PCDC Comments on Proposed CRA Changes

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PCDC recently commented on proposed revisions to the Community Reinvestment Act (CRA), the federal law that requires banks to meet the credit needs of surrounding communities, particularly low- and moderate-income neighborhoods.

“Changes to the CRA regulatory framework could have a significant impact on the community development financial institution (CDFI) industry’s capacity to lend and invest in low-wealth markets and contribute to economic revitalization,” wrote PCDC CEO Louise Cohen in a letter to federal authorities.

Enacted in 1977, the CRA was created to help counter informal and institutional prejudice in mortgage and business lending. Under proposed changes to the CRA framework, banks would be given wider latitude in determining lending, with serious implications for CDFIs and lower-income communities.

As a CDFI, PCDC provides flexible, affordable capital to community-based health providers. Nearly 35 percent of its current capital available for lending is from CRA-eligible financial institutions. 

PCDC has provided direct-financing and leveraged more than $1 billion across 130 primary care health center projects, with more than $5 of private investment for each $1 of public investment. These projects have enabled primary care access for millions of patients, created more than 10,000 jobs in low-income communities, and transformed more than 1.6 million square feet of space.

Federally Qualified Health Centers (FQHCs) — the primary recipients of PCDC’s lending activity — increase access to care by reducing barriers for patients, including cost, distance, lack of insurance, and language. More than 1,400 FQHCs serve 27 million patients across all 50 states.

Read the full letter below.


November 19, 2018

The Honorable Joseph Otting
Comptroller of the Currency
Office of the Comptroller of the Currency
400 7th St SW #3E-218
Washington, DC 20219

Re: Reforming the Community Reinvestment Act Regulatory Framework


Dear Comptroller Otting:

The Primary Care Development Corporation (PCDC) appreciates the opportunity to comment on Docket ID OCC–2018-0008, the “Advanced Notice of Proposed Rulemaking (ANPR) on Reforming the Community Reinvestment Act Regulatory Framework.” Our organization strongly supports the Community Reinvestment Act (CRA) while also acknowledging that there are aspects of the law and its administration that could be improved.

PCDC is a Community Development Financial Institution (CDFI) that invests in communities by providing flexible, affordable capital to community-based health providers to meet the primary health care needs in their communities. Nationally, PCDC has provided direct-financing and leveraged more than $1 billion across 130 primary care health center projects, with more than $5 of private investment for each $1 of public investment. These projects have provided primary care access for millions of patients, created more than 10,000 jobs in low-income communities, and transformed more than 1.6 million square feet of space. Nearly 35 percent of PCDC’s current capital available for lending is from CRA eligible financial institutions.

As the primary recipient of PCDC’s lending activity, Federally Qualified Health Centers (FQHCs) increase access to care by reducing barriers such as cost, distance, lack of insurance, and language for their patients.  Nationally, there are over 1,400 FQHCs serving 27 million patients in all fifty states. FQHCs also provide highly efficient and cost-effective care, generating $24 billion in savings for the health care system annually and providing care for one-sixth the average cost of an emergency department visit.[1]



The Community Reinvestment Act has been a primary factor enabling the CDFI industry to grow and deliver responsible financial services and products to low-wealth communities. Changes to the CRA regulatory framework could have a significant impact on the CDFI industry’s capacity to lend and invest in low-wealth markets and contribute to economic revitalization. There are currently more than 1,100 CDFIs certified by the Department of Treasury’s Community Development Financial Institutions (CDFI) Fund with over $150 billion in total assets.[2] With cumulative net charge-off rates of less than 1 percent, CDFIs lend prudently and productively in exactly the low- and moderate-income (LMI) communities that are the focus of CRA.

