REMA’s: Their Use and Abuse by Regulators in the war against redlining
In this podcast, Len Suzio discusses his concerns about the threat posed to banks by the misuse of the concept of Reasonably Expected Market Areas (REMA) by regulators in their fight against redlining. The DOJ's "Combatting redlining initiative" launched in October 2021 is one such example. Len highlights that the concept of REMA has no origin in law or regulation, making it vague and open to interpretation, which can lead to potential abuse.
Regulators often determine a bank's REMA based on factors like marketing campaigns, market plans, media usage, and self-produced promotional materials. If a bank's REMA is found to be larger than its Community Reinvestment Act (CRA) assessment area, the bank's lending outside its CRA-defined community could be subject to scrutiny for redlining.
Len shared his concern when federal examiners revealed that they use entire MSAs (Metropolitan Statistical Areas) or MDs (Metropolitan Divisions) as the basis for every bank's REMA, no matter the size of the bank. This approach makes almost every bank with an urban area nearby vulnerable to redlining accusations if they are not lending in the urban area.
The podcast concludes that this issue is alarming for banks, and they should be aware of the potential consequences of how their REMA is determined.