Community Reinvestment Act; Questions and Answers Regarding Community Reinvestment; Notice, 18807-18813 [06-3471]

Agencies

• DEPARTMENT OF THE TREASURY
• Office of Thrift Supervision
• Thrift Supervision Office

[Federal Register Volume 71, Number 70 (Wednesday, April 12, 2006)]
[Notices]
[Pages 18807-18813]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-3471]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[No. 2006-17]


Community Reinvestment Act; Questions and Answers Regarding 
Community Reinvestment; Notice

AGENCY: Office of Thrift Supervision (OTS).

ACTION: Notice and request for comment.

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SUMMARY: This proposal would revise OTS guidance relating to the 
Community Reinvestment Act (CRA). Accompanying this proposal and 
published in the Rules and Regulations portion of today's Federal 
Register, is a Final Rule revising the definition of ``community 
development'' in OTS's CRA rule. This proposal addresses topics related 
to that Final Rule among others. Public comment is invited on the 
proposed guidance, as well as any other community reinvestment issues.

DATE: Comments on the proposed questions and answers are requested by 
June 12, 2006.

ADDRESSES: You may submit comments, identified by No. 2006-17, by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail address: regs.comments@ots.treas.gov. Please 
include No. 2006-17 in the subject line of the message and include your 
name and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: No. 2006-17.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: 
Regulation Comments, Chief Counsel's Office, Attention: No. 2006-17.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to the OTS Internet Site at https://www.ots.
treas.gov/pagehtml.cfm?catNumber=67&an=1, including any personal 
information provided.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.ots.treas.gov/
pagehtml.cfm?catNumber=67&an=1.
    In addition, you may inspect comments at the Public Reading Room, 
1700 G Street, NW., by appointment. To make an appointment for access, 
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or 
send a facsimile transmission to (202) 906-7755. (Prior notice 
identifying the materials you will be requesting will assist us in 
serving you.) We schedule appointments on business days between 10 a.m. 
and 4 p.m. In most cases, appointments will be available the next 
business day following the date we receive a request.

FOR FURTHER INFORMATION CONTACT: Celeste Anderson, Senior Program 
Manager, Operation Risk, (202) 906-7990; Richard Bennett, Counsel, 
Regulations and Legislation Division, (202) 906-7409, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    Elsewhere in today's Federal Register, OTS is publishing a final 
rule revising its CRA rule effective immediately. That final rule 
revises the definition of ``community development'' to include 
activities to revitalize and stabilize distressed or underserved, 
nonmetropolitan middle-income areas and designated disaster areas. It 
also makes a technical change to the lettering of the definitions in 
the CRA rule to conform to that used in the CRA rules of the other 
Federal banking agencies.
    To help savings associations meet their responsibilities under the 
CRA and to increase public understanding of the CRA regulations, OTS, 
the Office of the Comptroller of the Currency (OCC), the Board of 
Governors of the Federal Reserve (Board), and the Federal Deposit 
Insurance Corporation (FDIC) have previously published guidance in the 
form of questions and answers about the CRA regulations. That guidance 
is intended to provide the informal views of agency staff for use by 
examiners and other agency personnel, financial institutions, and the 
public, and is

[[Page 18808]]

supplemented periodically. See Interagency Questions and Answers 
Regarding Community Reinvestment, 66 FR 36620 (July 12, 2001) (2001 
Interagency Q&As).
    Today, OTS is issuing proposed questions and answers to provide 
additional guidance for savings associations. All of this additional 
proposed guidance is substantively identical to final guidance jointly 
issued by the OCC, Board, and FDIC on March 10, 2006 (71 FR 12424). 
However, OTS's proposal only includes questions and answers that 
pertain to its revised definition of ``community development'' and 
certain other provisions of the CRA rule that are common to all four 
agencies. It does not include questions and answers that pertain to 
additional revisions the OCC, Board, and FDIC made to their CRA rules 
in their August 2, 2005 rulemaking (70 FR 44256), since OTS has not 
adopted those revisions to date.
    Just as in the 2001 Interagency Q&As, the proposed questions and 
answers are grouped by the provision of the CRA regulations that they 
discuss and are presented in the same order as the regulatory 
provisions. As a result of technical changes made to the four federal 
banking agencies' CRA rules (70 FR 15570 (March 28, 2005)) and the 
recent revisions, some of the numbering in the 2001 Interagency Q&As no 
longer corresponds to the appropriate sections of the revised 
regulation. However, in the proposed questions and answers, if a 
reference is made to an existing question and answer, the number of the 
existing question and answer, as published in the 2001 Interagency 
Q&As, is given, even if the old reference does not accurately describe 
the current provision in the regulations. When the proposed questions 
and answers are adopted as final and the rest of the questions and 
answers are updated, the references in the questions and answers will 
be updated.

