Opinion on credit under the Community Reinvestment Act (CRA) for lenders who participate in the Neighborhood Stabilization Program (NSP)

By the Division of Banks


April 27, 2009

Judith S. Jacobson
Deputy Director & General Counsel
Massachusetts Housing Partnership
160 Federal Street
Boston, Massachusetts 02110

Dear Ms. Jacobson:

The Division of Banks (Division) has reviewed your correspondence dated April 16, 2009 requesting a position on providing credit under the Community Reinvestment Act (CRA) for lenders who participate in the Neighborhood Stabilization Program (NSP). The Division regulates state-chartered banks and credit unions for compliance with the CRA under section 14 of chapter 167 of the General Laws and its implementing regulation 209 CMR 46.00 et seq.; and certain licensed mortgage lenders pursuant to section 3 of chapter 255E of the General Laws and its implementing regulation 209 CMR 54.00 et seq. for compliance with the Mortgage Lender Community Investment regulation.

Your letter notes that the Massachusetts Housing Partnership (MHP) and MassHousing are offering a Homebuyer Incentive/Rehabilitation Program to encourage low- and moderate-income homebuyers to purchase and rehabilitate foreclosed properties utilizing funding from NSP. The properties purchased must be in one of the NSP-eligible areas in the Commonwealth as determined by the Department of Housing and Community Development (DHCD) to be the "areas of greatest need." The question is that the income level limit under NSP rules, 120% of area median income, would include borrowers that exceed the limits of low- to moderate-income borrowers under the CRA evaluation. Additionally, although the "areas of greatest need" would tend to be located in low- to moderate-income geographies, this may not always be the case depending on the location of the census tract of the particular property in question.

Regardless of the income level or census tract designation, the importance of encouraging lenders to participate in this program is recognized. In addition to the credit an institution would receive when the borrower and the property location fell into the parameters of low- to moderate-income, the CRA could recognize participation in this program as Community Development. Community Development is defined, in part, as "[a]ctivities that revitalize or stabilize

(1) Low- or moderate-income geographies;
(2) Designated disaster areas; or
(3) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency; or
(4) Any other such area as determined by the Commissioner based on-
(A) Rates of poverty, unemployment, and population loss; or
(B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals.

The purpose of the NSP is to encourage low- to moderate-income homebuyers to purchase and improve foreclosed properties which will help stabilize geographic areas that have experienced economic distress due to excessive foreclosures. Further, these geographic areas are predominantly low- to moderate-income neighborhoods. Therefore, the Division would consider the NSP to be eligible for consideration as community development and loans originated under this program to be community development loans under CRA.

This analysis of applicable state law and related regulations was made on the basis of your written request. It remains the position of the Division that each financial institution is to determine which actions will allow it to comply with CRA within safe and sound banking practices. Accordingly, this letter is not an endorsement of your program by the Division.

The conclusions reached in this letter are based solely on the facts presented. Fact patterns which vary from that presented may result in a different position statement from the Division.

Very truly yours,

Steven L. Antonakes
Commissioner of Banks