Recently I attended a seminar where a Federal Deposit Insurance Corporation representative used the term “REMA” in a discussion of redlining risk. Have you heard the term? It’s a helpful acronym to know if you desire to understand how the FDIC makes determinations about redlining. What follows borrows heavily from the FDIC representative’s comments on REMA.
Reasonably Expected Market Area
As you can tell from the title of this blog, REMA stands for “reasonably expected market area.” The FDIC defines a REMA as a geographical area the FDIC believes a bank can serve based on its distribution of applications and loans in addition to its marketing and outreach efforts.
Here are some key points to know about REMAs:
- REMAs are used in conjunction with redlining analyses to evaluate a bank’s lending and level of services in majority minority census tracts.
- The FDIC, not the bank, may define what constitutes a REMA geography.
- REMA geographic areas do not necessarily coincide with a bank’s CRA assessment area
Defining a REMA
The FDIC says there are 7 factors that are used in defining a REMA:
- Where the bank has received applications
- Where the bank has originated loans
- The history of mergers and acquisitions
- The market area as defined by the bank in its written policies and procedures
- Branch structure and history including closures, acquisitions and relocations
- The inappropriate exclusion of majority minority census tracts from the bank’s assessment area.
What should you know?
As you can tell from the description above, what constitutes a REMA area is not well-defined. You may be at the mercy of the FDIC’s definition — unless, of course, you develop your own well-thought-out REMA geographic definition.
While a REMA may not coincide with your CRA assessment area, your assessment area is probably a good place to start defining your REMA. Include both applications and originations, and put your REMA definition in your policies and procedures. It may help you defend your definition of your REMA.
Keep a history of branching activity including closures, acquisitions, and relocations, and know the geographies your bank’s advertising reaches.
Lastly, map your REMA, and create REMAs for all of the significant geographies where your bank does business.
We Can Help
If you want to discuss REMAs in greater detail, please contact us.
To access the FDIC document on which these comments are based visit https://www.fdic.gov/news/conferences/other_events/2016-10-27-Banker-Call.pdf.