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28 OCC MODIFIES CRA TO KEEP UP WITH EVOLVING INDUSTRY In a speech delivered to attendees at the National Association of Affordable Housing Lenders Policy and Practice Conference, the Office of the Comptroller of the Currency's (OCC) omas J. Curry stressed the significance of Community Reinvestment Act (CRA) and its effects on the financial industry. Curry stated that the OCC's modifications will shape the future of the financial world. "e changes that the OCC is making to improve our supervision of compliance and CRA, are intended to keep up with the rapid pace of change occurring in the financial world today," he said. "ese changes are reshaping what financial products and services look like, how they are delivered to consumers, and who the financial services competitors are. Many of these changes are driven by technology developments that are reinventing how loans are made and bank account services are accessed." Established in 1977, the CRA lays the foundation for financial institutions, state and local governments, and community organizations to promote banking services to all members of a community. e CRA bans redlining and encourages attempts to meet the credit needs of each community member, including residents of low- and moderate-income neighborhoods. Last year, approximately $87 billion was allocated toward CRA community development lending for affordable housing, which was a $12 billion increase from 2014. Curry explained the correlation between CRA performance and the growth of financial institutions through mergers or acquisitions. e OCC examines CRA performance of the acquiring bank and the target bank when reviewing corporate applications, and the OCC "performs a convenience and needs analysis based on the bank's description of how the resulting financial institution will serve the community." "Your bank's performance related to CRA and fair lending is integral to its overall reputation and success, and your role within your organization can help your institution maintain a stronger compliance," he said. He went on to discuss the Compliance and Community Affairs (CCA) department, which is the newest unit in the OCC, led by Senior Deputy Comptroller Grovetta Gardineer. e department is split into three divisions: Compliance Risk, led by Deputy Comptroller Donna Murphy; Compliance Supervision, led by Deputy Comptroller Beverly Cole; and Community Affairs, led by Deputy Comptroller Barry Wides. ese units will work together to enhance the OCC's CRA performance evaluation process. CRA performance evaluations for the month of November were released on December 1, and the 2017 CRA first quarter performance evaluation schedule was released the following day. e CCA team will also collaborate to provide support to local examiners through training, risk analytics, examination tools, and quality assurance. BUYERS BEWARE: HOUSING INVENTORY TO CONTRACT FURTHER e housing market is finding no relief from tight inventory, and inventory may grow even tighter this year. Existing-home inventory has declined for 18 consecutive months ending in November, according to the National Association of Realtor's Existing Home Sales Report released in December. NAR reported that the number of existing- homes for sale fell over the month in November by 8 percent down to 1.85 million. Over the year, inventory is down by 9.3 percent (from 2.04 million in November 2015). Not only that, but unsold inventory declined from a 4.3 month supply in October down to a 4.0 month supply in November, according to NAR. "Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017," NAR Chief Economist Lawrence Yun said. "Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country." Realtor.com Chief Economist Jonathan Smoke stated, "Consumers should be aware that the overall supply of homes for sale remains very low, and pent up demand is leading to large jumps in price acceleration. e number of homes for sale is down 11 percent compared to a year ago, and median prices are up 7 percent. On top of that, December is tracking to an even bigger decline." Smoke continued, "Buyers planning to purchase in 2017 will contend with even more limited supply, while they also race against the prospect of mortgage rates reaching levels we have not seen since 2010. e good news is that rates are rising because of continued economic growth, and many households should see income gains in 2017. However, those gains are not likely to be higher than the combined effect of higher prices and higher mortgage rates." e news of the even shorter supply of housing did not dampen the headline numbers for existing-home sales, which in November had their best month in nearly 10 years. Existing homes sold at an annual pace of 5.61 million in November, the highest rate since they sold at a 5.79 million clip in February 2007. November's pace was also an increase of more than 15 percent from the previous November, when existing homes sold at an annual rate of 4.86 million. Further, distressed sales including foreclosures and short sales rose to 6 percent in November from the month prior, but this was still a decrease from 9 percent a year ago. Additionally, NAR found that foreclosures sold for an average discount of 17 percent below market value in November, while short sales were discounted 16 percent. "e healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months," Yun said. "Furthermore, it's no coincidence that home shoppers in the Northeast—where price growth has been tame all year—had the most success last month."

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