II. Proposed New Questions and Answers

    OTS believes new questions and answers addressing its CRA 
regulation would be helpful. Therefore, it is publishing for comment 
ten new questions and answers.

A. New Questions and Answers on Revised ``Community Development'' 
Definition

    Of the ten proposed new questions and answers, eight address the 
revised definition of ``community development,'' which includes 
activities that revitalize or stabilize a distressed or underserved, 
nonmetropolitan middle-income geography or a designated disaster area. 
Each of these questions and answers is discussed in the order that it 
appears in the text of OTS's proposed revisions.
    1. Is the same definition of community development applicable to 
all savings associations? (Sec.  563e.12(g)(4)-1) The proposed guidance 
clarifies that the same definition of ``community development,'' which 
OTS is revising today, applies to all savings associations.
    OTS's proposed guidance is worded somewhat differently from that 
used by the other federal banking agencies. The question that the other 
federal banking agencies used is, ``Is the revised definition of 
community development, effective September 1, 2005, applicable to all 
banks or only to intermediate small banks?'' OTS's revised definition 
becomes effective today, not September 1, 2005. Also, OTS has not, to 
date, adopted the intermediate small bank test and thus does not use 
that term. Further, OTS is concerned that using the term ``revised'' 
when referring to the definition of community development will cause 
confusion in future years once the revisions are no longer new. 
Instead, OTS focuses the question and answer on whether the same 
definition of community development applies to all savings 
associations.
    2. Will activities that provide housing for middle-income and 
upper-income persons qualify for favorable consideration as community 
development activities when they help to revitalize or stabilize a 
distressed or underserved, nonmetropolitan middle-income geography or 
designated disaster areas? (Sec.  563e.12(g)(4)-2) The proposed 
guidance clarifies that an activity that provides housing for middle-or 
upper-income individuals qualifies as an activity that revitalizes or 
stabilizes a distressed nonmetropolitan middle-income geography or a 
designated disaster area if the housing directly helps to revitalize or 
stabilize the community by attracting new, or retaining existing, 
businesses or residents and, in the case of a designated disaster area, 
is related to disaster recovery.
    OTS generally will consider all activities that revitalize or 
stabilize a distressed nonmetropolitan middle-income geography or 
designated disaster area, but will give greater weight to those 
activities that are most responsive to community needs, including needs 
of low-or moderate-income individuals or neighborhoods. For example, a 
loan solely for middle-or upper-income housing in a community in need 
of financing for low- and moderate-income housing would be given very 
little weight if there is only a short-term benefit to low- and 
moderate-income individuals in the community through the creation of 
temporary construction jobs. OTS will presume that an activity 
revitalizes or stabilizes such a geography or area if the activity is 
consistent with a bona fide government revitalization or stabilization 
plan or disaster recovery plan.
    3. What is a ``designated disaster area'' and how long does the 
designation last? (Sec.  563e.12(g)(4)(ii)-1) The proposed guidance 
explains that the term ``designated disaster area'' refers to federally 
designated disaster areas. State disasters or emergencies are usually 
declared as a prerequisite for Federal disaster assistance. Thus, 
restricting the term to federally designated disaster areas would not 
appear to meaningfully limit the scope of that term.
    Some Federal disaster area designations are solely for the purpose 
of providing short-term public assistance to address debris removal or 
emergency protective measures immediately following an incident--
specifically, Federal Emergency Management Agency (FEMA) Public 
Assistance Emergency Work Category A (Debris Removal) and Category B 
(Emergency Protective Measures). OTS believes that designations for 
these purposes may not exhibit the type of conditions that would 
require sustained disaster recovery-related revitalization or 
stabilization activities.
    Therefore, the proposed guidance states that a ``designated 
disaster area'' is a major disaster area designated by the Federal 
government. Such disaster designations include, in particular, Major 
Disaster Declarations administered by FEMA, but exclude counties 
designated to receive only FEMA Public Assistance Emergency Work 
Category A (Debris Removal) and/or Category B (Emergency Protective 
Measures).
    Although FEMA makes a public announcement of a disaster 
designation, FEMA generally does not announce an expiration of the 
disaster designation. Nor do its regulations provide for the 
designation's expiration. FEMA's regulations and practices entail 
different stages relevant to a disaster designation period, such as the 
incident period, the application period, the work completion deadlines, 
and the period that a joint field office is open, but these periods may 
vary from incident to incident, and may not be relevant to all 
designated disasters. FEMA's regulations establish a requirement that 
permanent public

