Lending Test

(1) Scope of Test. (a) The lending test evaluates an institution's record of helping to meet the credit needs of its assessment area(s) through its lending activities by considering an institution's home mortgage, small business, small farm, and community development lending. If consumer lending constitutes a substantial majority of an institution's business, the Commissioner will evaluate the institution's consumer lending in one or more of the following categories: motor vehicle, credit card, home equity, other secured, and other unsecured loans. In addition, at an institution's option, the Commissioner will evaluate one or more categories of consumer lending, if the institution has collected and maintained, as required in 209 CMR 46.42(3)(a), the data for each category that the institution elects to have the Commissioner evaluate. (b) The Commissioner considers originations and purchases of loans. The Commissioner will also consider any other loan data the institution may choose to provide, including data on loans outstanding, commitments and letters of credit. (c) An institution may ask the Commissioner to consider loans originated or purchased by consortia in which the institution participates or by third parties in which the institution has invested only if the loans meet the definition of community development loans and only in accordance with 209 CMR 46.22(4). The Commissioner will not consider these loans under any criterion of the lending test except the community development lending criterion. (2) Performance Criteria. The Commissioner evaluates an institution's lending performance pursuant to the following criteria: (a) Lending Activity. The number and amount of the institution's home mortgage, small business, small farm, and consumer loans, if applicable, in the institution's assessment area(s); (b) Geographic Distribution. The geographic distribution of the institution's home mortgage, small business, small farm, and consumer loans, if applicable, based on the loan location, including: 1. the proportion of the institution's lending in the institution's assessment area(s); 2. the dispersion of lending in the institution's assessment area(s); and 3. the number and amount of loans in low-, moderate-, middle-, and upper-income geographies in the institution's assessment area(s); (c) Borrower Characteristics. The distribution, particularly in the institution's assessment area(s), of the institution's home mortgage, small business, small farm, and consumer loans, if applicable, based on borrower characteristics, including the number and amount of: 1. home mortgage loans to low-, moderate-, middle-, and upper-income individuals, including loans to assist existing low- and moderate-income residents to be able to remain in affordable housing in their neighborhoods; 2. small business and small farm loans to businesses and farms with gross annual revenues of $1 million or less; 3. small business and small farm loans by loan amount at origination; and 4. consumer loans, if applicable, to low-, moderate-, middle-, and upper- income individuals. (d) Community Development Lending. The institution's community development lending, including the number and amount of community development loans, and their complexity and innovativeness; (e) Innovative or Flexible Lending Practices. The institution's use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- and moderate-income individuals or geographies; (f) Fair Lending. The institution's performance relative to fair lending policies and practices pursuant to written policies and directives issued by the Commissioner; and (g) Loss of Affordable Housing. The institution's number and amount of loans that show an undue concentration and a systematic pattern of lending resulting in the loss of affordable housing units. (3) Affiliate Lending. (a) At an institution's option, the Commissioner will consider loans by an affiliate of the institution, if the institution provides data on the affiliate's loans pursuant to 209 CMR 46.42. (b) The Commissioner considers affiliate lending subject to the following constraints: 1. no affiliate may claim a loan origination or loan purchase if another institution claims the same loan origination or purchase; and 2. if an institution elects to have the Commissioner consider loans within a particular lending category made by one or more of the institution's affiliates in a particular assessment area, the institution shall elect to have the Commissioner consider, in accordance with 209 CMR 46.22(3)(a), all the loans within that lending category in that particular assessment area made by all of the institution's affiliates. (c) The Commissioner does not consider affiliate lending in assessing an institution's performance under 209 CMR 46.22(2)(b)(1). (4) Lending by a Consortium or a Third Party. Community development loans originated or purchased by a consortium in which the institution participates or by a third party in which the institution has invested: (a) will be considered, at the institution's option, if the institution reports the data pertaining to these loans under 209 CMR 46.42; and (b) may be allocated among participants or investors, as they choose, for purposes of the lending test, except that no participant or investor: 1. may claim a loan origination or loan purchase if another participant or investor claims the same loan origination or purchase; or 2. may claim loans accounting for more than its percentage share (based on the level of its participation or investment) of the total loans originated by the consortium or third party. (5) Lending Performance Rating. The Commissioner rates an institution's lending performance as provided in 209 CMR 46.61 (Ratings).