NACEDA Policy Paper:

Community Reinvestment Act - March 2009

NACEDA Role and Policy Position

NACEDA pledges to support its national partners to secure the Community Reinvestment Modernization Act of 2009. NACEDA also supports the strengthening and enforcement of fair housing and fair lending legislation.

Background

The Community Reinvestment Act was passed in 1977 to end a period of so-called 'redlining' when many banks would not extend loans to residents of low-income and minority neighborhoods. CRA requires banks to help meet the credit needs in the local communities in which they are chartered, through loans, services, and investment. CRA has been instrumental in the efforts of community development corporations (CDCs) to combat the disinvestment of low-income neighborhoods throughout the U.S.

Threats to CRA

CRA has come under intense attack during the recent foreclosure crisis. Among other charges, critics say that pressure on banks to provide mortgage loans to low- and moderate-income and minority homebuyers caused a dramatic rise in subprime lending. However, analysis by the National Community Reinvestment Coalition (NCRC) found that only 25 percent of subprime loans were made by institutions covered by CRA.

NACEDA Supports the Community Reinvestment Modernization Act of 2009

This legislation, developed through the leadership of NACEDA's partner NCRC, will strengthen and modernize CRA in several significant ways. The Act will:

  • Apply CRA to a variety of non-bank institutions, such as mortgage companies, mainstream credit unions, and insurance companies.
  • Bolster the accountability of banks by requiring CRA exams in the great majority of geographical areas banks serve.
  • Address racial disparities in lending by requiring CRA exams to consider lending and services to minorities, in addition to low- and moderate-income communities.
  • Penalize banks that engage in predatory and abusive lending practices and securitization activities by assigning them lower CRA ratings.

For additional information, please contact Jane DeMarines at jdemarines@naceda.org or (703)741-0144. Website: http://www.naceda.org