[[Page 18809]]

assistance work relating to a major disaster must be completed within 
18 months of the disaster designation (44 CFR 206.204(c)) unless FEMA 
grants an extension.
    Accordingly, the proposed guidance states that OTS will consider 
disaster recovery-related activities that help to revitalize or 
stabilize a designated disaster area for 36 months following the date 
of designation by the Federal government. OTS proposes providing a 
uniform 36-month period following disaster designation to provide an 
adequate time period to address the variety of community revitalization 
or stabilization needs that may arise depending on the nature, extent, 
and severity of the particular disaster. Where there is a demonstrable 
community need to extend the period for recognizing revitalization or 
stabilization activities in a particular disaster area to assist in 
long-term recovery efforts, this time period could be extended.
    Finally, OTS would plan to extend substantially the time periods 
for recovery-related activities in the Gulf Coast areas designated as 
disaster areas because of Hurricanes Katrina and Rita. The extension 
beyond 36 months from the dates of the disaster designations would be 
because of the demonstrated community need for long-term involvement by 
financial institutions in helping to address the widespread devastation 
caused by these hurricanes.
    4. What activities are considered to ``revitalize or stabilize'' a 
designated disaster area, and how are those activities considered? 
(Sec.  563e.12(g)(4)(ii)-2) The proposed guidance states that OTS 
generally will consider an activity to revitalize or stabilize a 
designated disaster area if it helps to attract new, or retain 
existing, businesses or residents and is related to disaster recovery. 
An activity will be presumed to revitalize or stabilize the area if the 
activity is consistent with a bona fide government revitalization and 
stabilization plan or disaster recovery plan. OTS generally will 
consider all activities related to disaster recovery that revitalize or 
stabilize a designated disaster area, but will give greater weight to 
those activities that are most responsive to community needs, including 
needs of low-or moderate-income individuals or neighborhoods.
    The proposed guidance provides several examples of activities that 
will be considered to revitalize or stabilize a designated disaster 
area. Qualifying activities may include, for example, providing 
financing to help retain businesses in the area that employ local 
residents, including low- and moderate-income individuals; providing 
financing to attract a major new employer that will create long-term 
job opportunities, including for low- and moderate-income individuals; 
activities that provide financing or other assistance for essential 
community-wide infrastructure, community services, and rebuilding 
needs; and activities that provide housing, financial assistance, and 
services to individuals in designated disaster areas and to individuals 
who have been displaced from those areas, including low- and moderate-
income individuals.
    5. What criteria are used to identify distressed or underserved, 
nonmetropolitan middle-income geographies? (Sec.  563e.12(g)(4)(iii)-1) 
The proposed guidance explains the criteria OTS will use to designate 
nonmetropolitan middle-income geographies that are distressed or 
underserved. Data source information along with the list of designated 
census tracts is published on the Federal Financial Institutions 
Examination Council (FFIEC) Web site (https://www.ffiec.gov).
    6. How often will the list of designated distressed or underserved, 
nonmetropolitan middle-income geographies be updated? (Sec.  
563e.12(g)(4)(iii)-2) The proposed guidance states that the list of 
designated distressed or underserved nonmetropolitan middle-income 
geographies will be updated annually and will be published on the FFIEC 
Web site (https://www.ffiec.gov). It also proposes a twelve-month lag 
period immediately after a census tract is reclassified as no longer 
distressed or underserved. During the lag period, revitalization and 
stabilization activities will receive consideration as community 
development if the activities would have been considered to have a 
primary purpose of community development if the census tract in which 
they were located were still designated as distressed or underserved.
    The list will be updated annually based on annual changes in source 
data and published continuously on the FFIEC Web site. The list will 
indicate which designated census tracts are in their lag periods.
    OTS's proposed guidance contains an editorial, nonsubstantive 
difference from the final guidance of the other federal banking 
agencies. Whereas the other agencies use the terms ``twelve-month'' and 
``one year'' interchangeably when referring to the duration of the lag 
period, OTS uses the term ``twelve-month'' throughout for consistency.
    7. What activities are considered to ``revitalize or stabilize'' a 
distressed nonmetropolitan middle-income geography, and how are those 
activities evaluated? (Sec.  563e.12(g)(4)(iii)-3) The proposed 
guidance explains how revitalization and stabilization activities in 
designated distressed nonmetropolitan middle-income geographies will be 
evaluated. It is consistent with the similar proposed guidance 
applicable to savings associations' revitalization and stabilization 
activities in designated disaster areas. See proposed Q&A Sec.  
563e.12(g)(4)(ii)-2. The proposed guidance specifically states that 
examiners will give greater weight to those activities that are most 
responsive to community needs, including the needs of low-or moderate-
income individuals or neighborhoods.
    8. What activities are considered to ``revitalize or stabilize'' an 
underserved nonmetropolitan middle-income geography, and how are those 
activities evaluated? (Sec.  563e.12(g)(4)(iii)-4) The proposed 
guidance includes a restatement of the standard that appears in the 
regulations, that is, that activities revitalize or stabilize an 
underserved nonmetropolitan middle-income geography if they help to 
meet essential community needs, including the needs of low-or moderate-
income individuals. Activities such as financing for the construction, 
expansion, improvement, maintenance, or operation of essential 
infrastructure or facilities for health services, education, public 
safety, public services, industrial parks, or affordable housing, will 
be evaluated under these criteria to determine if they qualify for 
revitalization or stabilization consideration.

