§__.22(b)(1) – 1
Q: How will the Agencies apply the lending activity criterion to discourage an institution from originating loans that are view favorably under CRA in the institution itself and referring other loans, which are not viewed as favorably, for origination by an affiliate?
A1. Examiners will review closely institutions with (1) a small number and amount of home mortgage loans with an unusually good distribution among low- and moderate-income areas and low- and moderate-income borrowers and (2) a policy of referring most, but not all, of their home mortgage loans to affiliated institutions. If an institution is making loans mostly to low- and moderate-income individuals and areas and referring the rest of the loan applicants to an affiliate for the purpose of receiving a favorable CRA rating, examiners may conclude that the institution’s lending activity is not satisfactory because it has inappropriately attempted to influence the rating. In evaluating an institution’s lending, examiners will consider legitimate business reasons for the allocation of the lending activity.
Source: Interagency Questions & Answers Regarding Community Reinvestment | July 2016