WASHINGTON - Office of Thrift Supervision Director Ellen Seidman on Thursday outlined three issues regulators plan to tackle in 2002 when they review Community Reinvestment Act rules.

Addressing a group of affordable-housing lenders in San Francisco, Ms. Seidman said the current rules' emphasis on quantitative measures may be resulting in risky lending.

"There is extreme competition for 'CRA loans,' " she said. "Some institutions feel compelled perhaps to make loans for the sake of getting them on their books - maybe with loan terms that are too flexible, or to borrowers who are only marginally creditworthy."

It may be time for regulators to back off their traditional focus on the volume of lending in low- and moderate-income areas, Ms. Seidman said. "Perhaps there is too much focus on the quantitative aspects of community reinvestment and not enough on the qualitative aspects."

For example, regulators will review how investments are rated and weighed in CRA compliance, she said. Like lending and service, investment in low- and moderate-income areas is factored into an institution's CRA grade.

The definition of a CRA "assessment area," or where an institution's compliance is judged, needs to be updated to take into account the reality that banks and thrifts are reaching customers far from their physical headquarters, Ms. Seidman said.

"Institutions have a statutory obligation under CRA to the low- and moderate-income segments of the communities they are chartered to serve - even if that charter is for nationwide service," she said.

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