B. Other New Questions and Answers

    Two new questions and answers address consideration of prior-period 
qualified investments and treatment of small savings associations' 
affiliates' activities. Each of these questions and answers is 
discussed in the order that it appears in the text of OTS's proposed 
revisions.
    1. When evaluating a qualified investment, what consideration will 
be given for prior-period investments? (Sec.  563e.12(t)-1) The 
proposed guidance would explain that examiners consider qualified 
investments that were made during the prior evaluation period but that 
are still outstanding during the current evaluation period. This 
guidance would apply to savings associations of all sizes.
    Qualitative factors affect the weight given to both current period 
and outstanding prior-period qualified investments. Although prior-
period investments may receive consideration

[[Page 18810]]

in a savings association's current evaluation, examiners typically 
distinguish between current-period and prior-period investments when 
listing the amounts of a savings association's investments in the 
institution's performance evaluation. Further, examiners use 
qualitative factors to determine how much consideration a savings 
association receives for any given qualified investment. Greater weight 
is given to investments that are responsive to community needs, 
innovative, or complex.
    2. When evaluating a small savings association's performance, will 
examiners consider, at the institution's request, retail and community 
development loans originated or purchased by affiliates, qualified 
investments made by affiliates, or community development services 
provided by affiliates? (Sec.  563e.26-1) The proposed guidance would 
clarify that any small savings association may request that activities 
of an affiliate in the small savings association's assessment area(s) 
be considered in its performance evaluation. Those activities will be 
considered in the small savings association's performance evaluation 
subject to the same constraints that apply to large institutions' 
affiliate activities, including that the activities have not also been 
considered in the CRA evaluation of another institution.
    OTS's proposed question is worded differently from the comparable 
question in the other federal banking agencies' final guidance. Their 
question refers to a ``small or intermediate small bank's 
performance.'' Since OTS has not, to date, adopted the intermediate 
small bank test, OTS's proposed question does not use that term.

III. Revisions to Existing Guidance

    Proposed revisions to two existing questions and answers would 
address community development services and qualified investments. Each 
of these questions and answers is discussed in the order that it 
appears in the text of OTS's proposed revisions.
    A. What are examples of community development services? (Sec.  
563e.12(i)-3) The proposed guidance would revise the existing guidance 
from the 2001 Interagency Q&As (Sec.  563e.12(i)-3), which lists 
examples of community development services, to add two new examples. 
The first new example would state that providing financial services to 
low-or moderate-income individuals through branches and other 
facilities in low-or moderate-income areas is a community development 
service (unless the provision of such services has been considered in 
the evaluation of a savings association's retail banking services under 
Sec.  ----.24(d)).
    The second new example of a community development service would be 
providing international remittance services that increase access to 
financial services by low- and moderate-income persons (for example, by 
offering reasonably priced international remittance services in 
connection with a low-cost account). This example is consistent with 
guidance the four federal banking agencies previously provided in a 
letter responding to a question from a member of Congress.
    B. What are examples of qualified investments? (Sec.  563e.12(t)-4) 
The proposed revision would change a bullet to the existing guidance 
from the 2001 Interagency Q&As that provides examples of qualified 
investments (Sec.  563e.12(r)-4). The revised bullet would indicate 
that an example of a qualified investment includes savings 
associations' investments in Rural Business Investment Companies 
(RBICs). The Rural Business Investment Program (RBIP), which is a joint 
initiative between the U.S. Small Business Administration and the U.S. 
Department of Agriculture, is intended to promote economic development 
by financing small businesses located primarily in rural areas. OTS 
reminds savings associations that they may establish and invest in 
RBICs or entities established to invest solely in RBICs so long as 
those investments do not exceed five percent of the capital and surplus 
of the association. 7 U.S.C. 2009cc-9.

