REINID, LLC
LAKE WORTH, FLORIDA

Many of us already know that banks often play an important role in the growth of a business or venture in our community. Whether a company will have sufficient capital to expand its business enough to become a success often depends on whether a bank will take a chance and lend to it or invest in it. Knowing how pivotal a bank’s role can be in American businesses, ask yourself “Do banks have a responsibility to invest in the communities they do business in?” Before you decide whether banks should have a social responsibility to lend or invest in communities, let’s take a step back and remind ourselves how banks get much of their capital. How banks determine with whom to invest or lend is based on educated guesses, keeping in mind that their goal is to make the most money on their investments or loans (banks are businesses after all). However, in the past and even today, those educated guesses have led, and can lead, to the erosion of many communities. Banks were taking the money deposited by members of certain communities, and investing or lending it elsewhere (a concept coined as “deposit mining”). Worse, banks would “redline” certain areas as bad investments, so that it was extremely hard for people in those areas to get a loan for their business or a mortgage on their home. The concept of “redlining” is when decision-makers at banks (and other financial institutions) physically mark on a map what areas they consider to be low or moderate income communities (abbreviated to “LMCs”). Banks would use red ink to indicate where that bank would refuse to offer any lending or investment support. The banks would then deny, limit, or significantly increase the costs for products and services to individuals in that redlined area. Despite redlining LMCS, the banks continued to mine the deposits from those communities. The CRA requires that banks and thrifts insured by the Federal Deposit Insurance Corporation (FDIC) meet certain credit and investment obligations to LMCs, determined by the communities’ specific needs. Whether a bank or thrift is meeting its obligations is determined through an evaluation done by one or more of four federal agencies: the Federal Reserve Bank (FRB), the FDIC, the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervisions (OTS). If a bank scores poorly in meeting its credit and investment obligations, the bank’s forecasted growth will be jeopardized. Poor performance in meeting its credit and investment obligations to LMCs may mean bank mergers, branch openings, acquisitions, or restructuring as a bank holding company do not get approved. business and farms of different sizes ISBs are evaluated using a two-part exam: (1) the lending test, and (2) the community development test. The lending test is similar to the small bank examination. It evaluates a bank or thrift's record in meeting the credit needs of its assessment area through its lending activities. Under the lending test, the credit record of home mortgages and small business and farm loans are considered. The community development test evaluates the bank's record of community development loans, services and investment. Community development lending consists of making loans for affordable housing, loans to non-profits that serve low or moderate income persons' housing and community development needs, loans to financial intermediaries such as community development financial institutions (CDFIs), community development corporations (CDCs), community development entities (CDEs), other community funds or pools, and loans to local, state and tribal governments for community development activities. A bank can meet its credit obligations by investing in Low Income Housing Tax Credit housing projects (LIHTCs, also sometimes referred to as "li-teks"), for low and moderate income persons (LMIs); community services targeted to LMI; activities that promote economic development by financing small business or small farms; and activities that either revitalize or stabilize LMCs, which for banks include certain distress or underserved rural areas and areas affected by disasters. In addition, to seeing prior evaluations, the federal agencies post quarterly schedules announcing which banks/thrift will be reviewed. The public is encouraged to comment on upcoming CRA examinations. In addition, the public can comment on whether a bank should be allowed to merge, engage in an acquisition, open a new branch or become a holding company. The ReinID team has extensive experience in CRA, real estate planning and information technology. Our team built mapping tools upon massive amounts of banking data. We have also built an advanced easy-to-use mapping system to help communities, CRA professionals, governmental agencies and related banking and real estate industries, see the needs of assessment areas. ReinID is committed to real estate incentives tied to geographic areas and specific locations. Not only do we have maps and reports, we also make our data available to you for your business and your client's needs. The LIHTC program is a proven success, allowing rental housing developers to raise private equity by selling federal tax credits. The annual amount of the federal tax credits is determined by multiplying (i) a building’s qualified basis, by (ii) the tax credit rate (9 or 4 percent). The qualified basis of a building is the product of the cost of the building (known as the eligible basis) multiplied by the percentage of the building that is occupied by low income tenants. The eligible basis may equal the cost of acquiring an existing building (but not the cost of the land), plus for new buildings or rehabilitation expenditures to an existing building, the construction and other construction-related costs to complete the development. After a building is completed and the owner certifies the eligible basis, the building will qualify for federal tax credits upon rental of units to low income individuals and families.