OCC 2004-33 OCC Bulletin Subject: Community Reinvestment Act Regulations Description: Joint Interim Rule Date: July 20, 2004 TO: Chief Executive Officers and Compliance Officers of All National Banks, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties The Office of the Comptroller of the Currency (OCC), along with the Office of Thrift Supervision, Federal Reserve Board (Board), and Federal Deposit Insurance Corporation (the agencies), has issued a joint interim rule for the Community Reinvestment Act (CRA) regulations. This joint interim rule does not make substantive changes in the requirements of the CRA regulations. Instead, it conforms the CRA regulations to changes in: the Standards for Defining Metropolitan and Micropolitan Statistical Areas published by the U.S. Office of Management and Budget (OMB); census tracts designated by the U.S. Bureau of the Census (Census); and the Board’s Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). It also makes a technical correction to a cross-reference within the CRA regulations. The joint interim rule was effective July 8, 2004. The agencies invite comments on this joint interim rule; comments are due September 7. This OCC bulletin distributes the joint interim rule, summarizes the effect of the changes on HMDA and CRA loan data collection and reporting, and provides recommendations for integrating these changes into national banks’ HMDA and CRA programs. Background In December 2000, OMB revised its Standards for Defining Metropolitan and Micropolitan Areas. OMB finalized new metropolitan statistical area (MSA) boundaries in February 2004. These OMB changes were retroactive to December 2003. OMB changed the boundaries of many existing MSAs, created 49 new MSAs, and created some new types of statistical areas, including metropolitan divisions (MDs). OMB’s changes resulted in a total of 369 MSAs and 29 MDs. The new identifying numbers for MSAs and MDs have five digits, versus four digits under the obsolete standards. In addition to MDs, the new OMB statistical areas include micropolitan statistical areas (MicroSAs), combined statistical areas, and definitions for New England city and town areas, divisions and combined areas. The terms “consolidated MSA” (CMSA) and “primary MSA” (PMSA), from OMB’s 1990 standards, have been eliminated. Instead, the 11 largest MSAs have been subdivided into two or more MDs. Each MD consists of one or more counties that represent an employment center within the larger MSA. Definitions and lists of these areas are included with OMB Bulletin 04-03, available at www.whitehouse.gov/omb/bulletins/. Also, this joint interim rule addresses changes made by Census and the Board. Census eliminated the term “block numbering area” in conjunction with its 2000 census. Instead, all areas are designated as “census tracts.” The Board substantially revised Regulation C (12 CFR 203) in 2002, effective January 1, 2004. Among other changes, the revised Regulation C simplified the definition of “refinancing” so that now a loan is reportable as a refinancing if an obligation satisfies and replaces another obligation, and both the existing obligation and the new obligation are secured by a lien on a dwelling. 12 CFR 203.2(k)(2) Joint Interim Rule To conform the current CRA regulations to the changes by OMB, Census, and the Board, the joint interim rule: 1. Removes the definition of CMSA and all references to CMSA, replacing these references with MSA; 2. Revises the definition of MSA to remove the reference to PMSA; 3. Adds a definition for MD; 4. Revises the regulation to allow an institution to designate an assessment area that includes one or more MDs, just as an institution was allowed to designate an assessment area that included one or more PMSAs in the 1995 regulation; 5. Adds a definition for “nonmetropolitan area” and changes the reference for “non-MSA portion of each state” to “nonmetropolitan portion of each state” to ensure clarity; 6. Omits the term “block numbering area,” consistent with Census changes; 7. Amends the definition of “home mortgage loan” to include refinancings, as well as home purchase loans and home improvement loans, as defined in 12 CFR 203.2, consistent with Board changes to Regulation C; and 8. Corrects an error in the 1995 CRA rule in the cross-reference found in 12 CFR 25.27(g)(1). HMDA and CRA Programs Data Collection and Reporting Beginning January 1, 2004, HMDA and CRA data must be collected using the new OMB definitions. These data