IV. General Comments

    Public comment is invited on the proposed new and revised questions 
and answers. Public comment is also invited on a continuing basis on 
any issues raised by the CRA and the Interagency Q&As. If, after 
reading this proposed guidance and the existing Interagency Q&As, 
financial institutions, examiners, community organizations, or other 
interested parties have unanswered questions or comments about OTS's 
community reinvestment regulations, they should submit them to OTS. OTS 
will consider addressing such questions in future guidance.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    Section 212 of SBREFA, 5 U.S.C. 601 note, requires for each rule 
for which an agency prepares a final regulatory flexibility analysis, 
that the agency publish one or more compliance guides to help small 
entities understand how to comply with the rule. Pursuant to section 
605(b) of the Regulatory Flexibility Act, OTS certified that its 
proposed CRA rule would not have a significant economic impact on a 
substantial number of small entities. 69 FR 68257, 68265 (November 24, 
2004). Likewise, OTS certified that its final rule published in today's 
Federal Register would not have a significant impact on a substantial 
number of small entities.
    Nonetheless, as part of OTS's continuing efforts to provide clear, 
understandable regulations, the four Federal banking agencies have 
compiled the Interagency Q&As and OTS has compiled these proposed 
revisions. These materials serve the same purpose as the compliance 
guide described in the SBREFA by providing guidance on a variety of 
issues of particular concern to small institutions.
    The text of OTS's proposed revisions to the Interagency Questions 
and Answers Regarding Community Reinvestment follows:

Section 563e.12(g)(4) Activities That Revitalize or Stabilize

Section 563e.12(g)(4)--1: Is the same definition of community 
development applicable to all savings associations?
    Yes, one definition of community development is applicable to all 
savings associations.
Section 563e.12(g)(4)--2: Will activities that provide housing for 
middle-income and upper-income persons qualify for favorable 
consideration as community development activities when they help to 
revitalize or stabilize a distressed or underserved, nonmetropolitan 
middle-income geography or designated disaster areas?
    An activity that provides housing for middle-or upper-income 
individuals qualifies as an activity that revitalizes or stabilizes a 
distressed nonmetropolitan middle-income geography or a designated 
disaster area if the housing directly helps to revitalize or stabilize 
the community by attracting new, or retaining existing, businesses or 
residents and, in the case of a designated disaster area, is related to 
disaster recovery. OTS generally will consider all activities that 
revitalize or stabilize a distressed nonmetropolitan middle-income 
geography or designated disaster area, but will give greater weight to 
those activities that are most responsive to community needs, including 
needs of low-or moderate-income individuals or neighborhoods. For 
example, a loan solely to develop middle-or upper-income housing in a 
community in need of low- and moderate-income housing would be

[[Page 18811]]

