The CRA requires federal banking agencies to assess how well each institution fulfills its obligations to these communities. 1813(z), FFIEC Links to Federal Agency's CRA Regulations, "Community Reinvestment Act and Interstate Deposit Production Regulations", "Community Reinvestment Act (CRA) Information", "Community Reinvestment Act Regulations (2005) for OCC", "Community Reinvestment (Regulation BBP)", "Federal Reserve Regulations (1995) pt. , Niskanen's, and other respondents to the proposed changes, voiced their concerns during the public comment & testimony periods in late 1993 through early 1995. These included a consideration of race on CRA exams, more objective measures of performance that reduce ratings inflation, and expanded CRA assessment areas that include not only where banks have branches but also areas with significant amounts of bank lending and/or deposit activity. These evaluation reports were divided into separate sections - one confidential; allowing the evaluated institution to retain its proprietary and personal information integrity at the same time the beginnings of the related databases were being compiled, and the other made public; intended to increase access and oversight of the CRS examination process. Extensions of Credit by Federal Reserve Banks (Reg A), Limitations on Interbank Liabilities (Reg F), Privacy of Consumer Financial Information (Reg P), Transactions Between Member Banks and Their Affiliates (Reg W), This page was last edited on 21 June 2022, at 03:49. Average Credit Scores Across Different Racial Groups, How the Choice of a Bankruptcy Type Is Hurting Black Americans, Racial Bias in Medical Care Decision-Making Tools, The Insurance Industry Confronts Its Own Racism, What the Department of Housing and Urban Development Does. L. No. As a result, Bhutta and Ringo concluded, the law was not a major factor in the housing markets subsequent downturn.  In 2001 Fannie Mae announced that it had acquired $10 billion in specially-targeted Community Reinvestment Act (CRA) loans more than one and a half years ahead of schedule, and announced its goal to finance over $500 billion in CRA business by 2010, about one third of loans anticipated to be financed by Fannie Mae during that period. ", Office of the Comptroller of the Currency. L. No. There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. The years in which the legislative revisions were made appear in bold text preceding the Public Laws that enacted them. Lending institutions can only consider factors relevant to an applicant's creditworthiness (their ability to pay). "BankThink We Have a Once-In-A-Generation Chance To Revamp CRA. eliminating the option of alternative weights for lending, investment, and service under the large, retail savings association test; defining institutions with assets between $250 million and $1 billion as "intermediate small savings associations" subject to a new community development test; indexing the asset threshold for "small" and "intermediate small" savings associations annually based on changes to the Consumer Price Index (CPI); and. However, subprime loans were so profitable, that they were aggressively marketed in low-and moderate-income communities, even over the objections and warnings of housing advocacy groups like ACORN. BankThink:The Final CRA Rule Is In. It did this unilaterally without support from the FDIC and the Federal Reserve.. According to Yellen, former Chair of the Federal Reserve, independent mortgage companies made risky "higher-priced" loans at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the "higher-priced" loans that have contributed to the current crisis.  Krugman argues that Pinto's category of "other high-risk mortgages" incorrectly includes loans that were not high-risk, that instead were like traditional conforming mortgages. L. No. Most small business loans made by CRA regulated banks went to higher income areas; 16.6% in low-income areas, 18.4% in low- and moderate-income tracts; 21.8% in middle-income areas and 23.1% in upper-income areas. Regulation G requires banks with federally-insured deposits to disclose agreements made with non-governmental entities. 2", "Community Reinvestment Act (CRA) Background", "Community Reinvestment Act Interagency Examination Procedures", Federal financial supervisory agencies reporting CRA data to the FFIEC, "White House Press Briefing on Community Reinvestment Act Reform Progress", "FDIC's Implementation of the 2005 Amendments to the Community Reinvestment Act Regulations", H.R.6655: Housing and Community Development Act, "Gale Cincotta, 72, Opponent Of Biased Banking Policies", "Prepared Testimony of Ms. Sandra F. Braunstein, Director, Division of Consumer and Community Affairs, FRB; Serial 110-90, Hearing on The Community Reinvestment Act: Thirty Years of Accomplishments, but Challenges Remain", Prepared Testimony of Ms. Sandra L. Thompson, Crabgrass Frontier: The Suburbanization of the United States, FDIC page on Riegle-neal Interstate Banking and Branching Efficiency Act of 1994, SEC.  Regulatory changes during the Clinton administration allowed these community groups better access to CRA information and enabled them to increase their activities.  These agencies are the Federal Reserve System (FRB), the FDIC, and the Office of the Comptroller of the Currency (OCC). , The Office of Thrift Supervision (OTS) proposed revising and started to solicit public comment regarding the complete alignment of its CRA rule with the CRA rules of the other three federal banking agencies in November 2006. 3713), effective November 10, 1978; sections 744(q) of title VII and 1212(a) of title XII of the Act of August 9, 1989 (Pub.
