We are considering changing our assessment area, due to a branch closing and the expanded census tracts. Do we need approval from our regulators prior to making this change?

You don't need approval, but do yourself a favor and write a memo explaining your research and reason for the change, especially if the change involves removing LMI tracts from your AA. Save the memo for your next exam, then you have ready documentation as to why you made the changes, rather than having to remember/come up with something on the fly during your exam when they ask.

Also, review your justification that you had to provide your regulator for closing that branch location. If you said that it would not impact service levels in that area - that is going to be in direct contradiction.

Thanks so much!

Given the role that CRA AAs have played in recent redlining consent orders, I recommend the memo also address any removal on MMCT/MBHCT from the AA.

Mel, more of an issue in redlning is coming from the concept of identifying Reasonably Expected Market Areas. ("REMA's") rather than assessment areas. Part of the bank's confusion was that fair lender testing was uaually done in conjunction with a CRA exam However, since (as alluded to above) discrimination (including lending. marketing, etc) doesn't have a physical boundry, the examiners look at marketing, applications, etc. and they concentrate on MM tracts to the exclusion of LMI tracts.

Some REMA guidance that had been published reflects a few factors used by regulators that may determine the REMA are:
• Where the institution has received applications;
• Where the institution has originated loans;
• The history of mergers and acquisitions;
• The market area as defined by the bank in its written policies;
• Branching structure and history, including closures, acquisitions, and relocations;
Marketing and Advertising;
• The exclusion of Majority-Minority census tracts from the assessment area.

Greater expectations are placed on the lender if there is substantial lending outside of the assessment area, and in proximity to majority-minority census tracts.