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5 Requirements for Community Reinvestment Act (CRA) Compliance

November 12, 2021
Banking, lending, and other financial institutions are required to remain in compliance with a long list of regulations, including those established by the Community Reinvestment Act (CRA) of 1977. Regulatory compliance today, however, is more complicated now than it might have been in 1977 when this legislation was first enacted. Years of examination and the […]

Banking, lending, and other financial institutions are required to remain in compliance with a long list of regulations, including those established by the Community Reinvestment Act (CRA) of 1977. Regulatory compliance today, however, is more complicated now than it might have been in 1977 when this legislation was first enacted. Years of examination and the guidance implied in the results have left institutions both actively planning and executing on community engagement while still unsure about how their efforts might be interpreted by regulators. Therefore, in addition to pursuing a robust set of activities in distressed and underserved areas, financial organizations will be better prepared for scrutiny by capturing comprehensive evidence of activities and producing extensive analytics and reports to establish a record of CRA compliance, a task that can be very challenging to accomplish without the right systems in place. 

We’ll explore the five most important CRA and fair lending compliance activities and how financial organizations can benefit from implementing the right CRA reporting systems and resources.

What is the Community Reinvestment Act (CRA)?

According to the FDIC, “The Community Reinvestment Act (CRA) is a law intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighborhoods, consistent with safe and sound banking operations.” In combination with fair lending regulations, the CRA is intended to hold financial institutions accountable for providing equitable credit assistance to all the communities these institutions serve. To do this, financial institutions must:

  • Assess their record of meeting the credit and investment needs of the entire community in which they operate, inclusive of LMI areas
  • Provide available and effective access to retail services and community development resources in LMI areas
  • Report that record to the appropriate federal agency for CRA evaluation under FFIEC guidelines

While the direct consequences of CRA noncompliance may not appear on the surface as severe as fair lending noncompliance, the risks of CRA noncompliance remain essential for banks to consider when developing compliance protocols. Failure of adherence to CRA regulations can impact:

  • Reputation in the community: CRA assessment results are released to the public, which can affect your financial institution’s reputation of meeting credit needs in the local community.
  • Expandability: An institution’s CRA record is taken into consideration when applying for deposit facilities, such as mergers and acquisitions.
  • Examination frequency: The poorer your CRA performance, the more frequently your financial organization will need to submit to CRA assessments.

5 Requirements for CRA Reporting

Every lending institution should consider a number of factors when preparing for CRA reporting. When evaluating different CRA software, the consideration of certain key factors is critical to this important exercise.  

1. Analysis

Financial institutions need to be able to access in-depth analytics that can be pulled together easily to support a banking agency’s efforts in CRA compliance. Sifting through extensive data and records can be challenging and time-consuming for individuals, but the right CRA software is designed exactly for the performance of this crucial task. RiskExec from Asurity is designed by lending, regulatory, and technology experts to analyze your financial processes and to identify potential compliance risks. Using RiskExec, the leading solution in CRA compliance, you can automate your necessary CRA data protocols and allow this essential data to be gathered behind the scenes.

2. Insights

While the compiling of data records is essential for CRA regulations, any data can be twisted to misrepresent your organization’s compliance efforts. Certain data, when cast in a different light, can be used to present unfair claims, forcing costly litigation defense or settlements and causing significant harm to your institution’s reputation. Your analytics are only as good as the insights used to interpret the data in a way that is beneficial to your organization, which is where a powerful CRA software comes in. Asurity’s CRA solutions analyze and interpret trends against internal goals, as well as provide peer analysis of market share reports.

3. Corrective Action

If insights are properly developed from meaningful data, they should create a clear path for financial institutions to make informed decisions for the future of the organization and its CRA compliance. The CRA requires that any disparate credit treatment of LMI communities be addressed quickly and effectively, and the insights gleaned from accurate data will inform corrective action. RiskExec analyzes your organizational data, insightfully interprets it, and identifies real opportunities for movement toward an improved CRA rating. 

4. Reporting

Extensive data, analytics, and evidence of community engagement need to be compiled into reports and delivered to appropriate governing bodies; due to its complex nature, this task can be incredibly painstaking and time-consuming. RiskExec’s CRA software not only collects this imported data, but it performs automated CRA and HMDA reporting to empower financial institutions to fulfill federal regulatory requirements at the appropriate times. 

5. Maintenance

CRA compliance is not a one-and-done process — it is ongoing and needs to be perpetually addressed to ensure continued adherence to CRA regulations. Rather than reacting too late to a poor CRA rating from federal agencies, RiskExec will constantly run analytical procedures in the background so that noncompliance risks can be identified and addressed proactively.

Get Started with RiskExec CRA Software

CRA compliance is essential to ensuring the credit needs of consumers in all communities are met and for the longevity of any financial institution. While maintaining compliance can be intimidating and complicated, the right CRA software can ensure the correct data is gathered and reported to governing agencies. To learn more about how RiskExec from Asurity can help your organization maintain CRA compliance, contact us today.

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