA, the public file that a bank must maintain includes:
- Individual borrower credit scores and underwriting notes
- The bank's current CRA public notice and its most recent CRA performance evaluation (Correct answer)
- Proprietary loan pricing models used by underwriters
- Compensation details for CRA compliance officers
Correct answer: The bank's current CRA public notice and its most recent CRA performance evaluation
A bank's public CRA file must contain its current CRA notice and its most recent written CRA performance evaluation, among other items, but never confidential borrower or employee information.
Question 3: The CRA lending test for large banks primarily evaluates:
- The profitability of loans made in the bank's assessment area
- Only home mortgage loans made to LMI borrowers in LMI census tracts
- Geographic distribution and borrower characteristics of home mortgage, small business, small farm, and community development loans (Correct answer)
- The total number of loans approved versus denied each calendar year
Correct answer: Geographic distribution and borrower characteristics of home mortgage, small business, small farm, and community development loans
The lending test evaluates the full range of a large bank's home mortgage, small business, small farm, and community development lending, examining geographic distribution and the income levels of borrowers served.
Question 4: Approximately how often are CRA performance evaluations typically conducted for banks in good standing?
- Annually for all banks regardless of prior rating
- Monthly as part of ongoing regulatory supervision
- Every 2 to 5 years, depending on bank size and prior rating (Correct answer)
- Only when a bank applies for a merger or new branch
Correct answer: Every 2 to 5 years, depending on bank size and prior rating
CRA examinations are generally conducted on a cycle of approximately every 2 to 5 years, with the frequency influenced by the bank's asset size and its most recent CRA rating.
Question 5: The CRA strategic plan option allows a bank to:
- Defer CRA compliance for up to three years while developing internal systems
- Set its own measurable CRA goals, subject to public comment and regulatory approval (Correct answer)
- Be exempt from the lending test if it commits to community investment targets
- Use peer bank benchmarks instead of assessment-area-specific targets
Correct answer: Set its own measurable CRA goals, subject to public comment and regulatory approval
Under the strategic plan option, a bank may develop its own CRA goals, make the plan available for public comment, and then submit it to its regulator for approval, providing a customized compliance framework.
Question 6: Which federal agencies are responsible for conducting CRA examinations?
- The SEC, FINRA, and the Treasury Department
- Only the CFPB for all consumer compliance matters
- The Federal Reserve, OCC, and FDIC (Correct answer)
- The NCUA for all federally insured institutions
Correct answer: The Federal Reserve, OCC, and FDIC
The three primary federal bank regulators — the Federal Reserve (state member banks), OCC (national banks and federal thrifts), and FDIC (state nonmember banks) — each conduct CRA examinations for their supervised institutions.
Question 7: Which of the following would MOST likely qualify as a CRA investment under the investment test?
- Purchasing U.S. Treasury bills for the bank's investment portfolio
- Investing in a Low-Income Housing Tax Credit (LIHTC) partnership in the assessment area (Correct answer)
- Acquiring stock in a large regional competitor bank with strong earnings
- Buying AAA-rated commercial mortgage-backed securities on the secondary market
Correct answer: Investing in a Low-Income Housing Tax Credit (LIHTC) partnership in the assessment area
Investments in LIHTC projects that benefit LMI populations or areas in the bank's assessment area are a classic example of qualified CRA investments, satisfying the primary community development purpose requirement.
CRCM Community Reinvestment Act (CRA) Compliance 2
Which of the following BEST qualifies as a community development service under CRA?