Expansion of CRA coverage. On November 1, New York Governor Hochul signed into law amendments (S.5246-A/A.6247-A) to the New York Community Reinvestment Act (NYCRA) that expand the NYCRA’s coverage to non-depository mortgage lenders. The amendments are effective November 1, 2022. New York now joins a small group of states, including Illinois and Massachusetts, that apply CRA-type laws to non-depository mortgage lenders.
The amendments require the DFS to consider the performance record of a New York-licensed mortgage banker “in helping to meet the credit needs of its entire community, including low and moderate income neighborhoods…consistent with safe and sound operation” when taking action on an application for a change in control. The amendments allow DFS to issue regulations expanding the types of applications and notices for which it will consider such performance when taking action.
The amendments direct the DFS, in assessing a mortgage banker’s performance, to review all reports and documents filed by the mortgage banker. They also include a list of factors that DFS must consider when making such assessments. Most significantly, the amendments provide that an assessment of a mortgage banker’s performance can be the basis for DFS to deny an application. They also authorize DFS to issue regulations to implement the amendments, including establishing a minimum annual number of loans that a mortgage banker must originate to be subject to a NYCRA assessment.
Proposal regarding data collection on loan applications from minority- and women-owned businesses. In 2019 and effective in 2020, the NYCRA was amended to require DFS to consider several aspects of a New York-chartered bank’s activities with respect to minority- and women-owned businesses in NYCRA performance evaluations. DFS must consider “the record of performance of the banking institution in helping to meet the credit needs of its entire community, including … minority- and women-owned businesses, consistent with safe and sound operation of the banking institution.” The factors DFS must consider in assessing a bank’s performance include its “participation, including investments, … in technical assistance programs for small businesses and minority- and women-owned businesses” and its “origination of … minority- and women-owned business loans within its community or the purchase of such loans originated in its community.”
Earlier this month, DFS issued proposed revisions to its regulations implementing the NYCRA that would add a new section titled “Minority- and women-owned business loan data collection.” The new section sets forth the data that banks must compile and maintain regarding loan applications from minority- and women-owned businesses and make available to DFS upon request. It also includes (1) provisions restricting the access of loan underwriters or other bank officer or employee involved in making credit decisions to information provided by an applicant indicating whether or not it is a minority- or women-owned business, and (2) a new disclosure that banks must provide to business loan applicants. Comments on the proposal are due by January 3, 2022.
The CFPB is currently engaged in a rulemaking to implement Dodd-Frank Act Section 1071 which require financial institutions to collect and report certain data in connection with credit applications made by small businesses, including women- or minority-owned small businesses. Unlike the DFS’s proposal which would require banks to compile and maintain data about loan applications from all minority- and women-owned businesses regardless of their size, the CFPB’s proposed Section 1071 rule requires banks to collect and report data only regarding applications from women-owned and minority-owned businesses that are “small businesses.” The proposed DFS revisions, however, allow the DFS, at its discretion, to determine that a bank’s compliance with the CFPB’s final Section 1071 rule constitutes compliance with DFS’s data collection requirements for applications from minority- and women-owned businesses.