given very little weight if there is only a short-term benefit to low- 
and moderate-income individuals in the community through the creation 
of temporary construction jobs. (A housing-related loan is not 
evaluated as a ``community development loan'' if it has been reported 
or collected by the institution or its affiliate as a home mortgage 
loan, unless it is a multifamily dwelling loan. See 12 CFR 
563e.12(h)(2)(i) and Q&A Sec. Sec.  ----.12(i) & 563e.12(h)--2.) OTS 
will presume that an activity revitalizes or stabilizes such a 
geography or area if the activity is consistent with a bona fide 
government revitalization or stabilization plan or disaster recovery 
plan. See Q&As Sec. Sec.  ----.12(h)(4) & 563e.12(g)(4)--1 and 
Sec. Sec.  ----.12(i) & 563e.12(h)'4.
    In underserved nonmetropolitan middle-income geographies, 
activities that provide housing for middle- and upper-income 
individuals may qualify as activities that revitalize or stabilize such 
underserved areas if the activities also provide housing for low-or 
moderate-income individuals. For example, a loan to build a mixed-
income housing development that provides housing for middle- and upper-
income individuals in an underserved nonmetropolitan middle-income 
geography would receive positive consideration if it also provides 
housing for low-or moderate-income individuals.
Section 563e.12(g)(4)(ii) Activities That Revitalize or Stabilize 
Designated Disaster Areas
Section 563e.12(g)(4)(ii)--1: What is a ``designated disaster area'' 
and how long does the designation last?
    A ``designated disaster area'' is a major disaster area designated 
by the Federal Government. Such disaster designations include, in 
particular, Major Disaster Declarations administered by the Federal 
Emergency Management Agency (FEMA) (https://www.fema.gov), but exclude 
counties designated to receive only FEMA Public Assistance Emergency 
Work Category A (Debris Removal) and/or Category B (Emergency 
Protective Measures).
    Examiners will consider savings association activities related to 
disaster recovery that revitalize or stabilize a designated disaster 
area for 36 months following the date of designation. Where there is a 
demonstrable community need to extend the period for recognizing 
revitalization or stabilization activities in a particular disaster 
area to assist in long-term recovery efforts, this period may be 
extended.
Section 563e.12(g)(4)(ii)--2: What activities are considered to 
``revitalize or stabilize'' a designated disaster area, and how are 
those activities considered?
    OTS generally will consider an activity to revitalize or stabilize 
a designated disaster area if it helps to attract new, or retain 
existing, businesses or residents and is related to disaster recovery. 
An activity will be presumed to revitalize or stabilize the area if the 
activity is consistent with a bona fide government revitalization or 
stabilization plan or disaster recovery plan. OTS generally will 
consider all activities relating to disaster recovery that revitalize 
or stabilize a designated disaster area, but will give greater weight 
to those activities that are most responsive to community needs, 
including the needs of low-or moderate-income individuals or 
neighborhoods. Qualifying activities may include, for example, 
providing financing to help retain businesses in the area that employs 
local residents, including low- and moderate-income individuals; 
providing financing to attract a major new employer that will create 
long-term job opportunities, including for low- and moderate-income 
individuals; providing financing or other assistance for essential 
community-wide infrastructure, community services, and rebuilding 
needs; and activities that provide housing, financial assistance, and 
services to individuals in designated disaster areas and to individuals 
who have been displaced from those areas, including low- and moderate-
income individuals (see, e.g., Q&As Sec. Sec.  ----.12(j) & 
563e.12(i)'' 3; Sec. Sec.  ----.12(s) & 563e.12(r)'4; Sec.  --
--.22(b)(2) &(3)--4; Sec.  ----.22(b)(2) &(3)--5; and Sec.  --
--.24(d)(3)--1).
Section 563e.12(g)(4)(iii) Activities That Revitalize or Stabilize 
Distressed or Underserved, Nonmetropolitan Middle-income Geographies
Section 563e.12(g)(4)(iii)--1: What criteria are used to identify 
distressed or underserved, nonmetropolitan middle-income geographies?
    Eligible nonmetropolitan middle-income geographies are those 
designated by OTS as being in distress or that could have difficulty 
meeting essential community needs (underserved). A particular geography 
could be designated as both distressed and underserved. As defined in 
Sec.  563e.12(k), a geography is a census tract delineated by the 
United States Bureau of the Census.
    A nonmetropolitan middle-income geography will be designated as 
distressed if it is in a county that meets one or more of the following 
triggers: (1) An unemployment rate of at least 1.5 times the national 
average, (2) a poverty rate of 20 percent or more, or (3) a population 
loss of ten percent or more between the previous and most recent 
decennial census or a net migration loss of five percent or more over 
the five-year period preceding the most recent census.
    A nonmetropolitan middle-income geography will be designated as 
underserved if it meets criteria for population size, density, and 
dispersion that indicate the area's population is sufficiently small, 
thin, and distant from a population center that the tract is likely to 
have difficulty financing the fixed costs of meeting essential 
community needs. OTS will use as the basis for these designations the 
``urban influence codes,'' numbered ``7,'' ``10,'' ``11,'' and ``12,'' 
maintained by the Economic Research Service of the United States 
Department of Agriculture.
    Data source information along with the list of eligible 
nonmetropolitan census tracts will be published on the Federal 
Financial Institutions Examination Council Web site (https://
www.ffiec.gov).
Section 563e.12(g)(4)(iii)--2: How often will the list of designated 
distressed or underserved, nonmetropolitan middle-income geographies be 
updated?
    The list will be reviewed and updated annually, as needed. The list 
will be published on the Federal Financial Institutions Examination 
Council Web site (https://www.ffiec.gov).
    To the extent that changes to the designated census tracts occur, 
OTS has determined to adopt a twelve-month lag period. This lag period 
will be in effect for the twelve months immediately following the date 
when a census tract that was designated as distressed or underserved is 
removed from the designated list. Revitalization or stabilization 
activities undertaken during the lag period will receive consideration 
as community development activities if they would have been considered 
to have a primary purpose of community development if the census tract 
in which they were located were still designated as distressed or 
underserved.
Section 563e.12(g)(4)(iii)--3: What activities are considered to 
``revitalize or stabilize'' a distressed nonmetropolitan middle-income 
geography, and how are those activities evaluated?
    An activity revitalizes or stabilizes a distressed nonmetropolitan 
middle-income geography if it helps to attract

