(a) General definition of covered agreement. A covered agreement
is any contract, arrangement, or understanding that meets all of the
following criteria.
(1) The agreement is in writing.
(2) The parties to the agreement
include—
(i) one or more insured depository institutions
or affiliates of an insured depository institution; and
(ii) one or more nongovernmental
entities or persons (referred to hereafter as NGEPs).
(3) The agreement provides
for the insured depository institution or any affiliate to—
(i) provide
to one or more individuals or entities (whether or not parties to
the agreement) cash payments, grants, or other consideration (except
loans) that have an aggregate value of more than $10,000 in any calendar
year; or
(ii) make
to one or more individuals or entities (whether or not parties to the agreement)
loans that have an aggregate principal amount of more than $50,000
in any calendar year.
(4) The agreement is made pursuant to,
or in connection with, the fulfillment of the Community Reinvestment
Act of 1977 (12 USC 2901 et seq.) (CRA), as defined in section 207.4.
(5) The agreement is
with a NGEP that has had a CRA communication as described in section
207.3 prior to entering into the agreement.
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(b) Examples concerning written arrangements
or understandings.
(1) Example 1. A NGEP meets with an insured depository institution and states that
the institution needs to make more community development investments
in the NGEP’s community. The NGEP and insured depository institution
do not reach an agreement concerning the community development investments
the institution should make in the community, and the parties do not
reach any mutual arrangement or understanding. Two weeks later, the
institution unilaterally issues a press release announcing that it
has established a general goal of making $100 million of community
development grants in low- and moderate-income neighborhoods served
by the insured depository institution over the next five years. The
NGEP is not identified in the press release. The press release is
not a written arrangement or understanding.
(2) Example 2. A NGEP meets with an insured depository institution and states that
the institution needs to offer new loan programs in the NGEP’s community.
The NGEP and the insured depository institution reach a mutual arrangement
or understanding that the institution will provide additional loans
in the NGEP’s community. The institution tells the NGEP that it will
issue a press release announcing the program. Later, the insured depository
institution issues a press release announcing the loan program. The
press release incorporates the key terms of the understanding reached
between the NGEP and the insured depository institution. The written
press release reflects the mutual arrangement or understanding of
the NGEP and the insured depository institution and is, therefore,
a written arrangement or understanding.
(3) Example 3. An NGEP sends a letter to an insured depository institution requesting
that the institution provide a $15,000 grant to the NGEP. The insured
depository institution responds in writing and agrees to provide the
grant in connection with its annual grant program. The exchange of
letters constitutes a written arrangement or understanding.
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(c) Loan agreements that are
not covered agreements. A covered agreement does not include—
(1) any individual loan that
is secured by real estate; or
(2) any specific contract or commitment
for a loan or extension of credit to an individual, business, farm,
or other entity, or group of such individuals or entities, if—
(i) the funds are loaned at rates that are not substantially below
market rates; and
(ii) the loan application or other loan documentation does not indicate
that the borrower intends or is authorized to use the borrowed funds
to make a loan or extension of credit to one or more third parties.
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(d) Examples
concerning loan agreements.
(1) Example 1. An insured depository institution provides an organization with
a $1 million loan that is documented in writing and is secured by
real estate owned or to be acquired by the organization. The agreement
is an individual mortgage loan and is exempt from coverage under paragraph
(c)(1) of this section, regardless of the interest rate on the loan
or whether the organization intends or is authorized to re-loan the
funds to a third party.
(2) Example 2. An insured depository
institution commits to provide a $500,000 line of credit
to a small business that is documented by a written agreement. The
loan is made at rates that are within the range of rates offered by
the institution to similarly situated small businesses in the market
and the loan documentation does not indicate that the small business
intends or is authorized to re-lend the borrowed funds. The agreement
is exempt from coverage under paragraph (c)(2) of this section.
(3) Example 3. An insured depository institution
offers small business loans that are guaranteed by the Small Business
Administration (SBA). A small business obtains a $75,000 loan, documented
in writing, from the institution under the institution’s SBA loan
program. The loan documentation does not indicate that the borrower
intends or is authorized to re-lend the funds. Although the rate charged
on the loan is well below that charged by the institution on commercial
loans, the rate is within the range of rates that the institution
would charge a similarly situated small business for a similar loan
under the SBA loan program. Accordingly, the loan is not made at substantially
below market rates and is exempt from coverage under paragraph (c)(2)
of this section.
(4) Example 4. A bank holding company enters
into a written agreement with a community development organization
that provides that insured depository institutions owned by the bank
holding company will make $250 million in small business loans in
the community over the next five years. The written agreement is not
a specific contract or commitment for a loan or an extension of credit
and, thus, is not exempt from coverage under paragraph (c)(2) of this
section. Each small-business loan made by the insured depository institution
pursuant to this general commitment would, however, be exempt from
coverage if the loan is made at rates that are not substantially below
market rates and the loan documentation does not indicate that the
borrower intended or was authorized to re-lend the funds.
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(e) Agreements that include
exempt loan agreements. If an agreement includes a loan, extension
of credit or loan commitment that, if documented separately, would
be exempt under paragraph (c) of this section, the exempt loan, extension
of credit or loan commitment may be excluded for purposes of determining
whether the agreement is a covered agreement.
(f) Determining annual value of agreements that
lack schedule of disbursements. For purposes of paragraph (a)(3)
of this section, a multi-year agreement that does not include a schedule
for the disbursement of payments, grants, loans or other consideration
by the insured depository institution or affiliate, is considered
to have a value in the first year of the agreement equal to all payments,
grants, loans and other consideration to be provided at any time under
the agreement.