Hello, I'm struggling to create a working definition for naturally occurring affordable housing that would earn our bank community development credit. Am I correct in saying that granting a loan to either affordable housing or to an LMI individual isn't enough, both must be verified in order to receive credit? Meaning if we originate a mortgage for an LMI borrower but the mortgage is over 30% of their gross income than it doesn't count for CD credit because it isn't affordable housing. Or conversely, if we originate a loan to fund rental property that charges rents 30% below the tenants' gross income but (for whatever reason) we can't establish the majority of tenants are LMI based on the surrounding census tract than it doesn't count for CD credit. I am correct about this?

You must meet the "primary purpose" to get 100% credit for affordable housing (which can be done in 1 of 2 ways). The mortgage must be for a multifamily property that has "affordable" rent and the majority of the tenants receiving the affordable rent are qualified as LMI.

If fewer than 50% of the tenants are LMI and are paying affordable rent you can still get 100% credit if you meet the second option for the primary purpose test that has 3 conditions to be fulfilled.

Otherwise, you can get pro rata credit if you can document the percent of tenants who are qualified as LMI and who are paying affordable rent.

For Intermediate Small Institutions, is it possible to get credit for originating personal mortgages for single family homes if we choose to exclude these loans from the lending test (provided the borrower/location is LMI and the mortgage payments are <30% of the borrower's gross income)? Specifically, I'm focusing in on what you said about "the mortgage must be for a multifamily property."

No - you cannot get CD credit for 1-4 family units under the lending test.

Ironically, you can get credit under the investment test if you purchase a pool of mortgage-backed securities that you can document are affordable and owned by LMI owners.

Sorry Len if I'm still stuck on multifamily but does that mean a loan rehabilitating LMI Affordable Housing property with less than 5 units cannot be submitted for community development credit? And if so why not? I thought the only time the number of units was considered is when the loan is HMDA reportable and, therefore, included in the lending test (excluding multifamily). Appreciate your patience on this one.

Because Multi Family is 5 or more units. You can only use HMDA loans for CD credit also when it is Multi Family.

For a loan to be reported as a community development loan under CRA, it must not be reportable under HMDA or small business/small farm lending, unless it is a loan for a multifamily dwelling. A community development loan must have as its primary purpose: affordable housing (including multifamily rental housing) for low- or moderate-income individuals;


The notable exception is for multi-family loans, which can be reported BOTH on the HMDA LAR and as a Community Development Loan if the multi-family property provides housing for low- and moderate-income people.