[[Page 18812]]

new, or retain existing, businesses or residents. An activity will be 
presumed to revitalize or stabilize the area if the activity is 
consistent with a bona fide government revitalization or stabilization 
plan. OTS generally will consider all activities that revitalize or 
stabilize a distressed nonmetropolitan middle-income geography, but 
will give greater weight to those activities that are most responsive 
to community needs, including needs of low-or moderate-income 
individuals or neighborhoods. Qualifying activities may include, for 
example, providing financing to attract a major new employer that will 
create long-term job opportunities, including for low- and moderate-
income individuals, and activities that provide financing or other 
assistance for essential infrastructure or facilities necessary to 
attract or retain businesses or residents. See Q&As Sec. Sec.  --
--.12(h)(4) & 563e.12(g)(4)--1 and Sec. Sec.  ----.12(i) & 563e.12(h)--
4.
Section 563e.12(g)(4)(iii)--4: What activities are considered to 
``revitalize or stabilize'' an underserved nonmetropolitan middle-
income geography, and how are those activities evaluated?
    The regulation provides that activities revitalize or stabilize an 
underserved nonmetropolitan middle-income geography if they help to 
meet essential community needs, including needs of low-or moderate-
income individuals. Activities such as financing for the construction, 
expansion, improvement, maintenance, or operation of essential 
infrastructure or facilities for health services, education, public 
safety, public services, industrial parks, or affordable housing, will 
be evaluated under these criteria to determine if they qualify for 
revitalization or stabilization consideration. Examples of the types of 
projects that qualify as meeting essential community needs, including 
needs of low-or moderate-income individuals, would be a new or expanded 
hospital that serves the entire county, including low- and moderate-
income residents; an industrial park for businesses whose employees 
include low-or moderate-income individuals; a new or rehabilitated 
sewer line that serves community residents, including low-or moderate-
income residents; a mixed-income housing development that includes 
affordable housing for low- and moderate-income families; or a 
renovated elementary school that serves children from the community, 
including children from low- and moderate-income families. Other 
activities in the area, such as financing a project to build a sewer 
line spur that connects services to a middle-or upper-income housing 
development while bypassing a low-or moderate-income development that 
also needs the sewer services, generally would not qualify for 
revitalization or stabilization consideration in geographies designated 
as underserved. However, if an underserved geography is also designated 
as distressed or a disaster area, additional activities may be 
considered to revitalize or stabilize the geography, as explained in 
Q&As Sec. Sec.  563e.12(g)(4)(ii)--2 and 563e.12(g)(4)(iii)--3.

