CRA Reform 2026: How OCC and FDIC Proposed Changes Affect Your Lending Compliance Strategy

The regulatory landscape for the Community Reinvestment Act (CRA) is shifting again—marking the latest chapter in nearly three decades of efforts to modernize how banks serve their communities.

On July 16, 2025, the OCC, FDIC, and Federal Reserve issued a joint notice of proposed rulemaking to rescind the 2023 CRA Final Rule and replace it with the 1995/2021 CRA Regulations. This follows a federal court's preliminary injunction that has blocked the 2023 rule from taking effect.

For compliance officers and bank leaders, the message is clear: prepare for a supervisory approach that emphasizes proven performance tests—particularly lending and community development—rather than the expanded metrics framework the 2023 rule would have introduced.

Here's what your institution needs to know about the proposed changes and how to position your CRA strategy accordingly.

Why the Agencies Are Proposing a Course Correction

The 2023 CRA Final Rule aimed to modernize CRA evaluations with new metrics, expanded assessment areas, and streamlined ratings. However, industry stakeholders raised concerns about implementation burdens, data collection requirements, and the rule's treatment of small and rural banks.

Those concerns landed in court. In Texas Bankers Ass'n v. Office of the Comptroller of the Currency, the U.S. District Court for the Northern District of Texas issued a preliminary injunction, blocking the rule from taking effect while litigation proceeds.

The July 2025 "CRA Rescind and Replace NPR" represents the agencies' proposed reset. If finalized as proposed, banks would revert to the familiar 1995/2021 CRA framework—the same standards many institutions have operated under for years.

The practical implication: Examiners will apply the performance tests and standards that have guided CRA supervision since 1995, with amendments adopted through 2021.

What the Current Framework Emphasizes

Under the 1995/2021 CRA Regulations, your bank's evaluation depends on its asset size and business model. Understanding where your institution falls is essential to prioritizing compliance efforts.

Small Bank Performance Standards

Banks meeting the small bank asset-size threshold are evaluated primarily under lending test standards, with a focus on loan originations and purchases in assessment areas. Intermediate small banks face an additional community development (CD) test.

For most community banks—defined by the OCC as institutions with up to $30 billion in assets—lending performance remains the cornerstone of CRA evaluation.

Large Bank Standards

Banks exceeding the small bank threshold face three performance tests:

• Lending test: Evaluates home mortgage, small business, small farm, and community development lending
• Investment test: Assesses qualified investments that benefit the assessment area(s)
• Service test: Examines branch distribution and delivery systems, plus community development services

Wholesale and Limited Purpose Banks

Banks designated as wholesale or limited purpose institutions are evaluated under a CD test specific to their business model.

How Examiners Will Assess Lending Performance

If the proposed rule is finalized, expect examiners to focus intensely on your lending test results. Here's what they'll examine:

Assessment area lending activity: Examiners will review the volume and geographic distribution of your loans. Are you serving low- and moderate-income (LMI) geographies at reasonable levels compared to your peers and opportunities?

Borrower income distribution: Your lending to LMI borrowers will receive close attention. Do your loan records demonstrate meaningful outreach to underserved populations?

Loan product mix: Examiners will consider the variety and affordability of products you offer, including whether pricing and terms are responsive to community needs.

Community development lending: Loans with a primary purpose of community development—such as affordable housing, economic development, or revitalization projects—will factor into your overall assessment.

Performance context matters: Examiners consider factors beyond your control, including economic conditions, demographic trends, and legal or regulatory constraints. Documenting your context thoroughly strengthens your evaluation.

The Strategic Plan Option: A Flexible Alternative

The CRA regulation offers a strategic plan option that allows banks to propose their own measurable goals as an alternative to standard performance tests. This flexibility can benefit institutions with unique business models or community needs.

The OCC recently proposed a simplified strategic plan process for community banks, recognizing that timely guidance reducing regulatory burden remains important regardless of how the broader CRA reform process unfolds.

A strategic plan must include:

• Annual interim measurable goals for lending, investment, and/or services
• Identification of assessment areas covered by the plan
• Documentation of public participation in plan development
• A proposed effective date and substitution of standard performance tests

Key consideration: Goals must be specific enough for the OCC to evaluate whether you've met them. Vague commitments won't satisfy regulatory requirements.

The proposed guidance outlines elective goals banks can adopt—particularly for CD lending—with flexibility to propose custom goals reflecting local needs and opportunities.

Community Development Focus Areas

Under both the current framework and the proposed simplified strategic plan process, community development lending receives significant weight. Common CD lending categories include:

• Affordable housing construction and rehabilitation
• Small business development in LMI areas
• Revitalization of distressed neighborhoods
• Essential community facilities (healthcare, education, childcare)

If your CRA program emphasizes CD lending, ensure your tracking systems capture loan purpose and community benefit documentation. Examiners will want evidence that qualifies these loans for CD credit.

Documentation and Data Collection Priorities

Regardless of which regulatory framework ultimately applies, certain fundamentals remain critical for successful CRA examinations:

Maintain accurate assessment area delineation: Know where you're expected to lend and be able to justify your boundaries based on your business strategy and community needs.

Track lending activity by geography and borrower income: Your loan system should readily produce reports showing distribution across census tracts and borrower income levels.

Document community development activities: Create files for each CD loan, investment, or service that includes evidence of community benefit and LMI targeting.

Preserve public participation records: If you pursue the strategic plan option, maintain copies of public comments and your response to feedback.

Monitor performance against goals: Whether you're working under standard tests or a strategic plan, track progress monthly or quarterly—not just at exam time.

What Lenders Should Do Now

With the 2023 rule still under injunction and the rescind-and-replace proposal under consideration, the prudent approach is preparing for the 1995/2021 framework while monitoring regulatory developments.

Consider these action items:

1. Audit your current CRA program: Assess whether existing processes align with the lending test, small bank standards, or CD test—whichever applies to your institution.

2. Review assessment areas: Confirm your delineations remain appropriate given recent branching changes or market shifts.

3. Evaluate strategic plan feasibility: If your business model would benefit from tailored goals, explore whether the strategic plan option fits your needs.

4. Strengthen CD lending documentation: Ensure community development loans are properly coded and supported with purpose documentation.

5. Stay informed on rulemaking: The comment period for the CRA Rescind and Replace NPR closed August 18, 2025, but final rule timing remains uncertain. Automated regulatory tracking tools like Reglith can help your team monitor developments without manual effort.

6. Prepare your compliance calendar: Map key CRA milestones—data collection deadlines, exam preparation windows, and strategic plan review dates. See our guide on how to build a mortgage compliance calendar for a systematic approach.

Key Takeaways

• The proposed rescission would return CRA to the 1995/2021 framework, emphasizing established performance tests over new metrics.
• Lending test performance remains the primary focus for most banks, particularly community institutions under $30 billion in assets.
• Community development lending carries significant weight under both standard tests and strategic plan options.
• Strategic plans offer flexibility but require specific, measurable goals and public participation documentation.
• Robust documentation and data tracking are essential regardless of which regulatory outcome prevails.
• Proactive preparation positions your institution for success—whether the 2023 rule eventually takes effect or the 1995/2021 framework remains in place.

The regulatory uncertainty surrounding CRA reform underscores the importance of building adaptable compliance programs. By focusing on strong lending performance, clear documentation, and engagement with community needs, your institution can demonstrate its commitment to serving borrowers—whatever framework examiners ultimately apply.