Why CRA Data and Analysis is More Important Than Ever The webinar will begin at the top of the hour. You may download the presentation at: www.questsoft.com/cradata Why CRA Data and Analysis is More Important Than Ever Thank you for attending. The webinar has started. Housekeeping Asking Questions Downloading Materials QuestSoft.com/CRAData Technical Difficulties GoToMeeting Support (877) 582 7011 Disclaimer! www.questsoft.com 1
Today s Panelists Loretta Kirkwood Vice President, Compliance Leonard Ryan President Moderator Scott Mortenson Marketing Director Why CRA Data and Analysis is More Important Than Ever Wednesday, November 7, 2018 Loretta Kirkwood Vice President, Compliance The Community Reinvestment Act (CRA) Timeline Year Action 1977 CRA Enacted by Congress 1989 Financial Institution Reform and Recovery Act of 1989 CRA Public Disclosure of Ratings / Performance Evaluations 1995 CRA Regulation Revised Improve examination consistency, clarify performance standards, and reduce cost and compliance burden 1999 Gramm Leach Bliley Act Established Satisfactory CRA rating requirement to engage in new activities, requirement to disclose CRA agreements, and lengthened CRA exam cycle for community banks and thrifts 2005 CRA Regulation Revised New definitions for small bank and intermediate small bank and introduction of distressed and underserved non metropolitan middle income geographies and designated disaster areas 2017 CRA Regulation Revised Aligned the definition of home mortgage and consumer loans with HMDA changes (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 2
The Community Reinvestment Act (CRA) Timeline Date Action 02/14/2018 U.S. Government Accountability Office CRA Study Give More Consideration to Basic Banking Services (Service Test) Evaluate Small Dollar Non Mortgage Consumer Loans Expanding Assessment Areas to Include Services / Loans Provided Outside of Geographic Area Expand to Cover Affiliates, Credit Unions, and Non Banks 04/03/2018 U.S. Dept of Treasury CRA Modernization Recommendations Assessment Area Definition Increase Transparency / Effectiveness of CRA Rating Determinations Improve Timeliness of Evaluations and Increase Bank s Accountability Performance Incentives Related to Low and Moderate Income Communities 09/05/2018 OCC CRA Advanced Notice of Proposed Rulemaking Revising the Current Regulatory Approach (Performance Evaluation Method, Metric Based Framework, and Redefining Communities and Assessment Areas) Expanding CRA Qualifying Activities Recordkeeping and Reporting (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. References U.S. Government Accountability Office CRA Study https://www.gao.gov/assets/700/690050.pdf U.S. Department of Treasury Community Reinvestment Act Findings and Recommendations https://home.treasury.gov/sites/default/files/2018 04/4 3 18%20CRA%20memo.pdf OCC Advanced Notice of Proposed Rule Making (ANPR) Reforming the Community Reinvestment Act Regulatory Framework https://www.occ.gov/news issuances/news releases/2018/nr occ 2018 87a.pdf (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Background Encourage depository institutions to meet the credit needs of the communities in which they operate, including low and moderateincome neighborhoods, consistent with safe and sound banking operations. Requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. An institution s CRA rating is taken into account in considering an application for deposit facilities, including mergers and acquisitions. (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 3
Examination Process Current Process Different Evaluation Methods Inconsistent Exam Cycles Limited Market Data No Performance Benchmarks Inconsistent Evaluation of CRA Activities Metro vs. Non Metro Reviews (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Examination Process Potential Changes Evaluation Method Institution s size, business model, and other factors Demographics, economic and financial conditions of communities Separately evaluate retail and CD activities for all banks Metrics Based Framework Ratings based on quantitative benchmarks Standards for quantifying CRA activities Community defined more broadly business of banking Expand types of LMI activities (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Assessment Area vs. Community Current Requirements Must include main office, branches, deposit taking ATMs, and substantial portion of originated or purchased loans Must not reflect illegal discrimination redlining May not arbitrarily exclude low or moderate income geographies Whole vs. partial geographies (contiguous) Cannot combine MSA and non MSA areas Potential Changes Expanded to include LPOs and non bank affiliate offices Based on concentration of deposits, lending, employees, depositors, or borrowers Digital lending channel footprint (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 4
CRA Qualified Activities Current Process Benefit LMI Geographies / Individuals Q&A Provides Guidance Examiner Review / Approval Potential Changes Clear Standards Expanded Options Weighting of Activities (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. CRA Recordkeeping and Reporting Current Process Asset based $1.252 billion Small Business, Small Farm, Community Development No Aggregate Data / Comparative Analysis Potential Changes Financial Institutions Required to Report Data to be Reported Frequency of Reporting (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Be Prepared Assessment Area / Community Review Banking Services Deposits, Non Branch Offices Lending Performance Review New HMDA Open End, Reverse Mortgages All Small Business / Small Farm Loans Consumer Loans (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 5
