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OCC, FDIC New CRA Reform Proposal Misses the Mark

Thursday, December 12, 2019
Nikitra Bailey

WASHINGTON, D.C. – Today, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) announced a proposal to reform the Community Reinvestment Act (CRA)—the landmark anti-redlining law enacted nine years after the Fair Housing Act of 1968 to stop persistent discrimination in lending.

The Federal Reserve, which shares a regulatory oversight role on CRA along with the OCC and FDIC, did not sign the new proposal.

Center for Responsible Lending Executive Vice President Nikitra Bailey released the following statement:

Created in response to redlining, a practice in which banks refused to lend to communities of color, the Community Reinvestment Act of 1977 was designed to encourage depository institutions to serve the credit needs of low- and moderate-income communities (LMI). Since its enactment, CRA remains an important compliance tool that holds financial institutions accountable for making credit available in the communities they operate and must serve.

Unfortunately, today, far too many underserved LMI communities remain credit starved. In fact, the black homeownership rate is as low as it was when mortgage discrimination was legal as conventional lenders have exceedingly high loan denials and banks refuse to extend FHA-insured mortgage loans to consumers. The OCC and FDIC should follow CRA’s requirements to foster access to credit in economically vulnerable communities, partner with the Federal Reserve, and implement necessary changes that would strengthen credit access in LMI rural and urban communities across the nation.

Instead, they have ignored comments from consumer protection and civil rights organizations and have proposed a new ‘one ratio’ measurement that undermines CRA’s legislative intent with an overly simplified mathematical formula. This would make it easier for banks to scale up activities that are the most profitable in limited areas at the expense of those that are the most innovative and wide serving. The ‘one ratio’ approach also fails to factor in fair lending and does not add any teeth to CRA enforcement.

We encourage the OCC and FDIC to strengthen—not weaken—CRA by targeting solutions to ensure more quality credit in underserved markets. The fundamental goal of any new reform must be to ensure that hardworking families, including families of color, have access to sound and affordably priced credit, safe and responsible mortgages, small dollar consumer credit, and auto loans. Without this action, the racial wealth gap will continue to widen as LMI communities’ lack of credit access hampers their ability to create and sustain wealth building opportunities, which is the reverse goal of the law. CRA was created to undue the injustices created by the horrific practice of redlining and its modernization effort must center the people, families, and communities most harmed by it.

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Press Contact: vincenza.previte@responsiblelending.org