Performance Tests, Standards, and Ratings, in General

(1) Performance Tests and Standards. The Commissioner assesses the CRA performance of an institution in an examination as follows: (a) Lending, Investment, and Service Tests. The Commissioner applies the lending, investment, and service tests, as provided in 209 CMR 46.22 through 46.24, in evaluating the performance of an institution, except as provided in 209 CMR 46.21(1)(b), (1)(c), (1)(d), and (1)(e). (b) Community Development Test for Wholesale or Limited Purpose Institutions. The Commissioner applies the community development test for a wholesale or limited purpose institution, as provided in 209 CMR 46.25, except as provided in 209 CMR 46.21(1)(d). (c) Small Institution Performance Standards. The Commissioner applies the small institution performance standards as provided in 209 CMR 46.26 in evaluating the performance of a small institution or an institution that was a small institution during the prior calendar year, unless the institution elects to be assessed as provided in 209 CMR 46.21 (1)(a), (1)(b), or (1)(d). However, credit unions which are small institutions will be evaluated in the context of their membership by-law provisions, as prescribed under M.G.L. c. 171, § 9. An institution may elect to be assessed as provided in 209 CMR 46.21(1)(a) only if it collects and reports the data required for other institutions under 209 CMR 46.42. (d) Strategic Plan. The Commissioner evaluates the performance of an institution under a strategic plan if the institution submits, and the Commissioner approves, a strategic plan as provided in 209 CMR 46.27. (e) Credit Union Performance Standards. The Commissioner applies the lending and service tests, as provided in 209 CMR 46.22 and 46.24 in evaluating the performance of a credit union, except as provided in 209 CMR 46.21(1)(c) and (1)(d). The investment test does not apply to credit unions. However, a credit union that achieves at least a "satisfactory" rating under the lending and service tests may warrant consideration for an overall rating of "high satisfactory" or "outstanding" depending on the credit union's performance in making qualified investments and community development loans to the extent authorized under law, in accordance with 209 CMR 46.61(6)(c). (2) Performance Context. The Commissioner applies the tests and standards in 209 CMR 46.21(1) and also considers whether to approve a proposed strategic plan in the context of: (a) demographic data on median income levels, distribution of household income, nature of housing stock, housing costs, and other relevant data pertaining to an institution's assessment area(s); (b) any information about lending, investment, and service opportunities in the institution's assessment area(s) maintained by the institution or obtained from community organizations, state, local, and tribal governments, economic development agencies, or other sources; (c) the institution's product offerings and business strategy as determined from data provided by the institution; (d) institutional capacity and constraints, including the size and financial condition of the institution, the economic climate (national, regional, and local), safety and soundness limitations, and any other factors that significantly affect the institution's ability to provide lending, investments, or services in its assessment area(s); (e) the institution's past performance and the performance of similarly situated lenders; (f) the institution's public file, as described in 209 CMR 46.43, and any written comments about the institution's CRA performance submitted to the institution or the Commissioner; (g) the credit union's defined membership by-law provisions, as prescribed in M.G.L. c. 171, § 9, and the lending and investment authority restrictions under M.G.L. c. 171; and (h) any other information deemed relevant by the Commissioner. (3) Assigned Ratings. The Commissioner assigns to an institution one of the following five ratings pursuant to 209 CMR 46.28 and 46.61: "outstanding"; "high satisfactory"; "satisfactory"; "needs to improve"; or "substantial noncompliance" as provided in M.G.L. c. 167, § 14. The rating assigned by the Commissioner reflects the institution's record of helping to meet the credit needs of its entire community, including low- and moderate- income neighborhoods, consistent with the safe and sound operation of the institution. (4) Safe and Sound Operations. This regulation and the CRA do not require an institution to make loans or investments or to provide services that are inconsistent with safe and sound operations. To the contrary, the Commissioner anticipates institutions can meet the standards of this part with safe and sound loans, investments, and services on which the institutions expect to make a profit. Institutions are permitted and encouraged to develop and apply flexible underwriting standards for loans that benefit low- and moderate- income geographies or individuals, only if consistent with safe and sound operations. (5) Low-cost Education Loans Provided to Low-Income Borrowers. In assessing and taking into account the record of an institution under this part, the Commissioner considers, as a factor, low-cost education loans originated by the institution to borrowers, particularly in its assessment area(s), who have an individual income that is less than 50 percent of the area median income. For purposes of this paragraph, “low-cost education loans” means any education loan, as defined in section 140(a)(7) of the Truth in Lending Act (15 U.S.C. 1650(a)(7)) (including a loan under a state or local education loan program), originated by the institution for a student at an “institution of higher education,” as that term is generally defined in sections 101 and 102 of the Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the implementing regulations published by the U.S. Department of Education, with interest rates and fees no greater than those of comparable education loans offered directly by the U.S. Department of Education. Such rates and fees are specified in section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e). (6) Activities in Cooperation with Minority- or Women-Owned Financial Institutions and Low-Income Credit Unions. In assessing and taking into account the record of a nonminority-owned and nonwomen-owned institution under this part, the Commissioner considers as a factor capital investment, loan participation, and other ventures undertaken by the institution in cooperation with minority- and women-owned financial institutions and low-income credit unions. Such activities must help meet the credit needs of local communities in which the minority- and women-owned financial institutions and low- income credit unions are chartered. To be considered, such activities need not also benefit the institution's assessment area(s) or the broader statewide or regional area that includes the institution’s assessment area(s).