Financial Agencies Looking to Modernize Reinvestment Act

The Hill
August 14, 2010
Brush, Silla

Financial agencies and federal lawmakers are moving to revamp the 1970s-era Community Reinvestment Act (CRA) in order to reduce racial discrimination in lending and strengthen lending to low- and middle-income communities. Many Republicans believe the act contributed to the housing crisis, while Democrats say it should be widened in scope to better accomplish its mission. It currently requires federal agencies to examine financial institutions so they meet the needs of their communities, including low- and moderate-income areas; and regulators are considering changes to how banks comply with the examinations, the overall community development needs, and ways to better apply the law to the lending industry. Consumer advocacy groups have strongly urged a broadening of the law and regulations, petitioning to extend its influence over non-bank lenders. John Taylor, head of the National Community Reinvestment Coalition, observed that there is not enough lending under the act, placing many of the most egregious lending practices outside of the law. Despite claims that the act played a role in the housing crisis by encouraging loans to low-income borrowers, Federal Reserve researchers in 2009 found that loans made under CRA assessments "helped to ensure responsible lending, even during a period of overall declines in underwriting standards."
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