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This opinion was issued in the fourth quarter of 1998.
The Commonwealth's Community Reinvestment Act ("CRA") is codified at Mass. Gen. Laws chapter 167, section 14 and its implementing regulations 209 CMR 46.00 et seq. In determining whether certain real estate loans, to be securitized in a Fannie Mae Mortgage Backed Security, would qualify under the CRA, the Division looks to two issues: (1) is a bank's investment in said security considered to be a qualified investment; and (2) does the securitization of the real estate loans receive positive consideration under the Investment Test section of CRA?
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 that benefits 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." The Division would consider an institution's investment in a Fannie Mae, CRA targeted Mortgage Backed Security to be a qualified investment, provided the investment benefits the institution's assessment areas or a broader region which includes the institution's assessment area.
When an institution proposes to include home mortgage loans to low- and moderate-income borrowers, rather than community development loans, as part of its CRA requirements, the Division examines said mortgages under the lending test of the CRA examination. Such loans may be qualified investments - thus, the institution could securitize them in the previously mentioned Mortgage Backed Security and then hold said Security in its investment portfolio. These qualified investments, however, will be examined in terms of the institution's overall investment performance. The Division especially will examine the degree to which any net new benefit to meeting community credit needs is achieved.