Hoping to resolve confusion among bankers regarding the Community Reinvestment Act, federal regulators are providing answers to the questions most frequently asked about CRA rules.

The 93-page document, published today in the Federal Register, addresses secured credit card loans, mortgage brokering, loans for multiple purposes, and community development lending.

Steve Zeisel, senior counsel to the Consumer Bankers Association, said the document was a first step.

"The industry has been looking forward to this document, but it'll take a careful reading before we know if it answers everyone's questions or whether it raises more," he said.

Federal regulators revamped the CRA rules in April 1995. An expedited exam for small banks took effect Jan. 1. Larger banks, starting next July 1, must pass a three-tier test that will look at lending, service, and investment activities.

The document clarifies which lending activities count toward the new exam. For example, it says secured credit cards targeted at low-income earners don't count as community development loans, because their primary goal is not to revitalize a neighborhood.

Financial institutions that broker home mortgage loans can get partial CRA credit, the document states. Previously, regulators only credited the underwriter of the loan.

The document states that banks can get credit on the service test for taking applications and providing settlement services to other lenders. An institution also can earn points if it can show that its brokerage services are intended to help revitalize a community.

For multiple-purpose loans, the lender gets CRA credit based upon how the majority of the funds will be used. For example, a single loan to buy a $150,000 house and a $30,000 small business would be recorded as a home loan.

The document also says that banks can get "small business" credit for loans of less than $1 million to nonprofits. Loans above this threshold count toward the community development test.

Regulators also said they would downgrade an institution to "substantial noncompliance" if it repeatedly receives "needs to improve" ratings.

The document says banks in upper-income areas can get CRA credit for serving middle-income residents, and it clarifies that debit cards don't qualify for extra credit as an alternative delivery system.

It also clarifies how banks should treat corporate credit cards to small businesses. All cards issued on a single date count as one loan. Additional cards issued in subsequent months count as separate loans.

Mr. Shea writes for the Medill News Service

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