We're designing an inhouse mortgage program for LMI borrowers to enhance our CRA rating. The program would have low downpayment, low interest rate, etc.

When I read Reg B's definition of special purpose credit program, I don't think our program would fall under this category since it's not designed around one of the prohibited basis. Is my understanding of the special purpose credit program correct?

Also, the program proposal came to me with borrowers having to live in LMI census tracts. I'm concerned about his criteria because of potential red lining, but would appreciate thoughts on this too.

Thanks.

Your program does not have to be designed around a prohibited bases.

"Any special purpose credit program offered by a for-profit organization, or in which such an organization participates to meet special social needs, if:
(i) The program is established and administered pursuant to a written plan that identifies the class of persons that the program is designed to benefit and sets forth the procedures and standards for extending credit pursuant to the program; and
(ii) The program is established and administered to extend credit to a class of persons who, under the organization’s customary standards of creditworthiness, probably would not receive such credit or would receive it on less favorable terms than are ordinarily available to other applicants applying to the organization for a similar type and amount of credit."

Focusing on LMI borrowers rather than tracts would be best, and offer more opportunity.

I would review the plan with my regulator.

We'll be submitting our program plan for regulator review.

Thanks.