2012 Updates to Community Reinvestment Act Eligibility
With the CRA (Community Reinvestment Act) Eligibility data in the news this week, we wanted to take a moment to highlight some of the recent changes in the 2012 data-set and how it can be used. The Community Reinvestment Act is intended to encourage banks and financial institutions to meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.
Periodic investigations are conducted to see if financial institutions are meeting the communities’ needs in accordance with sound banking operations. In order to gauge CRA performance, the evaluation looks for bank activity in low- and moderate-income neighborhoods, nonmetropolitan distressed and underserved areas, and federally designated disaster areas.
The definition criteria for how low- and moderate-income neighborhoods changed in 2012. Previously (for the years 2010 and 2011) the CRA calculated neighborhood income-level by taking the Median Family Income (MFI) of each tract divided by the Area Median Family Income (AMFI).
However, for the year 2012 the CRA changed its formula by calculating AMFI (now designated as “Metropolitan Median Family Income”) using Census’ 2006-2010 American Community Survey estimates. For tracts located outside of an MSA/MD, the MFI used in the denominator is the statewide non-MSA/MD MFI. This is also the first year that this data is shown at the 2010 Census boundaries!
Tracts are CRA eligible if they are low- or moderate-income, or if they are nonmetropolitan middle income tracts designated by FFIEC as distressed or underserved. Distressed middle income tracts are those with: (1) Unemployment rate at least 1.5 times the national average or (2) Poverty rate of 20% or greater or (3) Population loss of 10% or more between the 1990 and 2000 census, or a net migration loss of 5% or more between 1995 and 2000.
We are hoping that this data helps to highlight underserved areas and promote community investment! For more information on CRA eligibility, including links to the FFIEC and information on how tract income levels or underserved middle-income tracts are defined, see our Data Directory. (see data directory)