CDFIs rely on the CRA to incentivize banks to make credit and capital available to underinvested communities. Banks typically meet their CRA obligations through their own direct lending however in recent years, CDFI-bank partnerships have flourished because banks recognize the CDFI industry’s strong track record. Under current CRA regulations and guidance, banks are assured CRA consideration for community development lending including loans and investments to CDFIs. (See Appendix). Existing guidance from the OCC, Federal Reserve Board of Governors and Federal Deposit Insurance Corporation regarding treatment of CDFIs should be retained and strengthened in any modernization of CRA regulations.


Access to Credit in Underserved Communities Must Remain CRA’s Primary Goal

CRA continues to be an important mechanism for encouraging banks to extend credit to LMI communities, but a complex regulatory regime inhibits adequate capital from flowing to these communities. PCDC agrees with OCC’s stated goal in the ANPR “to revise the CRA regulations to encourage more local and nationwide community and economic development – and thus promote economic opportunity – by encouraging banks to lend more to LMI areas, small businesses and other communities in need of financial services.”[3]

The primary purpose of CRA is to ensure that banks meet the credit and financial services needs of LMI communities. Ten years after the Great Recession, credit standards remain tight and some borrowers still face significant challenges accessing capital. Restricted capital access has an adverse impact on the markets that CDFIs serve, many of which have yet to fully rebound from the financial crisis. There is still a need for a CRA that is focused on connecting low- and moderate-income places and people with the financial mainstream, and ensuring access to fair, affordable financial products and services.

As the OCC notes in the ANPR, CRA modernization is also necessary because both the financial services industry and community development practice have changed dramatically since the passage of the law in 1977. Changes to the regulatory framework are overdue, and necessary in order to align with how financial services are delivered today.

Greater transparency and predictability must also be a goal of CRA modernization and would benefit communities, CDFIs and their bank partners. Increased clarity in advance regarding which activities will receive CRA credit is particularly important. Banks will provide more financing, especially for community development, if they can be reasonably confident that activities will receive CRA credit.



Recommendation: Oppose Moving to a CRA Test Based on a Single Ratio Metric

Substituting the existing lending, investment and service tests for a single metric is not a constructive reform. A single ratio metric that measures total dollar volume of CRA activity as it relates to a bank’s size would undervalue the unique economic conditions existing in different communities as well as the highly divergent business models pursued by different banks. The challenges facing LMI neighborhoods in Washington, DC are very different from those in Baltimore, MD or rural counties in Virginia. Internet banks with customers spread across the nation are very different from retail banks with hundreds of branches. One size does not fit all.

With a single ratio metric, a bank could make the rational choice to meet its CRA obligations by engaging in fewer, larger deals. Low-and moderate-income markets where incomes and home values are lower would be at a disadvantage in attracting CRA-motivated bank investment. Highly impactful activities that are complex – such as in community-based health care lending, longer-term, smaller, or not maximally profitable would be less attractive to a bank seeking to hit a certain dollar goal for CRA activity. One $5 million deal is an easier transaction for a bank to make than five $1 million loans to expand treatment services, recruit new health providers, upgrade new electronic health records systems, implement care coordination models, and better integrate substance use disorder services.

Bank partnerships with CDFIs are among the most impactful for low- and moderate-income communities but these CDFI transactions are usually small scale. Under a single ratio CRA test, banks are likely to choose the easier transaction over the more complicated CDFI transaction even if CDFI activity is weighted more or secures “extra credit.”



Recommendation: Treat Certified CDFIs the same as Minority- and Women-Owned Depository Institutions and Low-Income Credit Unions.

CRA regulations should explicitly afford CDFIs the same status as current law provides for minority- and women-owned depository institutions and low-income credit unions (MWLI). The CRA provides that, in assessing the CRA performance of banks, examiners may consider capital investments, loan participations, and other ventures undertaken in cooperation with MWLIs, provided that these activities help meet the credit needs of local communities in which the MWLIs are chartered. Banks receive CRA consideration for said ventures regardless of whether these communities overlap with the bank’s CRA assessment areas.

In 1977, the CDFI industry was nascent and the US Department of the Treasury’s CDFI Fund had not yet been created; however, with the passage of the Riegle Community Development and Regulatory Improvement Act of 1994, a system for supporting mission-driven financial institutions serving low wealth communities was established.

