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53 » VISIT US ONLINE @ DSNEWS.COM AGENCIES RELEASE CRA-ELIGIBLE LIST Close to 5,000 U.S. areas are eligible for consideration under the Community Reinvestment Act (CRA), according to a list released by several government agencies at the end of June. e Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System released their joint list of distressed or underserved nonmetropolitan middle-income geographies, which pinpoints the thousands of low- and moderate-income CRA-eligible communities across the nation. According to a press release from the agencies, the list names areas "where revitalization or stabilization activities are eligible to receive Community Reinvestment Act (CRA) consideration under the community development definition." Enacted in 1977, the Community Reinvestment Act encourages banks to "meet the needs of the communities in which they operate," according to the Federal Reserve. e public can submit comments regarding local bank performances, and the institutions are evaluated periodically against community need. ere are different standards for small, intermediate, large, wholesale, and strategic institutions. "Distressed nonmetropolitan middle- income geographies and underserved nonmetropolitan middle-income geographies are designated by the agencies in accordance with their CRA regulations," the release stated. "e designations continue to reflect local economic conditions, including unemployment, poverty, and population changes." Criteria for designating CRA-eligible areas are determined by the Federal Financial Institutions Examination Council and include factors like poverty level, unemployment rate, population loss, and remote/rural designation. Communities named on the list are eligible for CRA consideration for a full year after its publication. "e agencies apply a one-year lag period for geographies that were listed in 2016 but are no longer designated as distressed or underserved in the current release," the agencies reported. "Revitalization or stabilization activities in these geographies are eligible to receive CRA consideration under the community development definition for 12 months after publication of the current list." To determine the list, the agencies used poverty rate data from the U.S. Census Bureau Small Area Income and Poverty Estimates, population data from the U.S. Census Bureau County Intercensal Estimates, unemployment data from the U.S. Bureau of Labor Statistics, and low density data from the U.S. Department of Agriculture Economic Research Service Urban Influence Codes. LENDERS LOOSEN RISK STANDARDS AS RATES RISE Mortgage lenders are taking increased credit risks similar to those of the early 2000s, according to the Q1 Housing Credit Index Report released by CoreLogic in June. e level of credit risk taken by lenders in Q1 of 2017 was about the same as the average risk taken between 2001 and 2003. According to the report, the shift toward riskier lending standards is a result of declining refinances. "e slight loosening in the credit index during the past year was partly due to a shift in the mix of purchase versus refinance originations because purchase loans exhibit higher risk attributes than refinanced loans," CoreLogic reported. According to Frank Nothaft, CoreLogic's Chief Economist, increasing mortgage rates also played a role in the looser lending practices over the last quarter. "Mortgage rates during the first quarter of 2017 were up about 0.5 percentage points from a year earlier," Nothaft said. "Since 2009, for every one-half percentage point increase in mortgage rates, the average credit score on refinance borrowers has dipped by 9 points, and this pattern will likely continue if mortgage rates move higher. at is because when rates rise, applications drop off and loan officers spend more time with the applicants that have less-than-perfect credit scores, require more documentation, or have unique property issues." CoreLogic's Housing Credit Index, or HCI, takes into account borrower credit score, loan-to-value and debt-to-income ratios, investor-owned status, condo/co-op share of purchases, and level of documentation. According to the report, credit scores have increased over the year, rising 7 points between Q1 2016 and Q1 2017. Debt-to-income ratios were stable, LTV ratios dropped by 1.7 percent over the year, and investor share of purchase loans inched up just 1 percent. Condo/co-op share rose 2 percentage points over the year—another factor that, according to Nothaft, played a role in the riskier credit standards as of late. "Overall credit risk for purchase loans was slightly higher compared with a year ago as the investor share and condo/co-op share increased," Nothaft said. "ese increases offset lower-risk signals from the credit score, DTI, and LTV attributes to result in an uptick in overall riskiness. Still, overall risk is similar to that of the early 2000s." e HCI came in at 105.6 for the quarter; the average between 2001 and 2003 was 105.9 e 2001 to 2003 period is considered the "normal baseline for credit risk," according to CoreLogic's methodology.

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