We believe you may report your multi-family mortgage loans originated through HUD’s Neighborhood Stabilization Program (NSP) as “community development loans” for purposes of the Community Reinvestment Act (CRA) if the loans meet certain requirements in the CRA rules. Since your financial institution is a large financial institution, this will impact your CRA lending analysis under the lending test. See, 12 CFR 345.21(a)(1)12 CFR 345.22(b)(4).
The CRA rules define a “community development loan” as a loan that:
(1) Has as its primary purpose community development
(2) Except in the case of a wholesale or limited purpose bank:
(i) Has not been reported or collected by the bank or an affiliate for consideration in the bank's assessment as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to part 203 of this title
(ii) Benefits the bank's assessment area(s) or a broader statewide or regional area that includes the bank's assessment area(s).
12 CFR 345.12(h). (emphasis added) [Note that Appendix A to Part 203 (“Form and Instructions for Completion of HMDA Loan/Application Register”) simply references multi-family housing as being distinct from one-to-four family housing and manufactured housing. See, Appendix A, Section IA4 (“Types of Property”).] Put another way, the relevant parts of the above definition of “community development loan” are subsections (1) and (2)(ii) of Section 345.12(h).
With respect to loans, the CRA rules define the term “community development” to mean loans that:
(i) Support, enable or facilitate projects or activities that meet the “eligible uses” criteria described in Section 2301(c) of the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110- 289, 122 Stat. 2654, as amended, and are conducted in designated target areas identified in plans approved by the United States Department of Housing and Urban Development in accordance with the Neighborhood Stabilization Program (NSP);
(ii) Are provided no later than two years after the last date funds appropriated for the NSP are required to be spent by grantees; and
(iii) Benefit low-, moderate-, and middle-income individuals and geographies in the bank's assessment area(s) or areas outside the bank's assessment area(s) provided the bank has adequately addressed the community development needs of its assessment area(s).
Provided that your multi-family NSP loans meet the three requirements in Section 345.12(g)(5) above – along with the requirement in Section 345.12(h)(2)(ii) that the loans are being made in your assessment area, which you say is the case – they should be reportable as community development loans for CRA purposes. You will need to compare the facts involving the loans in question in order to determine whether they meet these three requirements.
For more background information and common questions on the Community Reinvestment Act and HUD’s NSP Program, see the Philadelphia Fed Consumer Compliance Outlook: Fourth Quarter 2011 — The Community Reinvestment Act and HUD’s Neighborhood Stabilization Program.