One of the first actions the CDFI Fund took was to implement a system for screening and credentialing financial institutions seeking to operate as “certified CDFIs”. To obtain CDFI certification, a financial institution is required to:

  • Have a primary mission of promoting community development. Certified CDFIs must direct at least 60% of financial product activities to areas meeting certain poverty or income standards, low-income targeted populations, or other targeted populations that lack adequate access to capital and historically have been denied credit.
  • Provide both financial and educational services.
  • Serve and maintain accountability to one or more defined target markets.
  • Maintain accountability to a defined market through representation on a governing or advisory board or through outreach activities.
  • Be a legal, non-governmental entity at the time of application (with the exception of Tribal governmental entities)

Today, CDFI certification by the US Treasury is an established credential, recognized by the federal government as well as the private sector. CDFI Certification is a precondition for participating in numerous federal programs not only at the CDFI Fund but at the Small Business Administration, US Department of Agriculture, and HUD.[4] The Federal Home Loan Bank System requires CDFI certification in considering a CDFI loan fund for membership. Bank regulators can rely with confidence on CDFI certification as a legitimate credential for determining a financial institution’s accountability to community development mission.

Such an update to the regulations recognizes the increasingly valuable role CDFIs have played in low-wealth markets since the CRA was first enacted. More importantly, it could result in expanded investment in “CRA deserts” including many of the nation’s rural and Native communities.


Recommendation: Offer equal treatment to banks for making loans to CDFIs as they currently receive for investments.

Bank loans to CDFIs should receive CRA credit for each year the loan is outstanding. Currently, investments made in prior exam periods generate CRA credit but loans do not. This policy incents banks to make short-term loans that correspond to their exam cycle rather than longer-term loans that better meet the needs of CDFI borrowers.


Recommendation: Offer greater CRA credit for loan originations than loan purchases, particularly sequential purchases of the same mortgage backed security.

In determining CRA credit, loan originations should be valued more highly than loan purchases. PCDC recommends that the regulators limit how many banks may get CRA credit for sequential purchases of the same mortgage backed securities (MBS), particularly single-family MBS guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae which are highly liquid.



Recommendation: Improve accessibility of CRA performance and other data

The existing CRA reporting system makes it difficult for the public to analyze CRA performance data and assess how well banks are meeting the needs of communities. CRA reports on an individual bank’s performance are very complex and rarely timely, limiting their usefulness.

Regulators should require banks to report on their investments and lending with CDFIs. Currently banks are not required to report on the community development lending or investments undertaken in concert with a CDFI. This makes it difficult to track, measure and assess this activity. Banks should be required to collect and report on whether they are partnering with a certified CDFI and the loan or investment amounts where applicable.



PCDC appreciates the opportunity to comment on potential changes to the CRA regulatory framework. We also hope you will consider the comments of CDFI membership organizations including the Lenders Coalition for Community Health Centers, the CDFI Coalition, and the Opportunity Finance Network. Please do not hesitate to contact me with any questions or concerns.


Louise Cohen, CEO
Primary Care Development Corporation (PCDC)


[1] The National Association of Community Health Centers.  Accessed November 19, 2018.  http://www.nachc.org/about-our-health-centers/how-health-centers-make-a-difference/2018.

[2] Annie Donovan, “Directors Report”, CDFI Fund Advisory Board Meeting, August 23, 2018. Accessed October 29, 2018. http://treas.yorkcast.com/webcast/Play/7b6cdda3ecd142dea1051ddc12fc3dad1d?autostart=true

[3] Office of the Comptroller of the Currency, “Advance notice of proposed rulemaking: Reforming the Community Reinvestment Act Regulatory Framework, August 28, 2018. https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-87a.pdf

[4] SBA: Community Advantage program, USDA: Rural Development Community Facilities Relending Program, HUD/FHA: Section 542(b) risk share program for multi-family housing