CRA Qualification Of Credit Union Mortgage Investment Pool - Q4 1998

By the Division of Banks

A credit union questioned whether its participation in a credit union mortgage investment pool would receive consideration as a qualified invest under the Massachusetts Community Reinvestment Act (CRA), found at Mass. Gen. Laws chapter 167, section 14 and its implementing regulations 209 CMR 46.00 et seq. The Investment Test, as defined by 209 CMR 46.23(1), evaluates an institution's record of helping to meet the credit needs of its assessment area(s) through qualified investments which benefit that area or a broader region that includes the assessment area. A qualified investment is defined by 209 CMR 46.12 as "a lawful instrument, deposit, membership share, or grant that has as its primary purpose community development." Community development is further defined in 209 CMR 46.12. Under the CRA, a credit union will not be evaluated under the investment test except as provided under 209 CMR 46.61(6)(c). A credit union that achieves at least a "satisfactory" rating under the lending and service tests may warrant consideration for an overall rating of "high satisfactory" or "outstanding" by having the Division consider its performance in making qualified investments and community development loans to the extent authorized by law. In determining whether certain mortgage investment pools would qualify under the CRA, the Division looks to two issues: (1) whether the institution's assessment area is benefited by the investment; and (2) whether the majority of the loans originated through the pool are to borrowers with incomes below 80% of the area median income. For credit unions which define their membership as their assessment area, the Division will consider the degree to which the investment provides any benefit in meeting the needs of the membership. The Division's position is that each financial institution is to determine which actions will allow it to comply with CRA within safe and sound banking practices.