must be submitted by March 1, 2005. For HMDA and CRA purposes, only MSAs and MDs will be recognized: institutions subject to HMDA or CRA data collection and reporting have been instructed to report property location using MSA code or MD code if the property is located in an MD. MicroSAs and nonclassified areas are considered nonmetropolitan for all purposes under HMDA and CRA. Refer to the Web site of the Federal Financial Institutions Examination Council (FFIEC) at www.ffiec.gov for data collection software, file specifications, and submission instructions. In addition, due to the creation of 49 new MSAs and the changes to the boundaries of existing MSAs, more banks may be subject to the data collection and reporting requirements of HMDA. For example, a national bank may now have an office either in a new MSA or a revised MSA as of December 31, 2003. Also, some counties that were previously outside any MSA are now included within the boundaries of an MSA requiring banks to report the MSA/MD five-digit codes. Refer to the 2004 version of a Guide to HMDA Reporting: Getting It Right! at www.ffiec.gov/hmda/ for complete instructions on reporting property locations. Assessment Areas The application of OMB’s 2000 standards also may affect CRA assessment area delineations. For example, using OMB’s standards that were in effect prior to December 2003, a bank delineated an entire MSA as its assessment area. However, the 2000 standards may have resulted in a county being added to or deleted from that MSA. The bank should determine whether any changes to the relevant MSA boundaries have an impact on its assessment area delineation, and if so, whether the assessment area delineation remains reasonable. Refer to OMB Bulletin 04-03 for complete lists of every MSA and MD. Refer to the CRA regulation for the definition of assessment area. Median Family Income When the boundaries of an MSA change, the median family income values for that MSA and the statewide nonmetropolitan area generally change also. Therefore, OMB’s designation of the MSA and MD boundaries required the determination of revised median family income values for the new and revised geographies (MSAs, MDs, and statewide nonmetropolitan areas). Estimated median family income values for existing and new MSAs, MDs, and statewide nonmetropolitan areas, using Census 2000 income data, have been posted to the FFIEC Web site. These estimated median family income values may be used for HMDA and CRA data and program purposes, to determine the income levels of geographies. Recommendations for Banks · Determine whether the bank is subject to HMDA data collection and reporting as a result of OMB’s new standards. · Determine whether the bank is subject to any change(s) in HMDA and CRA data collection reporting due to MSA changes, i.e., reporting the MSA/MD five- digit codes, instead of “NA” or “99999,” respectively. · Review data collection processes for HMDA and CRA data to ensure that property locations are accurately reported. · Revisit assessment area delineations in light of the MSA boundary changes. · Use estimated median family income values for MSAs, MDs, or statewide nonmetropolitan areas, as applicable, to identify the income levels of geographies. · Update public file information. · Retain a description of the bank’s assessment area delineation prior to January 1, 2004, for examination purposes. · Adjust CRA program implementation, as applicable, to reflect MSA and assessment area changes, if any. · Discuss any significant changes resulting from the new OMB definitions that may affect the bank’s CRA performance context with the appropriate examiner. For more information on HMDA and CRA data collection and reporting requirements and changes made by OMB, see the FFIEC Web site, at www.ffiec.gov. The following resources are available at that site: · HMDA Reporting: Getting It Right, effective January 1, 2004. · A Guide to CRA Data Collection and Reporting. · HMDA and CRA data collection software and instructions. · Interagency CRA Questions and Answers, which includes a section on data collection and reporting. Other sources of information: OMB Bulletin 04-03 and 03-04; see www.whitehouse.gov/omb/bulletins/. Questions may be directed to the appropriate supervisory office or the Compliance Department at (202) 874-4428. ______________________________________ Ann F. Jaedicke Deputy Comptroller for Compliance Attachment: 69 FR 41181 [http://www.occ.treas.gov/fr/fedregister/69fr41181.pdf]