Why CRA Data and Analysis is More Important Than Ever Wednesday, November 7, 2018 Leonard Ryan President Let s Discuss Yesterday s Mid Term Election Senate Becomes More Republican Presidential Appointees are confirmed by Senate not House. Mulvaney would have still been appointed to CFPB. Democrats Take Over House Maxine Waters has already indicated a strong combative attitude towards financial institutions. Don t expect further regulatory relief without CRA, LMI, or Affordable Housing strings attached to legislation. Any relief will probably come from regulators and not Congress. Expect a strong push by Waters teaming up with Elizabeth Warren on the Senate side to fight for significant changes to the Community Reinvestment Act. (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Your New House FSC Chairwoman I have not forgotten you foreclosed on our houses. I have not forgotten that you undermined our communities. I have not forgotten that you sold us those exotic products, had us sign on the line for junk and for mess that we could not afford. And for doing that, I have people who are homeless who have never gotten back into a home. What am I going to do to you? What I m going to do to you is fair. I m going to do to you what you did to us. Maxine Waters D California Expected Chairwoman, House Financial Services Committee November 1, 2018 (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 6
Compliance RELIEF CRA By the Numbers As of November 6, 2018 Current Financial Institutions Using One or More QuestSoft Products = 2,643 Banks Using QuestSoft Products = 1,357 (51%) Banks Using CRA & Market Data Modules = 491 Banks Considering Switch to CRA RELIEF By Feb, 2019. = 72 Regulatory Exams Using CRA RELIEF = Over 1,200 QuestSoft Bank Customers by Regulatory Agency (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. QuestSoft Competitive Advantages Only CRA provider that has designed its own Geocoder. Others use third party geocoding engines where they cannot control new features or integrate multiple databases (for example CFPB geocoding). Only CRA Provider that has 100% control of its Mapping software. Easiest to Use Mapping Module. Other systems take days of training to start using. Only HMDA API for LOS Systems. (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Planned Year 2019 Features Following are areas QuestSoft intends to focus its resources on for next year Plans for 2019: New Mapping Features scheduled for Early Q1 Release. Multi User Expansion for lower volume customers. New Analytical Reports for all modules scheduled throughout next year. Fair Lending Module scheduled for first quarter. Upgraded Graphics and integration with Word and Excel. Examiner, Executive and CRA Committee Dashboards. Establish Analysis Areas using our Assessment Area technology that can be used for any analysis of your lending (HMDA, CRA, Fair Lending, etc.). Optimizer Module Enhancements. (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 7
LMI Eligibility/Investment Review On a Per Loan Basis While Processing Determine LMI (Geography/Income/Both) Tract Minority Percentage Inside/Outside of Your Assessment Areas Established Investor Interest Potential Banks Interested in the Loan and potential increase in BP profit Distressed/Underserved Information CDFI Information (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Changes to Instant HMDA and Compliance EAGLE (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Changes to Instant HMDA and Compliance EAGLE Currently Anticipating Nov/Dec Availability Instant HMDA Review to be changed to move exempted fields into a new category. A preferences section similar to Compliance RELIEF will be added to the Administrator screens to allow the Instant HMDA/Compliance EAGLE user to coordinate their selections to Compliance RELIEF or other HMDA management systems. Exempt Fields Provided Value Rate Spread 1.250 Origination Charges Exempt Discount Points Exempt Lender Credits Exempt Loan Term 1111 (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. www.questsoft.com 8
Questions? Loretta Kirkwood Vice President, Compliance (949) 614 8957 Loretta.kirkwood@questsoft.com https://www.questsoft.com Leonard Ryan President (949) 614 8950 Leonard.ryan@questsoft.com https://www.questsoft.com You can enter your question in the GoToWebinar application box in the Questions section. If we can t get to your question during this session, we will create a Q & A document with all the questions and answers for For information on your review. products referenced during this presentation, contact QuestSoft at 800 575 4632 option 1 or visit www.questsoft.com QuestSoft Webinar Series Expanded HMDA = Expanded Fair Lending Risk Tuesday, March 5, 2019 https://www.questsoft.com/2018series (800) 575 4632 www.questsoft.com 2018. All Rights Reserved. Thanks for joining us today! Now it s time to make compliance relaxing For more information on solutions, call (800) 575 4632 option 1 or visit us at www.questsoft.com You can download this presentation at: www.questsoft.com/cradata www.questsoft.com 9