Section 563e.12(i) Community Development Service

Sec.  563e.12(i)--3: What are examples of community development 
services?
    [proposed revision to existing answer]: Examples of community 
development services include, but are not limited to, the following:
     Providing financial services to low- and moderate-income 
individuals through branches and other facilities located in low- and 
moderate-income areas, unless the provision of such services has been 
considered in the evaluation of a saving association's retail banking 
services under Sec.  563e.24(d);
     Providing technical assistance on financial matters to 
nonprofit, tribal or government organizations serving low- and 
moderate-income housing or economic revitalization and development 
needs;
     Providing technical assistance on financial matters to 
small businesses or community development organizations, including 
organizations and individuals who apply for loans or grants under the 
Federal Home Loan Banks' Affordable Housing Program;
     Lending employees to provide financial services for 
organizations facilitating affordable housing construction and 
rehabilitation or development of affordable housing;
     Providing credit counseling, home-buyer and home-
maintenance counseling, financial planning or other financial services 
education to promote community development and affordable housing;
     Establishing school savings programs and developing or 
teaching financial education curricula for low-or moderate-income 
individuals;
     Providing electronic benefits transfer and point of sale 
terminal systems to improve access to financial services, such as by 
decreasing costs, for low-or moderate-income individuals;
     Providing international remittance services that increase 
access to financial services by low- and moderate-income persons (for 
example, by offering reasonably priced international remittance 
services in connection with a low-cost account); and
     Providing other financial services with the primary 
purpose of community development, such as low-cost bank accounts, 
including ``Electronic Transfer Accounts'' provided pursuant to the 
Debt Collection Improvement Act of 1996, or free government check 
cashing that increases access to financial services for low-or 
moderate-income individuals.
    Examples of technical assistance activities that might be provided 
to community development organizations include:
     Serving on a loan review committee;
     Developing loan application and underwriting standards;
     Developing loan processing systems;
     Developing secondary market vehicles or programs;
     Assisting in marketing financial services, including 
development of advertising and promotions, publications, workshops and 
conferences;
     Furnishing financial services training for staff and 
management;
     Contributing accounting/bookkeeping services; and
     Assisting in fund raising, including soliciting or 
arranging investments.

Section 563e.12(t) Qualified Investment

Section 563e.12(t)--1: When evaluating a qualified investment, what 
consideration will be given for prior-period investments?
    When evaluating a savings association's qualified investment 
record, examiners will consider investments that were made prior to the 
current examination, but that are still outstanding. Qualitative 
factors will affect the weighting given to both current period and 
outstanding prior-period qualified investments. For example, a prior-
period outstanding investment with a multi-year impact that addresses 
assessment area community development needs may receive more 
consideration than a current period investment of a comparable amount 
that is less responsive to area community development needs.
Section 563e.12(t)--4: What are examples of qualified investments?
    [proposed revision to existing answer]: Examples of qualified 
investments include, but are not limited to, investments, grants, 
deposits, or shares in or to:

[[Page 18813]]

     Financial intermediaries (including, Community Development 
Financial Institutions (CDFIs), Community Development Corporations 
(CDCs), minority- and women-owned financial institutions, community 
loan funds, and low-income or community development credit unions) that 
primarily lend or facilitate lending in low-or moderate-income areas or 
to low- and moderate-income individuals in order to promote community 
development, such as a CDFI that promotes economic development on an 
Indian reservation;
     Organizations engaged in affordable housing rehabilitation 
and construction, including multifamily rental housing;
     Organizations, including for example, Small Business 
Investment Companies (SBICs), specialized SBICs, and Rural Business 
Investment Companies (RBICs), that promote economic development by 
financing small businesses or small farms;
     Facilities that promote community development in low- and 
moderate-income areas for low- and moderate-income individuals, such as 
youth programs, homeless centers, soup kitchens, health care 
facilities, battered women's centers, and alcohol and drug recovery 
centers;
     Projects eligible for low-income housing tax credits;
     State and municipal obligations, such as revenue bonds, 
that specifically support affordable housing or other community 
development;
     Not-for-profit organizations serving low- and moderate-
income housing or other community development needs, such as counseling 
for credit, home-ownership, home maintenance, and other financial 
services education; and
     Organizations supporting activities essential to the 
capacity of low- and moderate-income individuals or geographies to 
utilize credit or to sustain economic development, such as, for 
example, day care operations and job training programs that enable 
people to work.

Section 563e.26 Small Savings Association Performance Standards

Section 563e.26--1: When evaluating a small savings association's 
performance, will examiners consider, at the institution's request, 
retail and community development loans originated or purchased by 
affiliates, qualified investments of affiliates, or community 
development services of affiliates?
    Yes. However, a small institution that elects to have examiners 
consider affiliate activities must maintain sufficient information that 
the examiners may evaluate these activities under the appropriate 
performance criteria and ensure that the activities are not claimed by 
another institution. The constraints applicable to affiliate activities 
claimed by large institutions also apply to small institutions. See Q&A 
Sec.  ----.22(c)(2) and related guidance provided to large institutions 
regarding affiliate activities. Examiners will not include affiliate 
lending in calculating the percentage of loans and, as appropriate, 
other lending-related activities located in a savings association's 
assessment area.
    This concludes the text of OTS's proposed revisions to the 
Interagency Questions and Answers Regarding Community Reinvestment.

    Dated: March 31, 2006.

    By the Office of Thrift Supervision.
John M. Reich,
Director.
[FR Doc. 06-3471 Filed 4-11-06; 8:45 am]
BILLING CODE 6720-01-P