Third Federal's CRA rating cut on shortage of low-income mortgages

Federal regulators have downgraded the Community Reinvestment Act rating of Third Federal Savings and Loan Association in Cleveland, saying it made too few mortgage loans in low-income neighborhoods.

The Office of the Comptroller of the Currency cut the $14 billion-asset thrift's rating to “needs to improve.” Third Fed had received a “satisfactory” rating in 2012 from its previous exam.

The OCC’s rating was based on an examination conducted between January 2012 and December 2015 in the thrift's primary markets of Cleveland and Akron in Ohio, and Fort Lauderdale and Tampa in Florida. A Third Fed spokesman declined to comment Wednesday.

Virtually all lending conducted by Third Fed, a unit of TFS Financial, is for residential mortgages and for home equity loans and lines of credit. Third Fed retains most of the mortgages it originates and also services the loans.

Third Fed’s weak performance is a result of its not originating government-backed mortgages, such as VA and Federal Housing Administration mortgages, the OCC said. Those types of mortgages are frequently utilized in low-income and moderate-income communities.

However, the OCC noted that Third Fed offers mortgages with low-down-payment requirements designed for lower-income borrowers. The OCC also said that Third Fed has not engaged in discriminatory lending practices.