CRA Reform
The Community Reinvestment Act established an affirmative obligation for deposit insured lenders to serve their entire community. Reinvestment Partners was created to encourage lenders to invest in low income and minority communities utilizing the Community Reinvestment Act. Since 1986, the agency has catalyzed more than $40 billion of CRA commitments from large and small institutions in North Carolina and the Southeast. Bank commitments have come through friendly dialogue to hard fought challenges.
CRA has played a tremendous role in creating homeownership, promoting small business and funding community development projects in North Carolina. North Carolina bank commitments have supported its strong nonprofit community development infrastructure and had national impact through NC bank expansion.
As the financial sector changed dramatically with the concentration of assets and lending into national conglomerates, mortgage lending moving to unregulated sources and the rise of high cost lending services such as payday loans, CRA was not modernized to address these changes. Data collection requirements were not updated as loan characteristics became as important as credit access with the rise of predatory loans.
CRA has over time not been adequately enforced by regulators, allowing for a retreat by lenders from their commitment and performance. Ironically, CRA was tagged as the cause of the financial crisis. This claim has been refuted by the Financial Inquiry Commission and statements by all of the federal bank regulators. None the less the political attacks have made CRA controversial. As a result, reform of CRA was not included in the financial modernization of the Dodd Frank Act. Reform is being done through the federal regulatory process.
Reinvestment Partners testified at the Atlanta field hearings and submitted comments for substantive reform. Reinvestment Partners also testified at the reform hearings on CRA and HMDA data collection. Our comments are below.