Office of the Comptroller of the Currency, Community Reinvestment Act (CRA) Questions and Answers For Bank Customers, Mapping Inequality: Redlining in New Deal American, HOLC "Redlining" Maps: The Persistent Structure of Segregation and Economic Inequality, Housing Discrimination Under the Fair Housing Act, Effects Of Revisions To The CRA In 1995 On Regulatory Enforcement. "Community Reinvestment Act.".  The law does not list specific criteria for evaluating the performance of financial institutions. : Public Health and Social Welfare, House Banking, Finance, and Urban Affairs, Senate Banking, Housing, and Urban Affairs, Office of the Comptroller of the Currency, Federal Financial Institutions Examination Council, Housing and Community Development Act of 1977 TitleVIII, USC Title 12 Chapter 30 CommunityReinvestment, Financial Institutions Reform, Recovery and Enforcement Act of 1989, Federal Deposit Insurance Corporation Improvement Act of 1991, Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991, consideration of minority and female owned institutions & partnerships, Federal Housing Enterprises Financial Safety and Soundness Act of 1992, Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, United States House Committee on Financial Services, Housing and Economic Recovery Act of 2008, American Recovery and Reinvestment Act of 2009, Congressional Committee on Financial Services, Community Development Financial Institutions Fund, Department of Housing and Urban Development, House Committee on Oversight and Government Reform, Text of Housing and Community Development Act of 1977 Title VIII (Community Reinvestment), "The Performance and Profitability of CRA-Related Lending", "The Community Reinvestment Act: Its Evolution and New Challenges", "The Community Reinvestment Act: Thirty Years of Accomplishments, but Challenges Remain", Community Reinvestment Act: Review of Empirical Evidence, "Prepared Speech, Footnote #8, The CRA: Its Evolution and New Challenges", "Community Reinvestment Act: Background & Purpose", The Federal Banking Agency as defined under 12 U.S.C.
Groups at first only slowly took advantage of these rights. More recently, some economists and policymakers have suggested the law needs to be revised to keep up with changes in the industry and make the evaluation process less onerous for banks.
, In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. In response many institutions established separate business units and subsidiary corporations to facilitate CRA-related lending. Community groups were also opposed to the 2020 proposal. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU. Conversations with experts on their research and topics in the news, Podcast featuring economists and others making their marks in the field, Economic history from our digital library, Scholarly research on monetary policy, macroeconomics, and more. Still, each bank is given one of the following ratings: The FDIC maintains an online database where the public can see a particular banks score.
", Office of the Comptroller of the Currency. The share of total US lending to low and medium income borrowers rose from 25% in 1993 to 28% in 1998 as a consequence. , The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which repealed restrictions on interstate banking, listed the Community Reinvestment Act ratings received by the out-of-state bank as a consideration when determining whether to allow interstate branches. 2907) to the existing CRA statutes by the Act, any depository institution which donated, sold with favorable terms (as determined by the appropriate Federal financial supervisory agency), or made available on a rent-free basis any branch of such institutions located in any predominantly minority neighborhood to any minority depository institution or women's depository institution, the amount of the contribution or the amount of the loss incurred in connection with such activity would go towards meeting the credit needs of the institution's community and would be taken into consideration when CRA examinations were evaluated. 1148), effective October 12, 1977; as amended by section 358(2) of title III of the Act of July 21, 2010, (Pub. The first major research study of CRA was the 1993 book Community Reinvestment Performance (1993, Probus Publishing) by Kenneth H. Thomas, Ph.D., a Finance Lecturer at The Wharton School of the University of Pennsylvania.  The public offering was several times oversubscribed, predominantly by money managers and insurance companies who were not buying them for CRA credit.  Ben Bernanke, then Chairman of the Federal Reserve, wrote that experience and research contradict "the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties. In a 2018 op-ed piece, former Comptroller of the Currency Joseph Otting asserted that the CRAs outdated approach had led to investment deserts, where "CRA activity often fails to reach by preventing banks from receiving consideration when they want to lend and invest in communities with a need for capital.". , In 2015, Federal Reserve Board economists Neil Bhutta and Daniel Ringo published a summary of available studies on the issue. The law does not mandate any other penalties for non-compliance with the CRA. Niskanen believed that the primary long-term effect would be an artificial contraction of the banking system. 110-180, Hearing on the Role of Fannie Mae and Freddie Mac in the Financial Crisis [of 2008]", United States House Committee on Oversight and Government Reform, "FRB: FEDS Notes: Assessing the Community Reinvestment Act's Role in the Financial Crisis", Public Law 95-128, 95th Congress, H.R. CRA is designed as a simple test for how financial institutions are meeting obligations to serve the convenience and needs of the local market where they are located. ", Office of the Comptroller of the Currency. ", University of Chicago Law School.
Redlining is the discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity. 95128; 91 Stat. The commission also documented blanket refusals to lend in particular areas (redlining). Regulation BB is a regulation that requires banks to provide certain information to the public. These include white papers, government data, original reporting, and interviews with industry experts.
2901 et seq.) L. No. 1147, title VIII of the Housing and Community Development Act of 1977, 12U.S.C. , On June 24, 2010, the Office of the Comptroller of the Currency (OCC), Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) jointly published proposed revisions to the rules implementing the Community Reinvestment Act. , On April 15, 2008, an FDIC official told the same committee that the FDIC was exploring offering incentives for banks to offer low-cost alternatives to payday loans. The OCC's Final CRA Rule: What Changed From The Agency's Proposed Rule? The links to the codification and section notes may provide additional information about the legislative changes as well.