What is a Covered Agreement? A Comprehensive Legal Overview

Q: Who can enter into a covered agreement?

Any insured depository institution or its affiliates can enter into a covered agreement with one or more nongovernmental entities or persons.

Q: Are all financial agreements considered covered agreements?

No, only those that meet specific criteria related to community reinvestment are classified as covered agreements.

Q: What should I do if I need a covered agreement?

Consider using legal templates from US Legal Forms to draft your agreement, and consult a legal professional if needed.

Definition & meaning

A covered agreement is a formal contract or arrangement that meets specific criteria set forth under the Community Reinvestment Act. To qualify as a covered agreement, it must be a written document involving at least one insured depository institution or its affiliates and one or more nongovernmental entities or persons (NGEPs). The agreement typically involves significant financial commitments, such as cash payments or loans exceeding certain thresholds, aimed at fulfilling community reinvestment objectives.

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Legal Use & Context

Covered agreements are primarily used in the context of financial regulations and community development. They are relevant in civil law, particularly in areas concerning banking and finance. These agreements help ensure that financial institutions contribute to the economic well-being of the communities they serve. Users may manage related forms or procedures through resources like US Legal Forms, which provides templates for creating compliant agreements.

Key Legal Elements

The agreement must be in writing.
It must involve at least one insured depository institution or its affiliates.
It must include one or more nongovernmental entities or persons (NGEPs).
The financial commitments must exceed $10,000 in cash or grants, or $50,000 in loans within a calendar year.
The agreement must relate to the Community Reinvestment Act of 1977.
The NGEP must have had a CRA communication prior to the agreement.

Real-World Examples

Here are a couple of examples of abatement:

Example 1: A local bank enters into a covered agreement with a nonprofit organization to provide $15,000 in grants to support community development projects. This agreement is documented in writing and meets all criteria of a covered agreement.

Example 2: A credit union agrees to lend $60,000 to a small business for expansion, which is part of a covered agreement with a community organization aimed at promoting local economic growth. (hypothetical example)

Relevant Laws & Statutes

The primary law governing covered agreements is the Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.). This act encourages financial institutions to help meet the credit needs of the communities in which they operate, particularly low- and moderate-income neighborhoods.

Common Misunderstandings

What to Do If This Term Applies to You

If you are involved in a situation that may relate to a covered agreement, consider reviewing the terms carefully to ensure compliance with the Community Reinvestment Act. You can explore US Legal Forms for templates that can help you draft or manage these agreements. If your situation is complex, it may be wise to consult a legal professional for tailored advice.

Quick Facts

Attribute	Details
Minimum Cash Payment	More than $10,000 in a calendar year
Minimum Loan Amount	More than $50,000 in a calendar year
Governing Law	Community Reinvestment Act of 1977

Key Takeaways

A covered agreement is a written contract involving financial commitments aimed at community development.
It must involve at least one insured depository institution and one nongovernmental entity.
Significant financial thresholds apply for cash payments and loans.
These agreements are governed by the Community Reinvestment Act.
Understanding the criteria is essential for compliance and effective community engagement.

FAQs

What is a covered agreement?

A covered agreement is a written contract involving an insured depository institution and a nongovernmental entity, focusing on community reinvestment and significant financial commitments.